Vietnam stock market bullish in decades: VinaCapital

By Dat Nguyen   August 17, 2021 | 04:27 pm PT
Vietnam stock market bullish in decades: VinaCapital
Staff make contracts for new investors at a brokerage in Ho Chi Minh City. Photo by VnExpress/Quynh Tran
The rise in Vietnam’s stock market in recent years could be the beginning of a multi-decade surge, similar to what happened in Taiwan, VinaCapital stated.

The number of retail stock brokerage accounts in Vietnam currently equates to around 3 percent of the country’s population, comparable to the figure in Taiwan around 1986, the HCMC-based investment firm reported.

Vietnam is following the same "East Asian Development Model" that Taiwan and other Asian countries had used to become wealthy, with their stock markets flourishing as their economies grow, it added.

"We believe Vietnam is still at the very beginning of a multi-decade stock market development."

Source: Yuanta Securities via VinaCapital.

Source: Yuanta Securities via VinaCapital.

Vietnam’s government aims to increase the country’s stock brokerage penetration rate to 5 percent by 2025 and to 10 percent by 2030, which VinaCapital considers realistic targets given the trajectory of Taiwan’s retail investor participation.

Vietnam’s $3,500 per-capital GDP is similar to Taiwan’s $4,000 per-capita GDP (expressed in terms of USD in 2020) when its retail stock brokerage penetration rate was still only 3 percent, it said.

The development of Vietnam’s stock market leapt forward in recent years, with the number of companies with market caps of over $1 billion rising from 10 in 2015 to nearly 50 now.

The stock market’s total value surged from 30 percent of the country’s GDP to 90 percent, which is comparable to regional peers.

Another factor is the surge in the number of retail investors that began last year when deposit interests fell.

A series of record-high, monthly account openings has enthused investors and helped the benchmark VN-Index shrug off Covid-19-related issues this year, the report noted.

New securities accounts in the first seven months hit nearly 721,000, higher than 2020 and 2019 combined, according to Vietnam Securities Depository.

This trend shows a change in the interests of investors who were historically more focused on real estate and gold, VinaCapital held.

Attractive investment opportunities in Vietnam’s real estate market dried up recently due to pandemic-triggered construction delays, while gold is less appealing to many local savers because its prices traded in a narrow range over the last year, it was added.

"The participation rate of local investors in the stock market is still in its infancy compared to Asian Tigers like Taiwan when those economies were at a similar stage of economic development," it said, adding all the basic building blocks of a modern stock market are still being put in place to accommodate anticipated growth.

VN-Index is now nearly 14 percent higher than its peak in 2018.

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