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| Foreign investors optimistic to stock market |
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25-APR-2008 Intellasia | Thoi Bao Kinh Te Vietnam |
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25 Apr, 2008 - 7:00:00 AM |
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Recent corrections of the market have made many investors including foreign organisations suffer from heavy losses.
At a recent meeting held by the Dai Viet Securities Joint Stock Co (DVSC), Indochina Capital’s director Thomas Ngo said that since the end of 2007, securities indexes of both Hanoi and HCM City bourses have unexpectedly slashed. Like domestic investors, foreign investors have also suffered from heavy losses.
According to initial statistics from Indochina Capital, within over three recent months, 10 foreign organisations that are investing into Vietnam’s stock market have been entitled to a big loss of over US$1.3 billion. Each fund has lost some US$130 million on average, some funds have suffered from bigger losses.
Not only foreign individuals, organisations, funds investing into Vietnam’s stock market but also domestic organisations, namely securities companies have also entitled to heavy losses. Such losses came from the optimistic view on Vietnam’s stock market in 2008, which was made by many investment funds. Although having admitted that Vietnam’s stock market will not see a hot growth as 2006 and will be impacted by the global economy, many fund could not think that the stock market dropped by over 50% over the last time.
Even some funds forecasted at the start of 2008 that VN Index will increase by over 1,000 points or even exceed 1,100 points by the end of 2008.
The forecast was based on optimistic signs of economic growth at the start of this year when foreign direct investment flows into Vietnam last year surpassed US$20 billion, export strongly grew to over US$48 billion and was forecasted to continue rising in 2008. Additionally, consumer indexes, the number of tourists were also expected to further push domestic spending, which is also a factor promoting economic growth and presents positive impacts on Vietnam’s stock market.
Based on the above factors, foreign investors still continued buying shares that they hope will have development potentials in the future.
Ngo Huu Hung, chief of DVSC’s analysing division, said within some two recent weeks, foreign investors reported strong buying volume.
Big investment funds and financial organisations are preferred to buying shares that had good business results in 2007, earnings per share (EPS) growth of 40%. It is assumed that EPS in 2008 is 20%, P/E will be only 12x.
“However, the market is presenting unexpected changes. That the world’s and Vietnam’s economies have not yet had any positive sign, business results of many listed companies will be significantly by inflation and banks are facing up pressures on settling securities collaterals demonstrates that the market cannot see sustainable growth in short-term. Nevertheless, investors still can gain profit if they select shares with good P/E and have clear business strategies,” said Hung.
“Individual investors have been more professional and this will help promote development of Vietnam’s stock market in the future. The current corrections are only temporary, foreign investors still strongly believe and continue investing into Vietnam,” said Thomas.
However, buying shares by foreign investors could not rescue the market, particularly when securities companies, banks are facing up great pressure on setting securities collaterals when shares are dropping sharply.
“Foreign investors, we, are not Gods, we are still impacted by the market. On the other hand, not all foreign investors are long-term investors. Therefore, domestic investors should not trade shares based on transactions of foreign investors but they should base on their own analysis and determination. This is very important for sustainability of the market because only 20% of domestic small and medium investors are impacted, the market will be hurt accordingly, emphasized Thomas.
However, optimistic views on macro-economy makes long-term investors still consider buying shares despite of high inflation, difficulties in monetary policies or possible downward economic growth.
“Investors should not be too anxious because Vietnamese companies will still strongly develop in the upcoming time, the stock market still has many potential of growth and there remain many good opportunities for long-term investment,” said Thomas.
Not only Indochina but also many other investment funds such as Goldman Sachs, Vietnam Asset Management have optimistic points of views on Vietnam’s stock market.
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