Fund says banks, property attractive amid stock drop

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Two investors at a stock exchange in Ho Chi Minh City

Shares of banks and property companies from Vietnam Export-Import Commercial Joint Stock Bank to Vingroup JSC are "very attractive" as the country's benchmark index heads for the biggest monthly loss in more than a year, the nation's largest fund manager said.

Vingroup, the country's biggest listed property company, has slumped 9.6 percent this month and is valued at 10.8 times estimated 12-month earnings, a record low. Eximbank's 1.3 percent decline in June has driven its valuation to 6.9 times. The benchmark VN-Index has lost 8.8 percent this month through yesterday, poised for the biggest drop since May 2012, and trades at 10.8 times, a three-month low.

"If we look at the long-term view, property and bank stocks are very attractive," Andy Ho, managing director and head of investment at VinaCapital, said in an interview on June 24. Vietnam's biggest fund manager oversees about US$1.5 billion of assets. The government has been "very proactive" about fixing some issues in the economy, he said.

Vietnamese stocks have dropped as overseas investors pulled money from emerging-market assets after US Federal Reserve Chairman Ben S. Bernanke said the central bank could consider paring stimulus if the country's employment market showed sustainable improvement. While rising bad debts have fueled concerns over the Southeast Asian nation's banking industry, the government has taken steps to solve the issue by establishing the country's first state-run debt-asset management company.

Best performer

VinaCapital's Vietnam Opportunity Fund Ltd. has returned an annualized 14 percent during the past three years, the second-biggest gain among 37 Vietnam equity funds tracked by Bloomberg.

The VN-Index (VNINDEX) has gained 14 percent since Ho forecast a rally in December, making it Southeast Asia's best-performing benchmark gauge this year. The central bank cut interest rates last month for an eighth time since the start of 2012 and the government took steps to deal with bad debts at banks.

Ho also recommended shares of Military Joint-Stock Commercial Bank, Nam Long Investment Corp. and Khang Dien House Trading & Investment Joint-Stock Co.

Hanoi-based Military Bank has fallen 3 percent this month and trades at 5.2 times projected earnings, the lowest since April 12, according to data compiled by Bloomberg.

VinaCapital holds a 5 percent stake in Eximbank and 10.3 percent in Khang Dien House, according to data compiled by Bloomberg.

Cash outflows

Overseas investors sold a net $71.1 million of Vietnamese stocks this month through yesterday, poised for the biggest monthly sell-off since January 2012, according to data compiled by Bloomberg. Foreign funds are still net buyers this year, purchasing a net of $182.7 million of local shares, the most for the period since 2010.

The market will see some "volatilities" in the short term, creating "a lot of opportunities" for foreign investors, Ho said. The benchmark VN-index's 30-day volatility measure, a measure of price swings, rose to 20 yesterday, the highest in a month.

Prime Minister Nguyen Tan Dung approved the formation
of an asset management company last month. Effective July 9, the entity will acquire non-performing loans from lenders. Officials are under pressure to rejuvenate an economy that grew at the slowest pace since 1999 last year as one of the highest bad-debt levels in Southeast Asia crimped credit to businesses.

Vietnam's banks reported bad debt made up 4.51 percent of total loans as of the end of March, Deputy Prime Minister Nguyen Xuan Phuc said on May 20. That figure compares with the central bank's estimate of 7.8 percent at the end of 2012.

The government is aiming for economic growth of 5.5 percent in 2013. That would be the first time gross domestic product has expanded at less than 6 percent for three straight years since 1988, according to International Monetary Fund data.

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