Three factors for growth

Vietnam’s stock market has bounced back from the deepest low of 884 points in August. The VN Index has increased by 14% just in the last few weeks, and by 34% so far this year.

HSBC has attributed the recovery to three factors. First, the recovery of the global stock market. Second, the feeling that the 900 point threshold of the VN Index means the most attractive share prices. And third, the high expectations by foreign investors on the IPOs of big corporations.

Especially, the VN Index has been supported most by the share items of financial companies. Sacombank’s share price, for example, rose by 30% last month, while ACB’s rose by 26%.

The upward tendency has been stimulated by strategic investment deals of foreign investors in the financial sector. AXA has successfully purchased 16% of Bao Minh shares, while HSBC has purchased 10% of Bao Viet shares. Besides, foreign investors have been stimulated by the news that the foreign ownership ratio in local banks may be adjusted from the current 30% level.

The HSBC’s report has pointed out that the big purchased volume of domestic investors, not foreign investors, was the factor that pushed up the VN Index. It was because foreign investors could not buy more shares since the room for them has run out.

Since September, the volume of shares foreign investors purchased since early September has increased slightly. The net purchased volume of foreign investors was approximate the $72mil level of August and much lower than the $150mil level/month seen in the first months of the year.

The trading volume was at a low level, despite the slight increase in September. At the HCM City Stock Exchange, the everyday trading volume in September is $38mil, lower than the highest peak of $64mil in March. At the Hanoi Securities Trading Centre HASTC, the everyday trading volume was $9mil only, while the figure was $21mil in March.

Only six share items saw the trading value of more than $1mil/day, the liquidity threshold for many investors.

Bringing Vietnam back to a list of investment addresses

With the latest report, HSBC’s experts have brought Vietnam back to the list of the addresses worth of investment, which deserves 2% of total investment capital for the Asia Pacific.

According to HSBC, the most valuable catalyst to the stock market is the IPOs of big corporations slated for the coming months, including the IPO of Vietcombank. It is very likely that strategic investors will hold 15% of the bank’s shares. Domestic investors will be able to purchase 5% of shares worth $150-200mil, while 10% of shares will be auctioned on the international market in October. As the result, 30% of HSBC’s shares will fall into hands of individual investors. The IPO may valuate Vietcombank at $3-4bil and turn Vietcombank’s shares into the biggest share item to be listed on Vietnam’s bourse.

HSBC believes that Vietcombank’s IPO, if successful, will cross off the bad impressions of the previous unsuccessful IPOs in summer, and lead to the 5-6 other big IPOs in the next 12 months.

With 10 share items which have the listing value of more than $1bil, Vietnam may be added into the MSCI of the Asia Pacific stock market. HSBC’s experts think this may occur in 2008, which will list Vietnam in the investment portfolio of many big international investors.

Source: TBKTVN.