Vietnam’s share valuations will need more discounts to be attractive to both local and international investors, given weak liquidity, low transparency and an uncertain macro environment, HSBC said in its latest report.
Vietnam’s shares now have average 2009 P/E at 11.9x with a return on equity of 18% and a dividend yield of 2.4%.
With assumption on earnings growth of 25% in 2010, PE is estimated at 9.5x this year, higher than 9.2x of South Korea, but cheaper than other ASEAN markets such as Thailand with 12.2x and the Philippines 15.4x. It trades below its post-2008 average of 13.6x.
Valuation is becoming reasonable but liquidity remains a concern. Only 30 companies has market capitalizations above US$200 million, while the number of stocks with maximum foreign ownership, capped at 49% for firms and 30% for banks, increased to five from three.
The listings of 27 new companies in July and August failed to help boost liquidity, HSBC said, noting that the market volume is only improved when large-scale state-owned enterprises are listed.
Local banks are also facing the central bank’s strict regulations, which ask them to have a minimum registered capital of VND3 trillion (US$154 million) by end-2010 and capital adequacy ratio of 9% from October 1. Thus, they will rush to raise fund via the stock market, which may cap the index’s upside.
However, the government may introduce more measures to support the market before the Party Congress next year; and the Hochiminh Stock Exchange has started to extend continuous price bidding session to boost liquidity from September 13.
These factors are expected to lead to a rally in the short term, HSBC said.
As of September 6, only six companies on Vietnam’s exchanges had market value of over US$1 billion each, including Vietcombank (VCB), Vinamilk (VNM), Masan (MSN), Vincom (VIC), Vietinbank (CTG) and Hoang Anh Gia Lai (HAG).
The VN-Index closed at 448.72 on September 15, falling 9.2% from end-2009.
The government estimates the economy may grow at 7.18% in the third quarter versus 6.4% in Q2 and 5.83% in Q1, leading to a full-year growth of 6.7%, and a 7.5% projected for 2011. (HSBC Report)
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