Vietnam’s stock market is standing at a crossroads while seeking new growth drivers, but exogenous challenges can weigh on investors’ optimism.
|Economic fallout may well cut into stocks, Illustrative image (Photo: VNA) |
The recent local market surge has been driven largely by the economic recovery since the government lifted the social distancing restrictions. Experts believe that investors could make a virtue of the broad-based rally in the latter half of this year.
There is still more upside for the market in the forthcoming time thanks to current supporting factors, including potential progress in the hunt for a vaccine, a well-managed situation, and a slowdown in the unprecedented outbreak. Fiscal and monetary stimulus from governments, a rebound in oil price, as well as upcoming free trade agreement with the EU are viewed as trump cards to cushion the economic fallout.
“Furthermore, Vietnam could benefit from a larger inflow of foreign capital that targets frontier markets as the country will become the largest constituent in the MSCI Frontier 100 Index, along with the USD’s depreciation and a stronger appetite for foreign funds attraction,” said Tran Duc Anh, head of Macro and Market Strategy at KB Securities.
Anh also noted that certain risks could fuel investors’ concerns and bring about sell-offs and anxieties over a second COVID-19 wave and the perils of a global crisis.
Echoing his view, Le Quang Minh, research director at Mirae Asset Securities said Vietnam’s stock market is predicted to be challenged.
“The VN-Index will likely face difficulties stemming from tensions between the US and China, COVID-19, and Hong Kong’s political unrest. The potential for retaliation – be it political or economic – will exert pressure on the global stock market in the short run,” Minh told VIR.
Therefore, the upside momentum is expected to slow, with a target range of 830 to 890 points, equivalent to an interval of +/-4 per cent. Money flows showed signs of a move towards mid- and small-caps.
The risk of a correction is increasing, but remains low, thanks to strong domestic cashflows and positive fundamental elements, with the economy likely to bottom out in April as the easing of monetary policy continues to support the market.
Looking on the bright side, experts believe some stocks should be watched closely in the upcoming time. These include the cyclical sectors which are highly sensitive to the health of the economy – namely banks, real estate, and construction. It also involves those sectors that have been directly hit by COVID-19 and will be able to bounce back quickly when the pandemic is under control, such as consumer goods and services, airlines, and tourism.
For the latter two sectors, the recovery may be slower until the Vietnamese government allows resumption of international flights and welcomes foreign tourists again. However, global supply chain relocation from China to some countries like Vietnam could set the stage for some particular sectors such as industrial parks. Accordingly, a new wave of investment may be right around the corner, insiders insist, and Vietnam is slated to be high on the agency for overseas funds.
“We believe that growth stocks tend to be more attractive, and investors seem to be more bullish about upbeat performance regarding net sales and income, which is consequently adding to increased earnings per share, such as MWG of Mobile World Group, SCS of SCSC Cargo Service Corporation, and CTR of Viettel Construction JSC among others,” noted Minh.