Chứng VNI đang trở nên hấp dẫn với nước ngoài???

Chứng VNI đang trở nên hấp dẫn với nước ngoài???

Where has the Vietnam euphoria gone?
Inflation, trade deficit dent stocks; long-term investors still optimistic
By Polya Lesova, MarketWatch
Last update: 4:37 p.m. EDT May 22, 2008

NEW YORK (MarketWatch) -- What was once euphoria has turned to gloom.
In a classic case of how emerging markets offer both risk and reward, Vietnam''s stocks have tumbled more than 50% this year, making them the worst performer in their asset class, as the Southeast Asian country struggles to contain skyrocketing inflation and a hefty trade deficit.
On the reward side, Vietnam has been delivering the goods, up until recently. The benchmark VN stock index, a capitalization-weighted index of all the companies listed on the Ho Chi Minh Stock Exchange, delivered U.S.-dollar returns of about 240% over the last four years. This year, however, the index has fallen 53%. In comparison, the MSCI Emerging Markets index, a broad measure of the asset class, is down only 1%.
Unlike bigger and more established emerging markets, Vietnam is considered a frontier market, meaning it''s smaller, less-developed and under-researched, even by emerging-markets standards. Economic concerns, lack of liquidity and limits on foreign stock ownership have weighed on Vietnamese equities this year.
"Euphoria was created for Vietnamese assets. It was seen as China, except at an earlier stage," said Bernard Moody, London-based investment director at Progressive Developing Markets Ltd., whose Advance Frontier Markets Fund (UK:AFMF: news, chart, profile) has 3.3% of its portfolio invested in Vietnam.
"The stock market roared ahead with very strong returns, and valuations became extremely high," Moody said.
The market traded sideways to downward beginning in May 2007, but the real sell-off began over the past six months. However, while the short-term outlook remains uncertain, and the market may fall further still, Moody and others still believe Vietnam will likely reward investors over the long term.
"There is value emerging," Moody said. "In emerging markets, you get periods where economic bricks have to be applied. If you''re taking a bit of a longer-term view, [Vietnam is] a fantastic long-term growth story."
One reason for optimism is the growth rate of the Vietnamese economy. Real GDP growth is forecast to average 8% over the next four years. The Southeast Asian nation, whose main exports include petroleum, rice, coffee, rubber, tea, clothing and fish, acceded to the World Trade Organization in 2007.
With a population of more than 87 million, Vietnam has been successful at reducing its poverty rate, which has fallen from 58% in 1993 to less than 20% in 2004, according to the World Bank. While Vietnam is transforming its economy from a centrally planned one to an open, market-based one, it remains a one-party communist state.
Economy saps investor confidence
Despite its rapid economic growth, Vietnam faces pressing short-term challenges: soaring inflation and a large trade deficit, which in turn have dented sentiment in the stock market.
"The increasingly dire appearance of the economy started to attract people''s attention," said Kevin Snowball, director of PXP Vietnam Asset Management Ltd, based in Ho Chi Minh City. "That has damaged sentiment, and now there is no bid in the market."
In early May, Standard & Poor''s lowered its outlook on Vietnam''s sovereign credit ratings to negative from stable, citing rising risks to macroeconomic stability from an overheating economy. "Hectic investment activity of recent years appears to have pushed the economy to the limits of its capacity," S&P said.
Vietnam''s trade deficit soared to $11 billion during the first four months of the year, or 90% of the deficit level for all of 2007. Inflation hit a 15-year high of 21.4% on a year-on-year comparison basis in April, the second highest in the region after Sri Lanka''s 25%.
The surge is largely due to a rise in food inflation, which constitutes 43% of the CPI basket. Food-price inflation is, of course, not solely a Vietnamese phenomenon -- it is affecting countries all around the world. Increases in the international costs of other commodities -- such as oil, cement and steel -- are also contributing to inflation.
The Vietnamese government has highlighted fighting inflation as its priority and has said it will likely cut its growth target for 2008 to 7% from the prior 8.5% to 9%. The central bank raised its base lending rate to 12% from 8.75% this week, the latest in a series of moves aimed at curbing inflation.
"The [stock] market has declined significantly because the government implemented a number of tightened monetary policies to fight against inflation," said Andy Ho, managing director and head of investment at VinaCapital Group''s Vietnam Opportunity Fund (UK:VOF: news, chart, profile) .

"Market trading was highly leveraged, and mass selling took place when traders feared credit supplies would disappear," said Ho, who is based in Ho Chi Minh City.
Upbeat for the long haul
Much like Progressive Development''s Moody, Ho believes that the market will rebound in the medium to long term and that the fundamentals are still strong for Vietnam''s investable companies, he said.
"Because it was government policies that had such a strong negative impact on the market, stimulating policies will be required to instill confidence back in local investors," Ho said. "We believe local investors are the key to a rebound."
Liquidity has been poor recently. Daily trading volumes averaged only $34 million in April, compared with an average of $58 million in the first quarter.
Vietnam has two stock markets: the Ho Chi Minh Stock Exchange and the Hanoi Securities Trading Center. Ho Chi Minh City''s is the main exchange, with a market capitalization of about $14 billion and more than 150 listed stocks. In Hanoi, the market cap is only $5 billion and 135 stocks are listed.
There are only three Vietnamese-listed companies whose market capitalizations exceed $1 billion. Those are Vietnam Dairy Products, or Vinamilk ($1.5 billion market cap); Asia Commercial Bank ($1.4 billion); and Petrovietnam Fertilizer and Chemicals ($1.3 billion).
The Vietnamese market is fairly well-diversified. The top seven stocks in the VN index in terms of weight are Vinamilk; Petrovietnam Fertilizer and Chemicals; Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank); Vinpearl Tourism and Trading, which operates resorts and spas; Petrovietnam Drilling and Well Services; electricity generator and distributor Pha Lai Thermal Power; and Vincom, a real-estate developer.
"We have and will continue to invest in sectors that contribute to the domestic growth of the economy," said VinaCapital''s Ho. These sectors include financial services, consumer goods, logistics, property development, agriculture and infrastructure. Ho tends to avoid export-manufacturing businesses, he said.
''We have and will continue to invest in sectors that contribute to the domestic growth of the economy.''
â?" Andy Ho, VinaCapital Group
Foreigners own about 25% of stocks listed in Ho Chi Minh City and 15% of those listed in Hanoi. Foreign investors, subject to ownership limits in Vietnam, are allowed to own up to 49% of most listed stocks, except bank stocks, for which the limit is 30%.
This is a crucial factor for the markets, said PXP''s Snowball. He said the government should "raise the foreign-ownership limits and allow confidence to come back into the market."
"If the index finishes the year between 600 and 650 points, that would be long term a very encouraging sign," Snowball said. "We need a bit of stability, signs of maturity if you like, and that means less volatility."
The VN index is currently trading at 430.
In a recent research report, Garry Evans, equity strategist at HSBC, advised foreign investors to continue accumulating stocks with a long-term view, though he didn''t rule out further downside in the short term.
Quality growth stocks -- such as food manufacturer Vietnam Dairy Products (Vinamilk), Vinpearl and Petrovietnam Drilling and Well Services -- have begun to outperform the market, Evans said.
"While the short-term outlook is difficult, there is significant long-term value in the Vietnamese market," said Evans.
Tung Kim Nguyen, chief investment officer at Indochina Capital, also advised some careful stock selections. He said he expects a market rebound will be closely tied to positive sentiment resulting from the execution of government initiatives to address inflation and other economic challenges.
"A sensible strategy is to buy selected Vietnamese stocks now at fundamentally sound prices," Tung said, "with a view to holding [them] through year-end."
Polya Lesova is a MarketWatch reporter based in New York

Comments
There are 9 comments
(oldest to newest)
BigGoat 7 hours ago Even (1 Up / 1 Dn)
SentIt has gone MIA!

Goat

Never Forget
SentVietnam - "What was once euphoria has turned to gloom. Soaring inflation and a large trade deficit."

We fought to make them like us. Looks like we succeeded all too well.

Sentthats thing about a bust it may take a generation or two and maybe never.
tulip boom anyone?

SentI know an easy way for Marketwatch to come up with a new story. Simply rewrite this one but take out the word Vietnam and replace with USA.

I think the gurus at Microsoft developed a ''find and replace'' feature that will assist with this.


SentWhat do you expect from a communist party that rulling a country like Vietnam? Get out of there while you can.

SentIs there anyone around who knows of and can recommend a way to invest directly into VN shares? I don''t believe in mutual funds, for various reasons!

I found two companies that seem to offer a VN play, both quoted on the HK SE:

1.
Luks Group (Vietnam Holdings) Co, Ltd. (HKG:366), a company that is invested, inter alia, in VN building materials (cement) production;

2.
Vietnam Manufacturing and Export Ltd (HKG:0422), engaged in the manufacture of scooter and cub motorbikes in Vietnam.

Is there anybody around with any other ideas regarding VN related investments (shares)?

SentInvesting in emerging market takes knowledge but mostly patience. Vietnam is like China 20 years ago. If you look at China now it is like Hong Kong in mid-1970''s. With any emerging market there will be ups and downs. Do not invest in these markets unless you are able to take a 50% drop in one day. Long term wise there is nothing wrong with either China or Vietnam market.

Personally I used to laugh at my friends investing in Hong Kong market when it went from 1100 to 173 (in 24 months) in early 1970''s. Now who has the last laugh (the Hang Seng Index is 24,000). It is very difficult for any one (including locals) to understand and accept when the market is down 50%.


Right you are. But I am sure you will agree that it is better timing to invest in a market AFTER it has gone down by 50% rather than before it dips ? In such case, good timing is quite useful - and Vietnam has just dipped by 50%!

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SentThank you Polya Lesova and MarketWatch for your beautiful story on Vietnam!
There should be more stories of this type about this country. There was something like 30 billion USD in cash flowing into Vietnam in 2007 and that was too much for this small economy.Too much cash created too many bubbles and we have had to pay much higher prices for things. I''m so happy that people whose stomach is not good with volatility are pulling out of Vietnam. The fewer left, the better chance the rewards will be for us living here!
Thanks for all your comments too, folks!



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