VinaCapital upbeat about Vietnam’s stock market

The VN-Index has grown 10 so far this year, driven by an expected 19 increase in the fiscal year 2024 earnings, and strong buying of domestic individual investors, VinaCapital Chief Economist Michael Kokalari highlighted in his analysis announced on July 31.

The rebound in earnings growth from a 5 drop last year to a 19 growth this year is backed by an acceleration in the country’s GDP from 5.1 in 2023 to an estimated 6.5 in 2024. The local investors' strong buying has been stemmed from the facts that deposit rates in Vietnam have been below 5, even for 12-month deposits, and the country’s real estate market have been frozen, making stocks and gold the preferred places for domestic investors to pour their savings.

Furthermore, retail investors have dominated stock market trading in Vietnam, accounting for 90 of daily trading value on average this year. Their purchases absorbed an estimated US$2.4 billion worth of Vietnamese stocks that foreign investors net sold this year.

The expert held that foreign investor selling was prompted by profit taking, and concern about the 4 year-to-date depreciation of the VND, adding several are taking a wait-and-see approach towards investing in Vietnam in the light of recent political developments in the nation.

However, a quarter of foreign selling transpired via exchange-traded fund (ETF) redemptions, including the dissolution of Blackrock’s iShares Frontier ETF which was liquidated in June. The monthly foreign net sales of the stocks hit a record-high in June, spurred by the liquidation of the ETF. As a result, the proportion of Vietnam’s stock market owned by foreign investors fell to its lowest level in a decade.

The selling linked to the dissolution has finished, and some investors have taken advantage of foreign selling to increase their long-term strategic investments in Vietnam, including Capital Group, Fidelity and many others who acquired a large amount of shares at retail lender ACB, Michael Kokalari revealed.

VinaCapital expects earnings growth to increase from 9 year-on-year to 33 in the second half on the back of the recovery of the domestic realty market.

Earlier, the investment fund said the real estate market began to recover in December 2023, and the process has gained considerable momentum since then. Realty transactions surged some 40 year-on-year in the first half of this year thanks to a series of laws to revive the market recently enacted by the Government.

Against the backdrop, it expects the earnings of real estate developers, except for Vinhomes, will rise 80 this year. Besides, a healthier property market should support banks’ earnings by boosting credit growth and reducing asset quality concerns of credit loss.

“The recovery of Vietnam’s real estate sector is likely to further expand in 2025 which is one reason that we expect the VN-Index to grow by another 17 in the year”, he stated.