Calmer seas will help markets’ 2011 voyage

Investors are banking on smooth sailing next year

Coupled with the fact that Vietnam was cheap by many standards and that it had only received a trickle of global quantitative easing flows, head of research Marc Djandji believed markets were bound for an upward re-rating as domestic markets were at an inflexion point and would see significant inflows.

“Vietnam index set to perform at least 30 per cent up in 2011,” Djandji said in a report dated December 12.

The price to earnings (P/E) of Vietnamese stocks is currently around 9.9, compared with 12.4 at the end of the global financial crisis, according to Viet Capital Securities.

Ho Chi Minh Stock Exchange’s VN-Index closed at 485.29 points on December 17, nearly unchanged from 2009’s 494 points. With this VCSC forecast, it might increase to 625 points in 2011.

The market could see further upsides if the government started targeting inflation rather than growth and as companies continued to grow earnings in 2011, said Djandji.

“All in all, we argue that it is time to be bullish in Vietnam. Greater macroeconomic stability should bring investors back into dong assets, which could lead to substantial upward re-rating, exclusive earnings per share (EPS) growth. It could be lucrative to invest in Vietnam today,” he said.

Quach Manh Hao, Thang Long Securities’ deputy general director, said that numerous analysts were too optimistic when forecasting the 2010 market outlook in late 2009 as several macroeconomic challenges had not been carefully considered. Several analysts forecasted the VN-Index would rise 30-50 per cent on-year during 2010. However, in 2010 the market in fact plunged around 2 per cent against the end of 2009.

“With the expected loosening policy in early 2011, the VN-Index will rise 15 per cent in the first quarter of 2011 against late 2010 and additional 10 per cent in the second quarter against the first quarter. The market will then stabilise in the third quarter,” said Hao, who was among analysts failing to correctly predict 2010.

If Vietnam successfully stabilised its macroeconomy, foreign portfolio investment inflows would be on the rise, particularly in 2012 when financial markets were largely opening to foreign players, said Hao.