Vietnam stock market ‘undervalued’, says international fund

By Dat Nguyen   September 25, 2020 | 11:34 pm PT
Vietnam stock market ‘undervalued’, says international fund
An investor looks at stock prices on a laptop at a brokerage in Ho Chi Minh City. Photo by VnExpress/Quynh Tran.
Vietnam’s benchmark VN-Index is “undervalued” compared to other countries’ indexes, according to fund management company Asia Frontier Capital.

Its price earnings ratio (P/E) as of August 31 was 14.7 as against 27.3 for S&P500 Index in the U.S. and 21.3 for Thailand SET Index’s, the company, which has profiles in Iraq, Uzbekistan and Vietnam, said.

The P/E index reflects how much investors are willing to pay today for future growth expectations.

AFC said while U.S. stock market valuations are currently far away from tracking the real economy, and challenges remain for Europe’s expectations for a V-shaped recovery, the Vietnamese economy is doing much better than many others.

Its main economic drivers such as exports are already showing growth again, while most other countries are facing sharply lower trade figures, it said.

Vietnam’s exports rose 6.5 percent month-on-month and 2.5 percent year-on-year in August to $26.5 billion, according to the General Statistics Office.

The government is also considering public investment as a key solution to drive economic recovery.

It plans to spend nearly VND700 trillion ($30.2 billion) this year including on major infrastructure works such as the North-South Expressway, Long Thanh International Airport and My Thuan–Can Tho Expressway.

"Vietnam looks markedly undervalued relative to other markets – in terms of both relative and absolute valuations – especially when taking into consideration its stable currency, expected positive 2020 GDP growth numbers and continued inflow of foreign direct investment," the report said.

Its stock markets were finally able to show strong gains after the government successfully contained the July virus resurgence, it said.

Optimism about the economy led to a rise of 10.4 percent on the Ho Chi Minh City Stock Exchange and 16.1 percent on the Hanoi Stock Exchange in August, with small- and mid-cap stocks recovering strongly as well.

Banks were the driving force behind the gains with some gaining more than 20 percent.

The VN-Index closed at 908.27 points on Friday, a rise of 37 percent from this year’s bottom on March 31.

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