The Vietnamese stock market has had a bullish year despite Covid-19, with the benchmark VN-Index rising by over 33 percent to reach a new all-time high.
Starting off the year at 1,100 points, up nearly 60 percent from a slump in April 2020, the index gave investors hope that it would go past its previous high of 1,204 points achieved in 2018.
But after rising to around 1,190 by the end of January it lost 14 percent as the first Covid cases were found in the northern province of Hai Duong. It set off the third wave of the disease that lasted over two months.
But investors had seen the market rebound after the two previous waves and so remained unfazed, and the index quickly recovered to touch 1,200 on March 18.
On the first day of April it climbed to a new high of 1,216 points.
The fourth wave of Covid did not worry investors at first, and the index continued to climb to reach 1,420 in early July.
But strict social distancing in HCMC and other southern localities and the rising number of deaths dragged it back down to the 1,200 range in mid-July.
There was much volatility for the next two months as HCMC and Hanoi restricted mobility and limited factories’ operations.
The market started to rise again in early October, and on Nov. 25 hit the historic 1,500-point level.
However, amid all this, foreign investors were selling, with their net outflow in the first 11 months being worth VND57.7 trillion, 3.6 times higher than in 2020, according to data from SSI Securities Corporation.
SSI analysts said in a note there are not too many good stocks in technology, retail, healthcare, and education, which foreign investors are interested in, and many have already reached their foreign ownership cap.
Korean retail investors, who accounted for 16 percent of net foreign inflows in 2017-19, were among those selling out, offloading a net $166 million worth of stocks, according to data from the Korea Securities Depository.
“Bitcoin and U.S. stocks, especially tech growth stocks, showed big swings, so investors were attracted to them, rather than Vietnam,” Bloomberg quoted Lee Soyeon, a market strategist at Korea Investment & Securities Co, as saying.
“Stock transactions are a little complicated [in Vietnam] and returns have lagged”.
Analysts estimate that foreign investors account for 6-7 percent of trading and domestic retail investors for 84 percent.
Some 1.3 million new trading accounts were opened in the first 11 months this year, triple the 2020 number.
Tran Hoang Son, director of research for retail clients at for MB Securities, expects foreign investors to return to Vietnam in mid-2022 as the economy begins to recover.
Bullish for decades
In August asset management company VinaCapital said in a report that Vietnam is at the beginning of a multi-year stock market surge just like Taiwan was a few decades ago.
The number of retail stock brokerage accounts in Vietnam (3 percent of the population) is comparable to the figure in Taiwan in 1986, it said.
The Vietnamese government aims to increase the rate to 5 percent by 2025 and 10 percent by 2030, which are realistic targets given the trajectory of Taiwan’s retail investor participation, it said.
“The participation rate of local investors in the stock market is still in its infancy compared to Asian Tigers like Taiwan when those economies were at a similar stage of economic development.”
Another fund management company, Dragon Capital, said in Vietnam, stocks as an asset class have provided average returns of 16 percent a year since the first bourse was set up in HCMC in 2000. In comparison, real estate has yielded 11.9 percent and gold, 9 percent.
Vietnam has enormous medium- and long-term economic potential, Le Anh Tuan, director of investment strategy at Dragon Capital, said.
Brokerage VNDirect expects 2022 to remain a good year for Vietnamese stocks and the VN-Index to reach 1,750 points.
It expects average earnings-per-share on the Ho Chi Minh Stock Exchange to reach a high 23 next year before falling back to 19 in 2023.
Sectors likely to achieve high profit growth are materials, oil and gas and chemicals, it added.
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