Bank stocks still have good opportunities in 2021

12-Jun-2021 Intellasia | NDH | 5:02 AM Print This Post

In the past period, bank stocks played an important role and were the main driver of the market, helping the VN Index rise sharply to1,350 points. The market capitalisation of 16 listed banks currently contributed more than 35.5 percent of the total capitalisation of VN Index and 42 percent of capitalisation of VN30-Index, a sharp increase compared to the 20 percent of VN Index recorded a year ago.

Tran Thang Long, Research and Analysis director of BIDV Securities Company (BSC) had a talk with reporter of Thoi bao Ngan hang around this issue.

Assessing the growth rate of bank stocks in recent time, Long said that the top 5 stock markets of the Asean are all in the group of emerging markets including Malaysia, Indonesia, Philippines, Thailand and Singapore. Meanwhile, the Vietnam’s stock market is among frontier markets, but it achieved the best growth rate in the first five months of 2021 with 22 percent from1,098 points to 1,345 points, along with an outstanding growth in liquidity which is approaching 29 30 trillion dong per session, the second highest in the Southeast Asia.

The main contributor to such results is the group of bank stocks, which gained the highest increase and accounted for nearly 40 percent of the market’s liquidity. There are four driving forces behind bank stocks’ strong growth in both price and liquidity. Firstly, despite the Covid-19 epidemic, banks still maintain good growth in profit and asset quality, thereby becoming the fulcrum of confidence for investors and for the market.

Secondly, the economic recovery in 2021 will support businesses to resume production and business activities. This will help reduce bad debt pressure, thereby reducing the pressure of risk provisioning for banks.

Thirdly, the continuous market liquidity growth, the strong capital inflows of individual investors to the market in the first half of 2021 will positively support stock prices in general and bank stock prices in particular.

Fourthly, since the interest rate level is currently low, the valuation of the industry (Price to Earnings and Price to Book) are accepted at higher levels compared to 2019.

Talking about the prospects and risks of bank stocks, Long said that BSC believes that bank stocks have good prospects and will continue to be the dominant industry group which leads the market to rally in the second half of 2021. Firstly, not only in Vietnam, in other countries, banks always benefit when the economy recovers.

Secondly, each bank has its own story such as issuing shares to foreign investors to increase capital, distributing dividends in shares, etc. in order to attract investors.

Thirdly, the trading system of the HCM City Stock exchange (HoSE) is being upgraded, and it will create a premise for strong cash flows into the stock market, thereby helping increase the valuation of the VN Index in general and of bank stocks in particular.

Fourthly, the wave of banks shirting from the Over the Counter market (OTC), the Unlisted Public Company Market and the Hanoi Stock Exchange (HNX) to the HoSE is still ongoing and will continue to help increase the size of the whole industry in the total capitalisation of the VN Index.

Regarding risks, according to Long, the banking industry also has similar risks as the Vietnam’s economy. The fourth Covid-19 outbreak is still spreading in a much larger scale compared to three previous three outbreaks, causing the business activities of many industries to negatively affected. Being an economic sector, the banking industry will suffer from the epidemic both directly and indirectly through banks’ customers. However, when considering both the prospects and risks, BSC believed that bank stocks still have good opportunities in 2021.

BSC recommended that investors should be cautious when considering investing in any industry, not only in banking. They need to be equipped with necessary skills and knowledge for investment, such as fundamental analysis technical analysis, etc. In addition, investors also need to determine how much their investment expectations are, how long the investment will last and whether the capital used to invest is short term or long term.

Currently, Vietnam’s investors have only accounted for less than three percent of the population, a very low level compared to the 30 percent of the population in the Southeast Asia, or 50 70 percent of the population in developed countries. Therefore, the potential of the stock market in general and bank stocks in particular is very good.

For knowledgeable investors who want to access bank stocks, it is necessary to monitor macro factors that can affect the business results of the industry such as interest rates, bad debts, policies, etc. In addition, investors should investment in stocks with relatively cheap valuation in the industry which have good asset quality and high profitability.

For investors who are not equipped with necessary knowledge and skills or do not have a clear investment goal, instead of investing specifically in each stock code, they should buy fund certificates released by professional fund management companies to reduce risks.

 

Category: Finance, Vietnam

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