Institutional investors leading the charge

After a brutal market run some investors may be beginning to smile

“The market’s recent sharp rise indicated that investors with strong cash are chasing stocks at higher prices,” said David Kadarauch, chief analyst with Mekong Securities.

Kadarauch added that some investors were taken by surprise, but immediately chased up the opportunities.

This included ASEAN Investment Management CEO David Roes who said he was cutting back exposure to Indonesia and increasing the portfolio’s exposures to Vietnam from 10 to 30 per cent.

“Vietnam offers a fairly attractive investment proposition, with returns on equities as high as 30-40 per cent. It is now time to start buying,” Roes said on CNBC.

Roes also waved away concerns about inflation in Vietnam, saying he believed the country would bring the situation under control. “We would look forward, [to the] first half of 2012, for an inflation figure to be below 10, trending towards 9. That’s enough to see a doubling of the index,” said Roes.

The Ho Chi Minh Stock Exchange’s (HoSE) VN-Index last week closed at 459.92 points, up 5.6 per cent on a week earlier. Market liquidity also saw an improvement with around 50 million shares changing hands daily for the first time in several weeks.

Also positive is the news that the VN-Index is up 17 per cent against the low of 383.58 points recorded on August 12. This means the index has made up most of the ground it lost this year.

“I think the market is now in a long-run rally mode,” Thang Long Securities deputy CEO Quach Manh Hao told VIR.

Hao said the Vietnamese stock market had been bearish for quite some time because of macro instability in which inflationary pressure and credit crunch had played the key roles. Now the situation looked to have improved. The CPI peaked in August, while the State Bank had implemented solid measures aimed at lowering interest rates.

“This would mean an increase in liquidity in the economy and for the stock market,” Hao said.

Duong Hong Ha, chief analyst with Tri Viet Securities, added that the current rally would last as long as institutional investors continued to pour cash into the market and macro indicators improved.

Fiachra Mac Cana, Ho Chi Minh City Securities Corporation’s (HSC) head of research, said a confluence of issues was stimulating investor sentiment. Among these was the prime minister’s reiteration to international development partners that the government was not reneging on its commitment to prioritise economic stability over the previous growth strategy.

Then the market heard the country’s forex reserves had increased to $15 billion in late July, compared to $7.5 billion in February.

“This news does not really come as a surprise, but such a confirmation is fuel to the market at this stage of the rally,” said Mac Cana.