Finance & Banking

Last updated: Thursday, February 21, 2019


Securities - Magnet to Money Flows in 2018

Posted: Sunday, December 31, 2017

The Vietnamese stock market is seen as a strong magnet to both domestic and foreign cash flows and a good source of earnings in 2018.

In 2017, the stock market experienced a spur of excitement when VN-Index, rose 40 per cent from 665 points to 926 points, with the market capitalisation rising from 35 per cent of gross domestic product (GDP) in 2015 to 65 per cent in 2017 while liquidity doubled in 2016.

The report on market prospects released by Vietcombank Securities Company (VCBS) also stated its growing confidence in the Government's actions on exchange rates, inflation and interest rates in support of economic growth. The stock market will have a lot of supporting factors for a robust growth in 2018.

Bank stocks in focus

Property drew cash flows but 2018 will be the year of financial-banking stocks. Bank stocks were among the best performers on the stock market in 2017 and will be the most worthwhile investment in 2018.

Bad debt is not totally bad as it has brought unexpected profits to commercial banks in 2017 and this trend will continue to 2018. According to the Vietnam Asset Management Company (VAMC), after dealing with bad debts according to Resolution 42, the company recovered about VND5 trillion, bringing the total debts recovered from the beginning of the year to about VND16 trillion.

In 2018, banking industry is forecast to be positive and bank stocks are expected to go up. Many investors pin hopes on the rally of Vietinbank (CTG) and Vietcombank (VCB). As for joint stock commercial banks joining pilot Basel II, higher expectations are placed on Asia Commercial Bank (ACB) and Military Bank (MB). In addition, some commercial banks with the intention of floating their shares in 2018 may strongly attract investors.

In addition to banks, real estate stocks continued to catch the interest of investors. In the first nine months of 2017, many real estate companies had fulfilled their full-year business plans. In 2018, the real estate market is expected to continue to be active, led by big listings like Vingroup (VIC), Novaland (NVL), Nam Long (NLG) and Dat Xanh (DXG). Real estate stocks will continue to be hot picks.

In 2018, big electricity companies, including PV Power (a subsidiary of Vietnam National Oil and Gas Group - PetroVietnam) or three EVN power generators (GENCO. 1, GENCO 2 and GENCO 3) will give investors more options. Well-known oil and gas stocks are also prospective as oil prices recover from previous lows, helping many companies to take a hefty profit like GAS.

Driven by higher oil prices than last year, GAS reported a nine-month profit growth of 45 per cent from a year earlier and exceeded the full-year plan by 15.5 per cent. Without sudden changes, GAS’s profit is estimated at VND8,300 - 8,500 billion in 2017.

Abundant foreign cash inflows

Foreign net buying value was US$23 million since early October 2017. Foreign portfolio value increased by 47 per cent since the beginning of the year.

Foreigners bought net US$115 million in August and US$33 million in September. In the first 10 months of 2017, foreign net inflow was US$1.426 billion, including US$811 million for bonds and US$615 million for shares.

Foreign portfolio holdings totalled US$27.8 billion, an increase of roughly 36 per cent from the end of 2016. Foreign ownership on the stock market is estimated at 19.3 per cent and 5.3 per cent on the bond market.

Foreign net buying is expected to rebound from the first quarter of 2018 as the US Federal Reserve (FED) raised interest rates at the end of 2017 and they have started a new investment cycle, according to the National Financial Supervisory Commission. Government-backed reforms accelerated economic recovery, many big companies floated their shares and share values are attractive to investors, it said, citing supporting reasons.

Boosted by the increase of domestic and foreign investment capital, the stock market of Vietnam is expanding rapidly in scale and investment opportunities will be more. The market capitalisation grew from 35 per cent of GDP in 2015 to 65 per cent in 2017 and was expected to reach 100 per cent of GDP in the near term.

The Vietnamese stock market is named in the listed priorities for position upgrading by MSCI and the rankings is likely to be upgraded by the end of 2019. The upgrading will keep foreign capital staying in Vietnam and attracting more in the coming years. This is a positive development for the market.

Le Minh

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