Analysts see bright future for bank stocks

Going into 2011, Vietnam-dedicated investment fund management company, Vietnam Asset Management Limited (VAM), expected the domestic stock market to remain volatile until the current economic challenges can be managed.

VAM, however, on a brighter note said that the market valuation had become increasingly attractive, especially when compared with regional peers, seeing many solid, well-managed companies trading at attractive valuation levels.

“Along with retail, pharmaceutical, petroleum, natural resources, IT and telecommunications, banking is a very interesting sector to watch for a potential recovery given its deep discounted valuation,” the company said in its latest monthly report dated January 2011.

VAM did not provide further information but market analysts said the banking sector was offering rewards for medium to long-term investors as the country’s high potential banking shares have long been lagging behind.

“Banking shares are very attractive now as numerous stocks plunged to below face value. If investors cashed in [banking shares] now, they have chance to have high rewards as some banks pay high dividends, which could be a smart choice,” said Duong Hong Ha, chief analyst of Tri Viet Securities Company (TVSC). 

Nguyen Duc Hung Linh, a banking senior analyst with Saigon Securities Incorporation (SSI), said that short-term bank shares were not so positive but it might be the appropriate time for long-term investors to eye back as banks still reported stable earnings in 2010 and held positive 2011 outlook.

“Foreign investors have also cashed in, especially  Vietinbank (CTG) and Vietcombank (VCB) stocks, where foreign ownership ratio is not full,” said Linh.

Huynh Anh Tuan, SJC Securities Company’s general director, said banking shares were attractive during high economic growth period.

“For the time being, banking shares, especially banks with low foreign ownership ratios, would be the first destination for foreign portfolio investors,” said Tuan.

Linh, however, said risks remained for the banking sector with inflation still a concern, indicating a more cautious monetary policy.

“Banks are also worried about Vinashin’s large debts, responsible for a high proportion of debts in the sector and they may need to issue new shares to meet chartered capital hike requirements.

“Therefore, we keep a neutral attitude for banking shares,” said Linh.

Moody’s recently downgraded all six banks they follow including ACB, BIDV MB, VIB, SHB and TCB. The foreign currency deposit ratings of all six were lowered to B2 from B1 and continue to have a negative outlook.