Market upside is near

Investors who hedge their bets are more likely to be rewarded

As domestic equity markets plunged to new lows, analysts believe there is an upside to the long-term investment outlook.

Ho Chi Minh Stock Exchange’s VN-Index last week closed at 452.73 points, its lowest level in eight months, as investors dumped stocks due to oversupply fears. The VN-Index has so far lost 10 per cent against late 2009.

Vo Tri Thanh, economist and deputy director with the Ministry of Planning and Investment’s Central Institute for Economic Management (CIEM), said Vietnam’s stock market had moved in a tight range for several months as investors still doubted that the macro economic conditions for the next six months would be as good as expected.

Thanh said global economy uncertainties remained and some economists previously seemed too optimistic about the recovery outlook.

“Therefore, investors should be more patient between macro economic stability and growth goals to avoid sudden policy changes,” Thanh told reporters at a PetroVietnam Securities (PSI)-organised “World Economic Situations and its Impacts on Vietnam” workshop.

For Vietnam’s stock market, Thanh said there would be few breakthroughs this third quarter as macro stability was the buzz words.

“But, in the last two months of this year, the market could witness a bull after domestic macro policies and the global economic recoveries become clearer,” said Thanh.

PSI chief analyst Pham Thanh Binh said he was not bearish. “In medium and long-terms, Vietnam is attractive with average economic growth rate estimated at 7 per cent annually for the next five to seven years. In the short-term, Vietnam’s stock valuations are reasonable, but not cheap with earnings growth diluted sharply. The local market’s weighted price-to-earnings (P/E) ratio is now 10.5, higher than that of South Korea (9.8), Thailand (12.3).”

After a strong run from 235 to 630 points in 2009, the VN-Index is stuck in trading range between 430-550 points for three quarters now. Binh said the index was likely to stutter between 430-550 points in the next quarters due to limited capital inflows from domestic and foreign sources. “We are optimistic in the medium to long-term outlook, but patience is needed,” he added.