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"Sustainable" stock market to reach record high in 2018

Released at: 18:09, 03/01/2018

"Sustainable" stock market to reach record high in 2018

Photo from kinhtedothi.vn

Analysts believe VN-Index will surpass record reached in 2007 sometime this year.

by Duy Anh

Having hit 1,000 points on January 3, Vietnam’s stock market seems certain to retain the upbeat sentiment seen in 2017 and drive the VN-Index to an all-time high by year’s end, analysts say.

The VN Index was not only one of the strongest stock indices in the region last year but also the world. It closed at 984.24 on the last trading day of 2017, up 48 per cent from the same day 2016, wrapping up a bullish week and setting a ten-year high.

Average daily turnover rose 63 per cent compared to 2016, with growth attributable to new listings, the acceleration of the State-owned enterprise (SOE) equitization process, and a new law requiring companies list on the stock exchange after an initial public offering (IPO).

Analysts believe the momentum will continue and take the index passed the 2007 record of 1,178 points. The market bears very few risks but a high degree of confidence over growth, according to analysts.

The RongViet Securities Corp. said in a report that the VN-Index will increase at least 17 per cent this year or even 67 per cent in its best-case scenario, meaning it could end the year somewhere between 1,170 and 1,640 points.

“The VN-Index could reach 1,050 points in the short term and 1,300 by year’s end,” Mr. Nguyen The Minh, a senior analyst at Saigon Securities Incorporation, said. Stocks that did not receive much attention last year should have major potential now, he added.

The market in 2017 was driven by consumer goods stocks, but banking and energy will take the lead this year, he said, with the market to be boosted by interest from the foreign sector. Foreign investors made more than $1 billion in net purchases last year - the highest in five years - and will continue to stick around for new equitizations of State giants.

While the market is expected to see a steady flow of new listings, from both equitized SOEs and private companies, some are unsure that the 40 per cent increase in the VN Index is sustainable.

A market commentary released by VinaCapital in December stated that much of that growth was caused by a handful of large cap stocks. The price-to-earnings ratio in the VN Index is no longer a bargain compared to regional peers, hovering around 18-19x, though the growth opportunities in Vietnam are much higher.

“We note that global market valuations are up, and provided global confidence remains high we would expect the Vietnamese stock market to be positively impacted,” VinaCapital wrote.

The government has set some ambitious goals for equitizing SOEs during the 2017-2020 period, expecting to partially equitize 137; a move that could raise $13 billion or more for State coffers.

Major companies set to undergo equitization over the next two years include Vinataba, Saigon Trading, Ben Thanh Corp., Saigon Tourist, VNPT, and subsidiaries of PetroVietnam. The State Capital Investment Corporation (SCIC) is also authorized to sell down its holding in more than 100 companies, including blue-chips such as the Bao Minh Group, Binh Minh Plastic, Military Bank, Domesco, and Vinamilk.

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