Revised Securities Law: Most-expected Solutions

11:14:33 AM | 5/7/2019

Recent successful investment deals like Techcombank (US$900 million), Vinhomes (US$1.35 billion), and most recently Vingroup (US$1 billion), along with State divestment deals such as Vinaconex (VCG), PVOIL (OIL) and PV Power (POW), caught the interest of many foreign investors and kept strong foreign inflows to the Vietnamese stock market.

According to a research conducted by Vietnam Report Joint Stock Company, mid-cap stocks are expected to make a big rising wave across the Vietnamese stock market. After all, the Vietnamese economy benefited from the China-U.S. trade war. Among listed companies, those gaining most benefited from this dispute are industrial park developers (as manufacturing facilities relocate from China to Vietnam), logistics companies and garment and textile producers, which are largely mid-caps. The price-to-earnings (P/E) ratio of mid-cap stocks is quite low, standing at 9.3 times at the end of 2018.

However, it must be acknowledged that long-term benefits of the trade war will shift to retailers, consumer goods companies, large-cap banks and real estate developers, as more foreigners move to work and live in Vietnam, thus boosting the growth of consumer goods as the middle class expands.

According to surveyed experts, retail and consumer goods companies will be most attractive to investors in the coming time.

According to financial and securities brokers, investors and specialists surveyed, income and earnings of listed companies will have the biggest impact on stock price (57.1% of respondents opted for “very much impact” when asked about the extent of impact of earnings/income information on the stock price).

In fact, the stock performance of a company is often directly proportional to its business performance and matches investors’ expectations. According to data from Vietnam Report Joint Stock Company, positive information flows tend to decrease, while negative news frequency tends to increase in the last two months, which coincided with the first-quarter earnings season. According to financial data collected, 84% of listed companies reported a profit in the first quarter of 2019. By the end of April 2019, their net income reached VND31,347 billion (US$1.35 billion), a slight increase of 2.9% from a year earlier.

In general, first-quarter business results showed slowing profit growth, but the health of listed companies was still rated positive in 2019 as they quickly changed their target plans and operating strategies adapted to economic fluctuations and to minimize possible negative impacts from slowing global economy.

Accordingly, financial and securities experts still expect their business results will be better from the third quarter and reach the yearly target at the end of 2019. Thus, positive information flows are expected to increase sharply in the last two months.

According to the survey by Vietnam Report, the amended Securities Law is the “hottest” and most-expected solution in the coming time. Accordingly, 27.3% of listed enterprises, investors and industry specialists said that the Government should continue to improve the legal framework, focus on building a revised Securities Law to best support stock market development. Amendments and supplements to the Securities Law are expected to further integrate the domestic market into general standards of regional and global stock markets, and create opportunities for foreign investors to access the Vietnamese stock market more easily. In addition, improved regulatory transparency and uniformity will increase investor confidence and enhance the attractiveness of Vietnam’s stock market.

Binh Minh