Ready to ride the wave

Investors aim to surf the next wave and not wipe out

Vietnam’s stock markets are expected to witness a third wave next year as strongly increasing foreign portfolio investment inflows wash in, analysts have claimed.

Le Xuan Nghia, deputy chairman of National Committee for Financial Supervision’s (NCFS), said that in the last four months of 2010, foreign portfolio investment into Vietnam rose at around $120-150 million a month on average.

“An estimated $1.3 billion net foreign portfolio investment capital has been poured into Vietnam during the year to date,” Nghia told VIR reporters at a roundtable discussion on monetary policy in 2011.

However, State Bank statistics in late November showed that net foreign portfolio investment was $715 million by that time. In fact, a State Securities Commission source said net foreign portfolio investment was $900 million during the period.

Nghia attributed the strong flows to Vietnamese stocks being relatively cheap compared to regional peers. The Vietnam market’s trailing price to earnings (P/E) ratio is currently valued at around 9, compared to the Southeast Asian market’s between 14-21 and 17 for the global market on average.

Market analysts said in 2011, hot money would continue to find emerging Asia markets and Vietnam would attract a part of this thanks to its attractive valuations. “Foreign portfolio capital will heavily flow into Vietnam over the next six to 18 months,” said VinaCapital chief executive officer Andy Ho.

“The new foreign portfolio investment source will be a surprise for the time being,” a Tri Viet Securities analyst said.

In a related development, foreign investors have been net buyers of Vietnamese equities worth nearly $700 million on the Ho Chi Minh Stock Exchange (HoSE) during 2010, bringing total net buying to 15 consecutive months, according to HoSE statistics.

“With the increasing support of the foreign portfolio investors, I expect the third riding wave will incur in 2011,” Nghia said.

Nghia said that the first wave incurred when Vietnam’s market bottomed out at 235 in early 2009 during the crisis period, soaring by around 400 points, reaching as high as 625 points in late 2009. The second wave started at the recent bottom of 420 points, forecasting to reach as high as 888 points, the same rise as the first wave.   

“I forecast a strong rally in local stock valuations in the next several months,” said Nghia. He, however, doubted the market would reach 2007’s peak [1,300 points] as the share supply side was the key risk.

Foreign portfolio investment inflows into Vietnam were $1.31 billion in 2006 and surged to $6.24 billion in 2007, then the outflows were $578 million in 2008 and estimated at $500 million in 2009.