Investors are urged to hold tight amid storm

The market offers good value for investors as other avenues, such as the gold market, are volatile

Equities investors should stay with the stock market rather than head for the exit door, analysts have claimed.

Vietnam’s main stock market, the VN-Index, ended the first week of this month at 464.35 points at December 3, 2.8 per cent higher than November’s closing figure. During the year to date, the VN-Index still lost 10 per cent after rallying 56.8 per cent in 2009 but up 110 per cent from its lowest level on February 24, 2009.

Pham Kinh Luan, StoxPlus Corporation’s head of research, said alternative investment channels such as gold, hard currencies, property and savings in Vietnam were now less attractive than equities. Gold prices have soared to record highs, exchange rates remained volatile, savings were not a good option while not property investment needed huge capital. 

“Therefore, stocks continued being attractive investment tool for the time being [as the current valuations are relatively cheap],” Luan told StoxPlus clients recently.

The VN-Index has soared after testing the low 420 point level, viewed as the market’s bottom, as high inflation, trade deficit and oversupply bad news are priced in. 

Market analysts added that as lending rates were now high [at around 19 per cent annually], few enterprises would want to borrow, leaving bank capital idle.

“Bank capital will find equities rather than being unused,” said an analyst. 

A FPT Securities (FPTS) analyst said speculative money was finding shares with huge volatility, a signal that investors were accepting bigger risks for higher rewards.

“We expect a more bullish month ahead and opportunities of high rewards are clear if investors have suitable investment strategy at initial market recovery,” said the FPTS analyst.           

Luan said December might not be among the best months for Vietnamese stocks as controlling inflation was a critical task, indicating that further tightening policy was expected.

As the lending rates are around 19-20 per cent, stocks with returns-on-equity (RoE) of over 20 per cent, low debt on equity (D/E) of below 1 and huge cash in hands and high market liquidity would be among the choices.

“With the above criteria, PetroVietnam Fertiliser and Chemicals (DPM), Masan Group Corporation (MSN), Tu Liem Urban Development (NTL), PetroVietnam Low Pressure Gas Distribution (PGD) and Saigon Securities Incorporated (SSI) are recommended,” said Luan.