Vietnamese stock markets January performance

In January, securities from the securities trading centres in Hanoi and Ho Chi Minh City saw sharp increases in both volume and value, according to a report announced by the State Securities Commission of Vietnam.

At the Ho Chi Minh City Securities Trading Centre (HoSTC), the VN-Index stood at 725 points at the last trading session of December 2006. It climbed to 1,041 at the close on January 31, 2007, registering an average increase of 1.5% a day.

At the Hanoi Securities Trading Centre (HASTC), the HASTC-Index also increased consecutively. On January 2, it was 241.92 points and it reached 348.52 points on January 31, with an average growth of 1.8% a day.
The recent increase in prices of shares of listed companies started on December 27, 2006. At that time, the VN-Index was 751.77 and currently it exceeds over 1,000 points, up 140%. The market average P/E ratio is 43.24.

Of the 107 listed companies at the HoSTC, 17 has their P/E ratios bigger than the average ratio and more than half of them were shares of companies with sharp increases in prices. As many as 46 company shares have their P/E ratios bigger than 20 and the remaining 61 companies have their P/E ratio below 20.
At developed markets, the P/E ratio averages from 8-15. If this ratio is bigger than 20, the companies are marked to be good and investors expect the earnings per share of the company will increase sharply in the future.
Thus, the fact that 61 out of 107 listed companies have their P/E ratio lower than 20 is normal.
However, 17 out of these 107 companies have their P/E ratio bigger than the average P/E ratio of 43, shows that the market is showing signals of too high expectations. Especially, three companies have their P/E ratio bigger than 100. These include PVD (328), VIP (112) and HBC (162).

According to the SSC, the sharp growth of the stock market recently are due to the following reasons:
First, the overly high expectations of domestic and foreign investors in the securities market.
Secondly, the securities market is still new in Vietnam. Many investors are still influenced by demands from foreign investors.
Thirdly, some foreign and domestic investors are of the view that listed companies are mostly State-owned enterprises which have been equitised at an artificially at low price. Therefore, they hope that the price of these shares will remain cheap.
Fourthly, the sharp increase of shares of some listed companies is due to the fact that investors expect a sudden growth of some enterprises working in special sectors.
The last reason might be the capability that some big investors want to control the prices of some newly-listed shares.

Source: VNE