Vietnam’s biggest investors expect further gains despite virus

Vietnam’s nascent stock rebound could push on to fresh highs thanks to cheap valuations and a positive earnings outlook, according the country’s two biggest equity investors.

The VN Index may advance another 10% to 1,500 points provided that Covid-19 vaccinations curb new virus cases in coming weeks, according to Bill Stoops, chief investment officer at Dragon Capital Group Ltd., which manages $5.8 billion. Vietnam is dealing with the latest virus wave better than peers, according to $3.3 billion manager VinaCapital Group, which favors real estate and consumer companies.

The 7% slump in the benchmark gauge last month — the worst since March 2020 — triggered a bout of bargain hunting by global funds, which became net buyers for the first time in 10 months. Its performance mirrors that of other equity gauges, such as India and Australia, where investors are betting the recent wave of infections will come under control while policymakers continue to support the economy.

If Vietnam can control the outbreak, it will “get back on track to where it was before this fourth wave,” said Stoops, who expects earnings on the benchmark to jump 45% this year. The VN Index hit an all-time high of 1,420 in July before pulling back.

Stoops is bullish on banks, property and steel stocks as well as retail and technology firms like Mobile World JSC and FPT Corp.

Severe Outbreak

Like many of its Southeast Asian neighbors, Vietnam is struggling with a severe outbreak. The country has recorded nearly 290,000 local infections since late April, according to health ministry data.

Despite the recent plunge, the VN Index is still up 23% for the year, Asia’s best performing major stock gauge. Its forward price-to-earnings multiple, which is at 14 times, is below its five-year average of 14.5 times, according to Bloomberg-compiled data.

Vietnam aims to vaccinate 75% of its population by early next year, even though only 1.4% of its 98 million population was fully inoculated as of Aug. 18. The country has also handled the latest wave better than some nations like Malaysia and Thailand. That’s given investors confidence that the market will soon rebound.

By Nguyen Kieu Giang – Bloomberg – August 19, 2021