Vietnam's benchmark equity index is poised to rally about 10 percent by year-end as inflation slows and exports grow, according to the nation's biggest brokerage.
The VN Index (VNINDEX) will probably climb to 550 by December, versus yesterday's close of 501.17, said Fiachra MacCana, a managing director and research head at Ho Chi Minh City Securities Corp. The gauge has already risen 21 percent this year, outperforming a 17 percent gain in the MSCI Frontier Markets Index.
Vietnam's inflation rate fell to the slowest pace in 14 months in October, below the median economist estimate in a Bloomberg survey, data from the General Statistics Office showed yesterday. Exports climbed 16 percent in the first nine months of 2013 from a year earlier on sales of electronics and mobile phones. Overseas demand is helping support an economy that's been hurt by faltering credit growth, with Fitch Ratings estimating bank bad debt at about 15 percent of loans.
"We are very positive for the next six months," MacCana said in a phone interview. "The macro environment looks very stable with potential upside. Both currency and inflation are under control while export demand is picking up."
The State Bank of Vietnam devalued the dong by 1 percent in June, the first time since December 2011. Policy makers won't let the currency weaken by more than 3 percent this year as they seek to prevent the hoarding of dollars, the central bank said Oct. 8.
Vietnam's monetary authority cut its refinancing rate eight times since the beginning of 2012 to spur lending, while the legislature voted in June to lower the corporate income tax rate to help businesses. The government also started an asset management company in July to buy bad debt from banks.
Vietnam Dairy Products Joint-Stock Co. (VNM), the nation's biggest dairy producer, yesterday reported net income grew 19 percent in the first nine months of 2013. Hoa Phat Group, Vietnam's biggest steel producer by market value, said on Oct. 22 that net income surged to 1.46 trillion dong in the January-September period, exceeding its full-year target.
"So far, earnings in the stock market look very positive because of the low interest rates and low input costs," MacCana said. "A lot of companies have been able to boost profits significantly."
Earnings at listed companies may rise as much as 15 percent this year as the economy expands between 5.4 percent and 5.5 percent, he said. Vietnam's gross domestic product grew 5.25 percent last year, the slowest pace since at least 2005, government data showed.
The VN index may reach 600 by the end of the first quarter, or 20 percent above yesterday's close, MacCana said. Expenses for most companies will decline next year and that will help boost profits by at least 15 percent, he said.