Korean experts warn: Vietnamese stock market overheated!

As retail investors from the Republic of Korea flock to the Vietnamese stock market, fund managers and financial regulators in that country fear they may be managing their risks poorly.
These investors faced possible losses once speculative money exited the booming market, the experts warned.

The Vietnamese market has seen exponential growth in the last couple of years. It has come to a head with the combined market capitalization of the Ho Chi Minh City and the Hanoi stock markets jumping from 12.8 billion US$ at the end of 2006 to 20.3 billion US$ by the first week of February this year.
The HCMC exchange’s VN-Index went up from about 400 in July 2006 to 750 by the end of the year.

The experts attributed the growth to increasing equitization of state-owned enterprises, but also noted that the price-to-earnings valuation of Vietnamese shares had also jumped substantially.
Vietnamese shares are traded at an average price earnings of 40 to 50, compared to the benchmark Korea Composite Stock Index's 11, and Samsung Electronics Co.'s 13.
While listed Vietnamese companies were seeing a steep net earnings growth – with the HCMC exchange's average listed company seeing a 73.56% growth last year – many South Korean experts were concerned about the sheer pace of this growth.
Of the 25.6 billion US$ South Koreans have invested in overseas securities, nearly 1.06 billion US$ are Vietnam-related.

"Emerging markets are typically volatile, and the Vietnam market in particular grew substantially in a short period of time," Choi Sang-gil, executive director at the fund tracker Zeronin, said.
"I wouldn't deny that in the long-term, the Vietnamese market is promising, but in the short-term, there is a high possibility of a correction. The market is still in its infancy, and has not been tested yet. And there are plenty of factors that could swing the market," he warned.
Following a recent warning by the Financial Supervisory Service on Vietnam equities investment, a number of local asset managers including the Vietnam fund pioneer Korea Investment & Securities, said they would no longer be opening a new Vietnam fund for the time being.
"The VN index jumped 38.5% this year, there is no doubt about its being overheated," a Mirae Asset Group official said.

Source: Thanh Nien