Stronger economic growth as well as reinforced investor confidence in market restructuring will boost the stock market in the latter half of this year, analysts say. — Photo vietnambiz

HÀ NỘI – Stronger economic growth as well as reinforced investor confidence in market restructuring will boost the stock market in the latter half of this year, analysts say.

Economists and market analysts attending a weekend seminar in Thanh Hóa City on “VN-Index hits nine-year peak and Việt Nam’s securities market has new expectations,” .

The benchmark VN-Index on the HCM Stock Exchange touched 782.65 points on July 6, the highest since early 2008 and an expansion of nearly 17 per cent since the beginning of this year.

On the smaller Hà Nội Stock Exchange, the HNX-Index has also risen over 23 per cent in the first half of 2017. Việt Nam’s stock market was among the top five best performers in the world, according to Bloomberg’s data.

Total market capitalisation topped VNĐ2.5 quadrillion (US$110 billion), up 25.7 per cent over the end of 2016 and equivalent to 56.4 per cent of Việt Nam’s gross domestic product (GDP).

Total value of share issuance, auctions of State holdings and Government bonds raised through both local stock exchanges touched VNĐ131 trillion.

The expansion of local stock market has outperformed national economic growth. The VN-Index hit its nine-year peak while the GDP grew just 5.52 per cent in the first half of the year, all but putting the Government’s annual target of 6.7 per cent beyond reach.

Economist Nguyễn Minh Phong said the rapid growth of the securities market was mainly driven by large foreign capital inflows of around VNĐ9 trillion in the first six months.

In addition, the Government has taken support measures to lift foreign holding limits in listed companies and speeded up equitisation of State-owned enterprises (SOEs) which fueled growing market momentum, Phong said.

In the context that returns from investment in banks’deposits as well as gold and foreign currency market were not attractive and even declining, a lot of people have opted to put money in the stock market seeking higher returns.

Money magnet

Việt Nam’s total market cap currently accounts for 30 per cent of the country’s total savings, much lower than the rate of about 100 per cent in other neighboring markets in Thailand and Indonesia.

“The amount of cash held by people is huge and it is important to draw it into the stock market and increase the market cap” said Nguyễn Đức Hùng Linh, analysis director for Saigon Securities Inc, adding that keeping deposit interest rates low is good for turning depositors into investors.

More than 40 per cent of  the VNĐ9 trillion foreign investors poured in the market went into Vinamilk, and a large proportion of the remaining capital was also invested in leading companies.

“Foreign capital in Việt Nam is smart money. This also shows the attractiveness of Việt Nam’s securities market to foreigners,” Linh said, adding that big foreign investors will be paying high attention to equitisation of big corporations like PV Oil, MobiFone, two local brewery companies like Sabeco and Habeco.

Responding to concerns of foreign capital fleeing if the US Federal Reserve (Fed) continues to hike interest rates, Trần Văn Mẫn, director of VinaCapital’s VEOF, said Việt Nam’s stock market is a risky market and the Fed’s adjustments will not be a decisive factor to influence decision of foreign investors.

The local stock market remained small with few investment options for big foreign players with assets of $500 million to $1 billion, he said.

“The (results of the Government’s determination to speed up equitisation of large corporation is something all investors are looking forward to,” Mẫn said.

Most of analysts predict the VN-Index will likely surpass 800 points by the end of this year, driven by the Government’s urge to reach the GDP target of 6.7 per cent, strong restructuring in the stock market and the banking sector, and faster SOE equitisation. – VNS