VN-Index regains top performing spot in Asia thanks to foreign investors

By Ngan Anh   February 28, 2018 | 01:50 pm GMT+7
VN-Index regains top performing spot in Asia thanks to foreign investors
Global investors seem willing to pay premium multiples, given the country’s growth outlook. Photo by VnExpress

Vietnam's growth forecast is strong enough to have foreign investors paying premiums to buy into the market.

Just a few short weeks after a global equity selloff caused Vietnam to lose its crown as Asia's best-performing market so far this year, the country is back on top.

These gains may extend, helping the VN-Index surpass its March 2007 peak, as the gauge is forecast to reach 1,210 by the end of 2018, according to a survey of 10 strategists by Bloomberg.

RongViet Securities Corporation in Saigon said in a report that the VN-Index will increase by at least 17 percent this year, and even 67 percent in its best scenario, meaning it could end the year somewhere between 1,170 and 1,640.

Nguyen The Minh, a senior analyst at Saigon Securities Incorporation, was more reserved.

“The VN-Index could reach 1,050 points in the short term, and 1,300 by year-end,” he said.

Foreigners have been net buyers of the country’s shares this month, even as they pulled a combined $14 billion from nine Asian markets tracked by Bloomberg.

“Earnings growth is expected to be better, at around 20 to 25 percent, and not just with the listed companies but also at newly-listed ones,” Bloomberg quoted Thang Uong, who oversees a $1 billion portfolio at Manulife Asset Management (Vietnam) Co. in Ho Chi Minh City, as saying. “We are very bullish this year.”

A swift reversal since Feb. 12 has sent the gauge above levels reached before the selloff, making the nation’s shares more expensive relative to their regional peers. The VN-Index trades at about 20 times 12-month projected earnings, versus a multiple of 14 for the MSCI Frontier Markets Index and 16 for the MSCI Asean Index.

“The expectation is too high, valuation is too high,” Chris Freund, a Ho Chi Minh City-based partner at Mekong Capital, said in a phone interview. “Investors are getting enthusiastic, and eventually something will happen. Investor sentiment will turn from being over-optimistic to the other direction again.”

For now, global investors seem willing to pay premium multiples, given the country’s growth outlook. They’ve bought a net $432 million of local shares since Jan. 1, extending last year’s record inflow of $1 billion.

Bloomberg called Vietnam a “frontier market” in Asia last year, as it was the biggest gainer in percentage terms with a 47 percent gain on the VN-Index. Market capitalization increased by almost double to nearly $150 billion, fueled by state-owned company sales and listings, it said.

Vietnam’s economy grew 6.8 percent in 2017, breaking its own 6.7 percent target which both government officials and economists had considered ambitious.

The country remains one of the fastest growing economies in the world, and has set a goal of expanding another 6.7 percent this year.

 
 
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