The GDP growth rate is likely to hit the bottom in this third and fourth quarter or early next year when it would be a good time for investing in stocks, said CEO of Dragon Capital Domic Scriven.
Economic gloom has been observed since the second quarter two years ago till last year with galloping inflation, weakening GDP growth and flat stock market. The third quarter last year witnessed sluggish GDP growth, yet inflation was relaxed and known as reflation period. The matter in question is when inflation and GDP growth will hit the bottom.
CPI growth rate hit the record high of 23.1pct in August 2011 before continuously dropping till the time being. The rate edged up 0.18pct in last May against the preceding month and 8.3pct year-on-year. First-five-month inflation rate climbed 2.7pct over the end of 2011. CPI September is expected to hike 6pct year-on-year and hover around 7pct afterwards till the year end.
Like Europe and the U.S real estate firms, local businesses have also been burdened with enormous debts. However, borrowing via credit cards and housing collateral loans make up merely 12pct of 2010 GDP whereas the total outstanding loans equal to 136pct of GDP. Debt reduction was then kicked off in an attempt to lower the debt-to-GDP ratio to 117pct by the end of 2011.
The GDP growth rate is forecast to hit the bottom after two or three years since debts reduction, probably in early 2013 or 2014. Yet, given the modest proportion of households’ borrowing over GDP, GDP record low could be observed earlier in quarter 3 and quarter 4 this year or early next year which would be the best time for stock investment.
Importantly, businesses’ profits are anticipated to pick up for 2012. Also, price to earnings ratio (P/E) for 2012 is forecast at 9xs, VN Index 450 points and earnings per shares (EPS) up 18pct against the 9 percent decline one year ago.
In addition, mobilisation rate of between 12pct and 14pct is presently the highest in Asia. In all likelihood, monetary and fiscal policies could ease further in the time to come. Deposit interest rates are expected to drop another 400 basis points to 8pct, which could facilitate stock market revival.