Stock market to recover by year’s end?

The stock market is expected to see optimistic signs in the third and fourth quarters of the year, when listing companies begin reaping fruits in their business.

Though the stock market is still lackluster with falls in prices, experts still believe that the bourse will recover its prosperity by the end of the year.

The good performance of listing companies, the interest of foreign investors in Vietnam’s stocks, the equitisation and IPOs of big corporations all are believed will help warm up the market. Moreover, investors will increase trading once they believe that share prices have returned to their actual values.

In a meeting with the press in early August, 2007, Chairman of the State Securities Commission (SSC) Vu Bang said he was optimistic about the development of Vietnam’s stock market. “I believe that the market still has many opportunities to develop as the foreign capital flow keeps rising. Many big foreign investors have expressed their interest in Vietnam’s stocks, including Goldman Sachs and Merrill Lynch,” said Mr Bang.

Huy Nam, securities and finance expert, also said that the bourse would be better towards the year’s end. However, he declined to forecast how much better the market would be.

Though the market has been in the ‘correction’ period, it has not witnessed serious setbacks, and investors have not fled. Mr Nam said that his survey showed that the number of new accounts opened at securities companies was still rising weekly.

Hoang Xuan Quyen, Head of the Research Division under the Tan Viet Securities Company, also said that the stock market would warm up towards the year’s end, though he warned that it would not warm up much. What can bring hope to investors are satisfactory business results of listing companies in the third and fourth quarters of the year (the third and fourth quarters are always the best season of enterprises).

SSC has announced that a taskforce in charge of auctioning shares has been established. The taskforce will programme the auctions of shares of equitising enterprises, ensuring the auctions in the harmonisation with the stock market situation and the listing of other enterprises.

Hanoi Boston Group under Vietnam Report Co has released a report about the stock market from August 31-September 7, saying that it is the right time to buy stocks again.

The sideways of the VN Index, hovering at the 900 point level, still fills investors with doubt about the recovery of the market. However, it is clear that the 900 point level is a firm bottom of the share prices. Investors who buy shares at this time have reason to believe that they are buying at the lowest possible price levels.

For these reasons, the group has advised investors to buy stocks at this moment, when share prices have returned to the actual value, and the picture of the stock market has become brighter than last month.

Meanwhile, the Hong Kong and Shanghai Banking Corporation (HSBC) has released a report about Vietnam’s stock market, the conclusions of which prove to coincide with the suggestions by Hanoi Boston Group. “We recommend investors look to buy Vietnamese equities again. Earnings are growing strongly, and valuations now look reasonable. The catalyst may be successful privatisation offerings in Q4,” the report reads.

If considering the main indexes of the national economy, one would see that it is the right time to make investment in stocks: the national economy growth is rapid and firmly, inflation has been controlled, the profits of listing company are very high, while the growth rate of EPS is clearly lower than the net profit growth rate due to the dilution effects of new issuances. The EPS growth rate, according to HSBC, is 22-25%, higher than that of China (15%) and Malaysia (19%). It is likely that the VN Index will return to the 1,150 point level by the end of this year.

Investment funds are expected to push up disbursement in September. To date, only a small proportion of capital has been disbursed, while funds are still awaiting the big IPOs slated for the fourth quarter of the year.

Source: VNE