Vietnam stocks to extend best Asia rally on valuations, PXP says

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Vietnamese stocks will extend a rally that has made the VN Index the best performer in Asia this year after its 16 percent surge failed to erase the discount to other markets, according to PXP Vietnam Asset Management.

The Southeast Asian nation's benchmark gauge will climb 33 percent in 2013, according to PXP Chief Executive Officer Kevin Snowball. The money manager, whose fund beat 92 percent of its peers in the past month, holds Saigon Thuong Tin Commercial JSB and Ho Chi Minh City Securities Corp. as well as Vietnam Dairy Products JSC.

The VN Index slumped 11 percent during the second and third quarters of 2012 as the slowing economy eroded earnings and banking officials were arrested. The measure rebounded after the central bank cut interest rates and as improvement in developed economies bolstered prospects for exports, which contribute 80 percent of gross domestic product. The VN Index trades at 11.2 times estimated earnings, 7.4 percent below the average valuation on the MSCI Frontier Emerging Markets Index.

"People started recognizing the fact that the market is cheap rather than being worried about small micro issues," Snowball said in an interview at Bloomberg's headquarters in New York Feb. 1. "They started looking at the market from a much broader perspective, and globally people are taking on a bit more risk."

Vietnam's benchmark climbed 3.3 percent last week to 483.42, and reached an eight-month high Jan. 30. The measure's 16 percent advance last month outperformed the biggest stock indexes in Asia.

Global rebound

A recovery in the global economy is helping support demand for the nation's goods and the World Bank said in a Dec. 10 report that shipments have been driven mainly by foreign companies.

Exports, which fell to $10.1 billion in January from a revised $10.36 billion in December, climbed 43 percent from a year ago, according to the government statistician. Vietnam recorded its first annual surplus since 1992 last year, easing concern about the stability of its currency and the economy.

"Nobody has cared about Vietnam in the last five to six years, but now confidence is starting to drive the market," Snowball said in the Feb. 1 interview. "It's had a good start to the year, and the way it's moving is a typical early bull market path."

The VN Index has rallied 28 percent from a Nov. 5 intraday low of 372.39.

Bloomberg Markets magazine ranks Vietnam as the most promising frontier market for investors, followed by Estonia and Kazakhstan. In compiling the rankings, greater weight was given to macroeconomic forecasts from the International Monetary Fund.

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