VN Index Falls, Investors Advised To Buy Equities

Investors have been advised to buy equities

Just within 1.5 months, the VN Index dropped from a peak of 1,200 points to 900 points, turning Vietnam from the best performing to the sharpest decreasing stock market.

It took four months for the VN Index to climb from 900 points last December to 1,200 points on April 9, 2018. But in 1.5 months the gains were blown away. The VN Index plunged again by 22 percent to 931 points on May 28.

A report showed that more than 50 shares saw prices drop by more than 50 percent from their peaks, while 100 shares saw prices drop by 30-50 percent and 180 shares by 10-30 percent. The P/E decreased to below 18 from 22 which was seen before April 9.

Meanwhile, Bill Stoops, CIO of Dragon Capital, speaking to CNBC, said it is now a good time to buy. Vietnam’s economy is now in good shape with improved payment balance and low foreign debts, and a stable and healthy local currency. 

Besides, as the market has become exhausted because of sell-offs, the share prices are at reasonable levels with the P/E at 13-14 and the EPS at 25 percent.

When the VN Index dropped to the 900 point threshold, it met the resistance threshold, so the sell-offs will stop. Foreign investors will calm down and the stock market will recover.

Asked to suggest some shares investors can buy at this moment, he named Hoa Phat steel group. Surprisingly, the P/E of the share is 8 only, while the EPS is between 25-30 percent in the next three years.

Bloomberg also reported that though Vietnam is among the most oversold markets in the world, bull investors still think that Vietnam’s high economic growth rate and enterprises’ good performance are reasons to remain optimistic.

Predicting the market performance in June, Maybank King Eng (MBKE) is inclined to be a better scenario for three reasons.

First, in Vietnam’s stock market history, in 2009-2018, the VN Index never decreased by more than 20 percent. This means that the decrease in the last two months was the maximum level and it is the time for the index to rise. Second, foreign investors are likely to come back to become net buyers. 

The net sales in the last two months were attributed to an oversupply of shares. A lot of investment funds had to restructure their investment portfolios by selling shares, so as to buy VHM. As the factors leading to oversupply won’t exist in June, the net sales will end.

Vietnam’s economy is also healthy with a GDP growth rate of 7.38 percent in the first quarter.

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Chi Mai