MBKE forecasts foreign capital surge for Vietnam

Maybank Kim Eng’s Ong Seng Yeow at a workshop in Ho Chi Minh City on March 8 (Photo: Tuong Thuy)

“We think 2014 will be a Vietnam year in terms of attracting foreign capital flows against its regional peers thanks to three reasons,” said Ong Seng Yeow, executive director of Maybank Kim Eng (MBKE) Research.

“Firstly, the Vietnamese stock market’s valuation is relatively cheap versus competing nations such as Indonesia, the Philippines and Thailand. Secondly, Vietnam’s macro-economic picture is significantly improved. Finally, Vietnam is nearly immune to external volatilities such as Quantitative Easing tapering in the US or political unrest.”

Addressing a stock market workshop in Ho Chi Minh City on March 8, Yeow forecasted Vietnam’s benchmark VN Index would reach 600 points or so this year, thus supporting further gains.

The index is currently just over 580 and has increased by around 16 per cent so far this year.

According to MBKE, foreign investors are showing more and more interest in the Vietnamese bourses.

“Specifically, our institutional research team has welcomed numerous offshore institutional investors to Vietnam so far this year,” Yeow continued. He explained that this year foreign investors are tending to diversify their assets to stable and higher potential markets and they were keeping a close eye on Vietnam.

When asked about which sectors, the researcher said investors showed more interest in industries bound to Vietnam’s economic growth such as consumer goods and oil and gas. They had less interest in the banking sector “as it seems they’re aware of the difficulties it faces.”

Other good news for the market is Vietnam’s considering raising the foreign ownership limit from 49 per cent to 60 per cent, he added.

“We think the market will see even greater improvement once the foreign ownership cap is raised. As you can see, market breadth is getting tighter and tighter because so many good fundamental stocks have already hit the foreign ownership limit. This restricts foreign investors’ options in putting their money in the market.”

Yeow provided examples where MBKE’s offshore institutional investors showed interest in FPT, Binh Minh Plastics and some other blue chips. But all are already at the ownership cap. Therefore, if this is lifted it is likely that Vietnam would see a surge of new capital inflows.