HSBC maintains pessimism regarding Vietnam’s stocks
- UPDATED: 05/12/2008 - December’s report by the Hong Kong and Shanghai Banking Corporation (HSBC), Vietnam Monitor Issue 20, has shown a pessimistic view of Vietnam’s stock market, stressing the departure of many foreign investors from Vietnam’s market.
November was another month that saw the gloominess of Vietnam’s stock market, with the VN Index losing another 10.1%. This proves to be a bad decrease, when noting that the MSCI of the Asian market (not including Japan) has decreased by 6.1%. The VN Index has dropped closer to 300 points, the main resistance level.
When comparing to the highest peak attained in March 2007, the VN Index has lost 75% of points.
The total market capitalization value of both the Hanoi and HCM City stock exchanges has been narrowed to $13 billion, a sharp decrease from the $30 billion seen earlier this year. The HSBC’s report has pointed out that the sum proves to be too small in comparison with other small stock markets in Asia, like Indonesia, which has a market capitalization value of $79 billion, or the Philippines’ $98 billion.
The total trading volume of the Vietnam stock market in November was only $782 million, just a little higher than ½ of the trading volume last December. Currently, there is only one listing company that has the market capitalization value of over $1 billion, the Asia Commercial Bank, while there were nine during the same period last year. The number of listing companies with the market capitalization value of over $500 million has also decreased from 15 to 7.
The report said that Vietnam’s stock market has been excluded from the investment portfolios of many foreign institutional investors, except country funds.
Therefore, it is not quite a surprise to see foreign investors continuing to sell the Vietnam’s stocks that they are holding. In November, the net sales of foreign investors were reportedly at $48 million, nearly the same as their net sales in October. However, foreign country funds are still holding 22% of the listing shares.
Regarding the reasons behind the sharp fall of the market, HSBC’s analysts said that besides the impact of the global stock market crash, Vietnam’s market has been falling also because of its internal problems. Lower economic growth and the errors by listed companies in the investment in non-forte business fields, which has caused them to incur loss, have both been cited as important reasons.
HSBC cannot see the bright prospects of Vietnam’s stock market in the time to come. The personal income tax collection from securities investors will begin in January 2009. Though the tax rates are considered very low, experts still believe that the taxation will have a bad impact on the market, thus keeping small investors away from the market.
HSBC believes that Vietnam’s stocks are not cheap at all. The P/E in the next 12 months (it is expected that the EPS will increase by 10% this year and 15% in 2009) is 10, which is much higher than 8.3 in China, and 8.9 in India.
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