The stock market of Vietnam is likely to move sideway in several coming quarters after suffering strong fall in recent sessions, said Pham Thanh Binh, director of Research and Analysis Division of PetroVietnam Securities JSC (PSI) at a seminar on August 9.
The weak momentum is attributed to limited cash flows, weak foreign investment, share oversupply and slow EPS growth, Binh said.
The outstanding loans of Vietnamese banks rose 12.97% in the first seven months of this year, while credit growth is curbed at only 25% for this year, which will be not supportive for cash flows into the stock market.
Foreign portfolio investment has been weakened in recent one month, with a net buying of VND566.42 trillion on the Hochiminh Stock Exchange (HOSE) in July compared to average VND1 trillion per month during the first half.
On assumption, analysts said troubles of the state-run shipbuilder giant Vinashin exposed recently may have hurt foreign confidence and weakened their inflows.
A glut of shares from new listings and additional offerings by listed firms will also contribute to holding back the market. Commercial banks may absorb up to VND100 trillion ($5.24 billion) for their capital hike from now to 2015, equal to VND1.5 trillion per month.
The HOSE said some 1.3 billion shares will also go on bourse through the end of this year.
PSI estimated forward EPS for 2010 would rise 13% on average from last year, based on six-months earnings results of 13 bluechips on the market; while many small and mid-cap stocks are being diluted, Binh said.
As a result, the market is unlikely to have rallies though share prices are relatively low. P/E of Vietnam shares is now 10.5x, just higher than 9.8x in South Korea.
However, analysts still get upbeat about Vietnam’s economic growth in medium and long term. The average GDP growth was 7.31% between 2001 and 2008, and would be maintained at 7%/year in next 5-7 years.
Vo Tri Thanh, deputy head of the Central institute of Economic Management (CIEM), said the government would focus on measures to stabilize the macro economy rather than boosting growth; so investors should not pin high hopes on sudden changes in monetary and forex policies.
The VN-Index moved around 500-point level during the first seven months, but it has lost 6.23% from early August to close at 463.12 today, August 11, on increasing concerns over weak inflows and oversupply. (Vietnam Economic Times, Securities Investment)
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