HSBC says Vietnamese stocks expensive

In its latest Vietnam Monitor report released on July 8, the Hong Kong Shanghai and Banking Corporation (HSBC) said that since the strong growth period began, Vietnamese stocks have become expensive.

According to HSBC’s experts, Vietnam’s stock market is the market which witnessed the strongest rise in Asia in the second quarter of the year, with the VN Index having increased by 60 percent. The index increased by 117 percent from the deepest low in March to the highest peak in June.

 

Other figures also show the warming up of the market. The market capitalisation value of both the Hanoi and HCM City bourses has exceeded $20 billion. Two share items now have the market capitalisation value at over $1 billion, while 12 other items have the market capitalisation value at $500 million and higher.

 

However, HSBC believes that the most impressive rise was seen in the trading value. The banking group’s report contained figures which show that in June, the daily trading volume of the two bourses reached $166 million on average. Especially, on some days, the total trading volume reached $300 million.

 

Meanwhile, in lackluster days in February, the daily average trading volume of the two bourses was $13 million only.

 

According to HSBC, the recovery of Vietnam’s stock market was led by domestic investors rather than foreign ones.

 

In May, foreign investors were modest investors in Vietnam’s stock market with the net purchase value of $46 million. Meanwhile, in June, foreign investors sold $28 million worth of stocks more than they purchased.

 

In June, foreign investors’ transactions only accounted for 6.8 percent of the total trading value on Vietnam’s stock market, while the figure was 22 percent last year.

 

According to HSBC, the dominance of domestic investors in the domestic market with their speculation plans proves to be worrying foreign institutional investors, since domestic investors have pushed stock prices to unattractive levels.

 

According to HSBC, the P/E of the Vietnamese market is forecast to rise to 15.6, a high level.

 

The P/E proves to be higher than the projected P/Es in other markets in Asia. In China, for example, the P/E is forecast to be 14.5, while the figures are 10.8 in Thailand and 12.8 in Indonesia.

 

As the Government’s one-year term bond yield is 8.5 percent and real estate prices have increased again, a lot of domestic investors are considering injecting money in other assets instead of stocks. That explains why June sometimes saw the VN Index decrease to below 500 points.

 

HSBC believes that with the heavy fluctuations of Vietnam’s stock market, foreign investors should not join the market at this moment.

 

VietNamNet/TBKTVN

 

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