Racing to top Vietnam's stock market

August 25, 2022 | 13:31
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Recent investigations, the tightening of capital market regulations by the government, and global economic uncertainty have led to a significant correction in Vietnam’s stock market. However, Maybank Investment Bank contends that the robust fundamentals underpinning Vietnam’s capital markets and its economy remain intact.
Racing to top Vietnam's stock market

The upbeat outlook is underpinned by the resilient GDP growth figure of 7.7 per cent on-year for the second quarter of 2022 – the highest in 10 years – and corporate earnings growth projections – FY22 EPS growth of around 20-25 per cent on-year.

The recent tightening of liquidity will soon reverse when local political news subsides in the fourth quarter as the government finalises its regulatory framework for capital markets including the amended Decree 153 and Circular 39.

While global uncertainty persists, liquidity in the equity market has fallen close to levels last witnessed in 2018 and the VNindex is trading at an unprecedented -2 standard deviation of the five-year P/E average, signalling an inflexion point is near for Vietnam’s equity market.

Indeed, the brokerage business in Vietnam is experiencing a golden period of high growth with low penetration and low barriers to entry. Most brokers are currently focused on winning retail market share and building their client bases.

Analysts at Maybank Investment Bank noted, "With new retail account openings staying elevated and the Vietnamese market on the verge of upgrade to Emerging Status by MSCI, we expect the race for market share will be rewarding. We believe the sector offers tremendous opportunities, but competition is already intense with big players leveraging their size as a competitive advantage. We contend that players with strong client bases will be the ultimate winners."

According to Maybank Investment Bank, most brokerage players in Vietnam have high betas, which means they usually underperform the broader market in a downward trend and vice versa. Despite recording stable, and in some cases, more than adequate earnings, leaders in the segment have underperformed the VNindex since the correction started this year.

The sector itself has corrected c.-42 per cent YTD versus the VNindex’s -22 per cent. This has presented investors with an attractive opportunity as there are many companies in the sector with strong fundamentals and promising outlooks. These stocks could be major outperformers when the current liquidity trend reverses.

In addition, the nascent capital market also offers potential aplenty. Specifically, underlying Vietnam’s growing middle-income economy is a very underpenetrated capital market, which offers substantial opportunities for brokerage businesses.

There has been a strong demand from retail and institutional investors and corporates for more complex financial solutions. This includes investments like stocks, investment-linked products, and mutual funds as well as a wider range of fundraising methods such as IPOs and placements, which have never been popular before. The country is also a hotspot for mergers and acquisitions in the region, ranking 3rd in ASEAN and providing fertile ground for advisory businesses.

Investors have around $3.4b in securities accounts at end of Q2 Investors have around $3.4b in securities accounts at end of Q2

The stock market is experiencing one of its worst periods since a new wave of investors boomed two years ago.

Vietnam stock market remains attractive to foreign investors Vietnam stock market remains attractive to foreign investors

Foreign investors net purchased 14.8 million stocks, worth some 80 billion VND (3,42 million USD) during the week from August 8 – 12, showing that the Vietnamese securities market remained attractive to them.

Shares rebound on banking, mining and securities stocks Shares rebound on banking, mining and securities stocks

Stocks recovered on Tuesday, bolstered by the growth of the banking, mining and securities stocks groups.

By Maybank Investment Bank

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