As Vietnam’s economy began to enter the stage of stability, the stock market has reacted positively. Many listed companies reported positive third-quarter earnings. Hence, investors are hoping for a breath of fresh air on the Vietnamese stock market, generated by foreign capital flows.
According to Institutional Investor Magazine, the Vietnam’s stock market is among the most attractive markets to foreign investors. Foreign investors bought US$280 million net in the first six months of 2014 on the Hochiminh Stock Exchange (HOSE), nearly 20 times higher than in 2013.
The active participation of foreign investors has substantially boosted market liquidity. The VN-Index, the main gauge in Vietnam, sometimes surpassed 600-point threshold, 19 percent higher than the value at the start of the year. This is a desirable growth rate for any stock market in the region and in the world.
Positive business performance
In addition to the stronger participation of foreign investors, positive business results of listed companies in 2014 also added impetus to investors. According to Vietstock, a market data company, among 251 companies reporting third-quarter earnings results as of October 21, 2014, only 33 incurred a combined loss of VND603 billion.
According to financial statements released by listed companies, real estate and construction companies still faced up with numerous difficulties. Hoang Quan Consulting – Trading – Service Real Estate Corporation (HQC) fetched VND10.5 billion of net profit in the first nine months of 2014, down 63 percent from a year earlier. But, some companies of the same industries managed to overcome the tough time by reshuffling finance, accelerating debt recovery and restructuring business lines, including Kinh Bac City Development Holding Corporation (KBC) and Vietnam Electricity Construction Joint Stock Corporation (VNE). VNE made a net profit of VND104 billion in the third quarter, an increase of 55 times over the same period last year), thus sending its nine-month profit to VND4 billion.
Hoang Anh Gia Lai Group also made a breakthrough profit in the third quarter of 2014 with VND950 billion, four times higher than a year earlier. Although this result came from its proceeds it took from selling stakes in its subsidiaries but its business operations kept growing up, featured by a 45 percent growth in gross profit.
Phu Nhuan Jewelry Joint Stock Company (PNJ) boasted a very good result after restructuring its business lines. The company saw a slight decline in net revenue but its profit after tax soared 76 percent to VND205.8 billion in the third quarter.
Optimistic performances of enterprises have a positive impact on the economy. Macro economy has been more stable. Gross domestic product (GDP) in the first nine months rose 5.62 percent from the same period of 2013. Market risks also eased when the credit risk swap index for a 5-year term plunged from 700 in 2008 to 200 now.
Inflation also improved significantly. Inflation climbed 3.62 percent in September, enticing banks to lower interest rates. This is considered one of the factors that pull foreign investors back to Vietnam.
More diverse products
Although Vietnam has not raised the ownership ratio of foreign investors in listed companies, the Government’s consideration on this matter also motivates foreign investors to invest more into Vietnam’s stock market.
Mr Bill Stoops, Investment Director at Dragon Capital, said “The widening of foreign-ownership room will be surely a long journey as it happened in other Asian nations in the past 20 years. The proposal for the increase of foreign ownership ratio from 49 percent to 60 percent and the change of the individual ownership ratio at Vietnamese banks is expected to be submitted in the first quarter of next year. Currently, foreign investment value accounts 10-15 percent of total market value.
Mr Marc Djandji, Brokerage Director at VPBank Securities Company (VPBS), said more and more fund managers are visiting the Vietnamese stock market because this show enormous investment opportunities, particularly when Vietnam is coming closer to the ASEAN Economic Community (AEC).
Products on the stock market are more diverse. The launch of the first domestic ETF exchange-traded fund (ETF), VFMVN30, drew VND202 billion of investment capital, doubling the initial expectations. The advent of domestic ETF funds will increase investment opportunities from foreign capital flows. Besides, the market for securities derivatives is expected to be launched in 2016, with the first being futures contracts.
However, these products will only be seen after several years. So, the ongoing privatisation of over 400 State-owned enterprises (SOEs) engaged in various industries is offering a great opportunity for foreign investors. On November 14, the national flag carrier Vietnam Airlines will launch its initial public offering (IPO) and the leading mobile carrier Mobifone is expected to go public next year.
Dinh Thanh
Đăng ký: VietNam News