Conditions ripe for sharemarket growth

There are positive factors to support the growth of the stock market, including the absence of crisis risks and an improving economy, an economist has said.

Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program in HCM City, told a seminar on post-crisis investment opportunities on Wednesday that inflation was at a low rate and foreign exchange reserves were stable and substantial. It was at US$30 billion last December, more than twice the amount a year earlier.


The driving forces for the current economic growth, he said, are the higher level of public investment through higher issuance of government bonds — expected at US$10 billion, up from $7 billion in 2012-13 and $3 billion in 2010-11 — lower interest rates, and the handling of bad debts.

Nguyen Duc Hung Linh, director of analysis and investment consultancy for Saigon Securities Inc, said: "The lower interest rates have been positively supporting the stock market."

According to Linh they are helping reduce production costs and improve profits for companies, and attracting investors to their stocks.

Another key factor impacting the stock market is the economic revival in the EU and the US, Viet Nam's two major export markets, which buy 36 per cent of its total exports. Last year exports to the two markets had increased by 20 per cent against an overall growth of 15.4 per cent.

He also cited factors like the continued flow of foreign direct investment into Viet Nam, with disbursement in the first quarter hitting $2.85 billion, and the speeding up of restructure of State-owned enterprises.

He told investors that the inflow of portfolio investment, especially by ETFs (exchange-traded funds), had a major influence on the stock market, and they were unlikely to make any withdrawals this year like they had done in the past due to the impact of the US's quantitative easing round 3 and trouble in Syria.

Viet Nam had so far been untouched by the flight of capital from emerging markets, he said.

Further, the stock market price-earnings ratio (PE) for Viet Nam's was the lowest among ASEAN-5 member countries at 14. It is 15.6 for Thailand, 17.3 for Malaysia, 20.5 for the Philippines, and 29.9 for Indonesia.