With Vietnamese shares close to erasing their losses this year, strategists say the benchmark gauge will continue climbing to reach the highest level since 2008 as a rising economy and earnings draw investors.
After surging 11 percent from this year's low on Jan. 21, the measure will extend gains to about 642 by the end of 2016, or 11 percent above its close on March 14, according to the average of 10 analyst forecasts in a Bloomberg survey. The stock index rose 6.1 percent in 2015, the best performer in Southeast Asia, while the MSCI ALL Country World Index slid 4.3 percent.
"The outlook for this year looks better as we expect strong earnings growth, driven by an emerging consumer and strong manufacturing," said Barry Weisblatt, head of research at Viet Capital Securities, the country's third-largest brokerage. "The domestic story is quite strong." He expects earnings growth of 20 percent this year and targets the stock index to reach 680 by year-end.
Vietnam's economic growth target of almost 7 percent this year makes it among the fastest-growing markets in the world and offers investors a refuge in a region rocked by the fallout from China's economic slowdown. Companies in the consumer, industrial, building and power sectors will help power a rally as they benefit from fastest expansion in almost a decade, according to the strategists. Profit at companies on the benchmark gauge are projected to grow 14 percent in the next 12 months.
Dream House Investment Corp., a construction company, and Foreign Trade Development and Investment JSC, a developer of industrial parks, are among the biggest gainers this year on the VN Index, having jumped at least 46 percent.
The VN Index is down 0.2 percent for 2016 after briefly erasing its annual loss in intraday trading on March 14. The measure was down as much as 10 percent in January. The stock gauge rose for a fourth year in 2015, the longest run of annual gains since 2007. Overseas investors added a net $100.4 million to their Vietnam stock holdings in 2015, the 10th straight year of inflows, when other Asian markets suffered outflows. Disbursed foreign investment surged to a record $14.5 billion last year, while pledged foreign investment climbed 12.5 percent, government data show.
"Strong domestic consumption and continued FDI will support the market," Patrick Mitchell, director of institutional marketing at Maybank Kim Eng Securities Ltd., said in Ho Chi Minh City. "The positive macroeconomic environment continues to promote cash flows from developed markets into Vietnam." He recommends builders as well as companies that will gain from free-trade agreements, such as Kinh Bac City Development Share Holding Corp., Gemadept Corp., and Cotec Construction JSC.
Growth Quickens
Vietnam's gross domestic product rose 7.01 percent in the fourth quarter from a year earlier, quickening from a revised 6.87 percent gain in the three months through September, according to government data. The Asian Development Bank predicts the country's economic expansion for 2016 will be 6.6 percent, the highest among six Southeast Asian countries, according to a December report.
The Vietnamese equity gauge is trading at 1.7 times net assets, near the lowest level in three years, while the MSCI All Country World Index is valued at 1.9 times, data compiled by Bloomberg show.
Vietnamese equities are still vulnerable to external risks including prospects of higher U.S interest rates and more devaluations of China's yuan that may affect the local market, according Nguyen Hoang Giang, chief executive officer at VNDirect Securities JSC. The yuan's depreciation will "put pressure" on the local currency to compete for export markets, he said.
Bloomberg
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