Low valuations and strong fundamentals signal upside for select stocks

Following the market’s prolonged correction since the outset of the year, many sectors are now trading at significantly lower valuation levels.

Nguyen The Minh, director of Investment Banking at ABS Securities JSC, noted that the VN-Index’s average price-to-earnings (P/E) ratio has fallen to around 10–11 times.

“This is a relatively low level, approaching the valuations seen when the market bottomed during previous crises, including the outbreak of the COVID-19 pandemic in early 2020, the US tariff shock in April last year, and the escalation of tensions involving the United States, Israel, and Iran in February this year,” he said.

According to the ABS expert, in a market environment characterised by ‘deep discounts’, stocks supported by specific growth stories are likely to experience stronger recoveries.

One example is state-controlled enterprises, which are expected to benefit from Politburo Resolution 79 on the development of the state sector. The policy aims to reduce state ownership in enterprises and increase free-float ratios.

Secondly, the prospect of a market upgrade is expected to support large-cap stocks, particularly in the securities, banking, and real estate sectors.

Within the banking sector, the average price-to-book (P/B) ratio currently stands at 1.2–1.3 times, a relatively low level amid pressure on net interest margins (NIMs).

Expectations that such pressures will ease during the second half of the year, allowing NIMs to recover, could provide meaningful support for banking stocks.

Thirdly, with the government targeting economic growth of 10 per cent this year, manufacturing companies have attracted increasing attention.

One of the economy’s bright spots is the recovery in new orders, reflected in the Purchasing Managers’ Index, which rose to 52.8 points in May.

This trend is expected to support retailers, food producers, and export-oriented businesses.

Another investment theme involves the initial public offerings (IPOs) of subsidiaries owned by listed companies. A vibrant IPO market could enhance the appeal of the parent companies’ shares.

Meanwhile, according to MBS Securities, several sectors are likely to attract returning capital flows, supported by pro-growth policies such as public investment initiatives, banking sector support measures, and industries expected to benefit from the World Cup season, including retail, food, and telecommunications.

From the perspective of Truong Hien Phuong, senior director at KIS Vietnam Securities, securities stocks still offer substantial growth potential.

Share prices of brokerage firms have undergone significant corrections in recent months despite the sector’s strong long-term prospects.

Many securities stocks are currently trading at attractive valuations, with P/E ratios below 15 times and P/B ratios below 2 times. Examples include SSI (P/E of 14.81 times; P/B of 1.7 times), VIX (P/E of 8.24 times; P/B of 1.97 times), VND (P/E of 11.95 times; P/B of 1.22 times), or SHS (P/E of 12.13 times; P/B of 1.15 times), among others.

The sector’s most significant growth catalyst is the anticipated upgrade of Vietnam’s stock market.

An official market reclassification in September 2026 is expected to create opportunities for substantial international capital inflows, particularly from passive investment funds and global financial institutions. Passive inflows from global exchange-traded funds alone are estimated at $1.67 billion. These funds are expected to be deployed gradually over several quarters.

In addition, KIS Vietnam Securities holds a positive view on steel stocks, which are currently trading at attractive valuation levels while benefiting from policies promoting public investment.

Large-scale infrastructure projects such as the North–South high-speed railway, metro systems in major cities, the national stadium, and numerous other key developments are either underway or planned, creating substantial steel demand over the coming years.

Moreover, the recovery of the residential and industrial real estate markets, along with a rebound in global construction activity, should provide additional support for the steel industry.

According to Phuong, from a valuation perspective, many stocks within the aforementioned sectors are currently trading at P/E multiples of around 10 times. During more favourable market conditions, reasonable valuations for industries with strong growth potential typically range from 15 to 17 times.

This suggests that considerable upside potential remains if corporate earnings improve and market sentiment becomes more positive in the upcoming period.

However, the KIS Vietnam Securities expert also advised that investors should not focus solely on how deeply a stock has been discounted, but should pay close attention to a company's underlying fundamentals.

Priority should be given to shares of industry-leading businesses with strong financial positions, clear earnings growth prospects, and direct exposure to the economy’s major long-term growth trends. Investors should also consider accumulating such stocks during market pullbacks and correction phases.

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