Mirae Asset Vietnam: VN Index to rise by 30pct in 2021

20-Jan-2021 Intellasia | The Leader | 6:02 AM Print This Post

In the 2021 Strategic report in 2021, Mirae Asset Vietnam Securities Company expressed a positive view on Vietnam’s stock market.

Accordingly, the uptrend of the market is expected to be mostly in in 2021 with the highest target for the VN Index being 1,355 1,425 points, up by nearly 30 percent over 2020.

This expectation is based on the assumptions that the corporate earnings growth is estimated at 19 percent and the highest Price to Earnings (P/E) target reaches 19 20x, on the expectation that the economy will maintain a good recovery momentum.

The P/E of the VN Index by the end of 2020 was 17.6 times, 10 percent higher than the average P/E in the past five years (16 times). The current valuation is no longer cheap but still much lower than the P/E of 22 times recorded in early 2018 when the VN Index reached its historical high of 1,200 points.

The analysis team of Mirae Asset Vietnam believed that the valuation will continue attractive to long-term investors with forecasted P/E in 2021 reaching 14 times (assuming that the Earning per Share (ESP) in 2021 to be 25.5%). It means that the expected valuation remains cheap and opportunities are still open for medium and long-term investors.

The above expected P/E valuation zone is still in the movement zone in the last three years. accordingly, the real asset bubble risk will not occur in 2021 although the market has been going through a period of exceeding expectations.

Mirae Asset Vietnam’s analysis report mentioned that the VN Index will have the opportunity to surpass the 1,200 record level set in 2018 to reach a new peak. However, the level of market volatility is expected to increase after the VN Index set new highs.

After a large-scale rally since the market recovery from April 2020 until now, the differentiation between sectors and stocks has become clear in the context that investors have time to re-evaluate business performance of companies after the Covid-19, especially the second half of 2021.

The economic outlook for 2021 is still growing according to the V-shaped model, reaching 6.9%. the driving force comes from the export growth when Vietnam has participated in many FTAs, and Vietnam is the destination of the waves of supply chain restructuring. At the same time, domestic consumption keeps up the recovery momentum and economic support policies are maintained.

The biggest risk for the Vietnam’s economy and the world economy is still Covid-19. In the opposite direction, if the Covid-19 situation continues to be complicated on a global scale, this will slow down Vietnam’s economic recovery due to the high openness of the country and Vietnam is taking part more deeply into the global supply chain.

On the other hand, despite being controlled, Covid-19 is forecasted to hardly disappear in 2021 and the global economic growth will need more time to return to its pre-epidemic normal state. This will have a significant impact on Vietnam’s economic growth in the medium term when the economy is increasingly penetrating deeply into the global supply chain,

The global stock market will continue to be affected by the geopolitical/non-traditional events such as the US-China tensions after Biden is elected as the US President, accompanied by unpredictable policies. The pressure on stock valuation is increasing on a global scale after a period of rapid and strong recovery. Many key indexes in the world have established new highs in history.

In addition, Mirae Asset Vietnam also said that the macroeconomic risks will increase in the medium and long-term due to the excessive monetary and fiscal policy loosening, which needs special monitoring, including inflation, exchange rate, public debts, etc.

 

Category: Stocks, Vietnam

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