Stock market valuation falls to 4-year low

By Phuong Dong   March 12, 2020 | 05:43 pm PT
Stock market valuation falls to 4-year low
Investors observe the stock market on a computer at a securities firm in Ho Chi Minh City. Photo by VnExpress/Huu Khoa.
The price-earnings ratio of Vietnam’s VN-Index fell to 13 on Wednesday, its lowest level since mid-2016.  

After the Ho Chi Minh Stock Exchange’s benchmark index lost heavily twice this week, its PE ratio has fallen 21 percent below the average of the last five years, according to data from brokerages. 

In Southeast Asia it is higher only than that of Singapore’s STI (11). It is 16 in Malaysia, 15.6 in Indonesia and 14.8 in Thailand, SSI Securities said in its latest report. 

"The valuation of the stock market falling to a low level is an advantage for Vietnam in reattracting foreign capital flows and helping indices rebound when the novel coronavirus  epidemic is controlled globally." 

VNDIRECT Securities said the low PE could also bring back domestic cash in the final week of March, with investors buying stocks with high potential, but investors should avoid using leverage for safety. 

At the end of 2019 the VN-Index had a PE of around 15.5, with many securities firms forecasting robust profit growth for listed companies this year. 

But after the Covid-19 epidemic broke out in Vietnam in late January, some firms revised their PE forecasts down to 13.9 after factoring in the epidemic’s likely effect in the first quarter. 

The outbreak has shaved 15.45 percent off Vietnam’s benchmark index since it reopened on January 30 after a one-week national holiday, closing at 811.35 on Wednesday. 

On Monday alone the index lost 6.28 percent, its worst fall since 2001. 

Since January 30 foreign investors have been net sellers for 22 straight sessions, offloading VND4.86 trillion ($209.51 million) worth of shares. 

In February their sales amounted to VND3.13 trillion ($134.93 million), the highest single-month figure in a decade, according to SSI. 

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