Bualuang Securities (BLS) is bullish on the Vietnamese stock market despite a sharp decline of 11.6% in April, citing Vietnam's high economic growth prospects.
According to BLS Mutual Funds, an investment unit of BLS, the drop in the Vietnam Stock Index can be attributed to three factors.
The first factor was the arrest of an executive at FLC Group, a Vietnamese real estate firm, for manipulating stock prices, concealing securities information and violating rules related to capital raising from the issuance of Tan Hoang Minh shares worth more than 10 trillion dong (15 billion baht).
The news soured market sentiment and caused panic selling among retail investors who constitute a large part of the market's investor base.
The second factor is that the Vietnamese government has reportedly tightened its grip on the country's real estate sector to prevent an economic bubble.
The third factor is that securities firms in Vietnam have margin loan policies, forcing mass sales of equities when their values plunge below a minimum margin requirement and investors fail to bring their account values to the required amount. The forced selling caused stock prices to further drop.
These issues lead BLS to expect market sentiment to remain under pressure for the short term, with the sharp decline over the past two weeks perhaps causing more selling pressure.
However, in the medium to long term, such factors are not expected to have a significant effect on the economy's fundamentals, said the brokerage.
BLS Mutual Funds said Vietnam is set to be one of the fastest growing economies in the world in 2022-2023 and is likely to grow considerably due to its favourable social structure. The state aims to become a developed country by 2045.
Moreover, the country's fiscal status also remains strong. The government is expected to target a fiscal deficit of 4% between 2021 and 2025 to support the expansion of the country's economy. The low interest rate policy is also a stimulus for the recovering economy.
BLS said up to 79% of the country's population have already been fully vaccinated against Covid-19, so the country has considerable immunity against new waves of infection. The amount of outdoor activity has also increased markedly since the end of 2021.
"The Vietnamese stock market will continue to grow in line with the economic recovery. Vietnam's share price has dropped to an attractive level with the price-to-earnings ratio of 12 times. Considering the recent decline, it's a good time to invest more in the [Vietnamese] market," BLS Mutual Funds said.
BLS's picks for Vietnamese funds include PRINCIPAL VNEQ-A, SCBVIET and B-VIETNAMRMF.
BLS says PRINCIPAL VNEQ-A has active management and more flexibility as it let investors choose their own stocks. It also emphasises large-cap stocks with high liquidity that will benefit the most from the country's reopening and economic recovery.
SCBVIET is a tax-deductible fund with balanced portfolio management. Its investment is diversified into three kinds of products, including single stocks, exchange-traded funds and foreign active funds that let the funds capture returns in all long-term situations.
B-VIETNAMRMF primarily focuses on small- and medium-cap stocks.
