According to VinaCapital, all previous negative factors have either diminished or are gradually easing, paving the way for higher stock prices in Vietnam in the coming months. The rebounding earnings growth, recovering economy, and attractive market valuation contribute to the positive outlook.
In the latest report by VinaCapital’s chief economist, Michael Kokalari, it is highlighted that despite a 16% sell-off in the VN-Index between mid-September and end-October, the economy is now recovering from its previous slowdown. Kokalari identifies three key factors that drove the sell-off:
1. Concerns over the depreciation of the Vietnamese đồng led to worries about significant monetary policy tightening by the State Bank of Vietnam, resulting in some selling by foreign investors.
2. The announcement of Vingroup’s $250 million convertible bond, exchangeable into Vinhomes shares, caused a decline of over 10% in Vingroup’s share price. This, in turn, affected investor sentiment towards VIC, as VIC and VHM collectively account for approximately 10% of the VN-Index.
3. Margin calls from local securities companies and rumors of regulatory actions against unofficial margin lending sources led to an unwinding of highly leveraged speculative positions on October 17.
Kokalari emphasizes that the main factor weighing on Vietnam’s economy had been a slowdown in exports to the US. However, recent high-frequency economic data for October confirms the recovery of Vietnam’s manufacturing activity and exports, reinforcing the expectation of a GDP growth rebound to 6.5% next year.
