Vietnam’s benchmark stock index may be poised for its best year since 2009 as accelerating economic growth and low bank deposit rates draw investors to equities, according to the country’s fourth-largest brokerage.
The VN Index (VNINDEX) will climb to 620 by the end of the year, a 5 percent gain from its closing level today, Nguyen Hoang Giang, chief executive officer at VNDirect Securities Corp., said in an interview. The gauge has increased 17 percent in 2014, the second-best performer among Southeast Asian markets.
Foreign funds have poured a net $291.5 million into the nation’s shares this year, the most since 2008. Domestic investors are also being drawn to stocks because the property market has failed to rebound and interest rates on term savings accounts at banks are not attractive, Giang said. Vietnam’s economic growth quickened to 5.25 percent in the second quarter as the outlook for exports improved after the dong was devalued for the first time in a year.
“Macro indicators are supporting the stock market in the second half,” Giang said. “The real estate market has not really recovered, while banks are offering very low deposit interest rates.”
The VN Index rose 0.2 percent to 590.69 today, the highest close since April 14.
Confidence in the property market is weak as families struggle to access loans, real estate services company CBRE Group Inc. said in April, even after the central bank lowered its benchmark refinancing rate to a six-year low of 6.5 percent in March. Local banks are offering term-savings rates as low as 5 percent, while inflation was at 4.98 percent in June.
Prime Minister Nguyen Tan Dung is targeting annual economic growth of about 6.5 percent in 2016-2020, compared with 5.4 percent last year, as the government takes steps to spur exports and attract more foreign investment.
Still, ongoing tension between Vietnam and China over an oil rig in a disputed area of the South China Sea remains a risk to investors, Giang said. If the situation escalates, “the picture will be different,” he said.
The State Bank of Vietnam last week devalued the dong to help spur exports after anti-China protests in May halted production at foreign-owned factories for a few days.
Vietnam and China have accused each other of ramming ships near the rig, which was moved to an area off Vietnam’s coast May 2. A collision in late May caused a Vietnamese fishing boat to capsize. Vietnam is considering taking legal action against China, Le Hai Binh, Vietnam’s foreign ministry spokesman, said at a Hanoi briefing July 3.
Giang recommended investors buy shares in consumer, logistics and building materials companies. He listed his top picks as Vietnam Dairy Products JSC, Dinh Vu Port Investment & Development JSC, Tien Phong Plastic JSC and Hoa Phat Group.
VNDirect plans to raise its registered capital to 1.5 trillion dong ($70.5 million) this quarter, from the current 1 trillion dong, Giang said. VNDirect estimated pretax profit of 97 billion dong in the January-June period, more than 50 percent of the company’s full-year target, he said.