Illustrative image (Photo: tinnhanhchungkhoan.vn)Hanoi (VNS/VNA) - Foreign investors are edging back into emergingmarkets like Vietnam on hopes the recent significant recovery of the equitymarket will reassure those hoping to capitalise on stronger economic growth inthe emerging world.
Investment funds including Ashmore Group Plc and Coeli Asset Management SA haveincreased holdings in the 174 billion USD market since March, while foreigninvestors have returned to net buying so far this month, the first time sinceJanuary.
Swedish-based investment fund Coeli Asset has increased the proportion ofVietnamese stocks in its portfolio from 18.6 percent in early 2020 to about 25 percent,buying shares after the March selloff. The portfolio value of the fund in frontiermarkets now totals some 350 million USD.
“The price-to-books of Vietnam equities have deteriorated materially over thelast 18 months and do not price in the long-term opportunity,” Coeli Asset fundmanager James Bannan was quoted by Bloomberg as saying.
The price-to-book (P/B) ratio compares the stock price with underlying assets.A ratio below 1 could indicate either an undervalued stock or that investorshave concerns about how well the stock is backed up by assets. A low P/B is ared flag for investors.
The VN-Index is trading at 1.9 times book value, down from about 3.3 times inMarch 2018.
PYN Elite Fund, a Finnish fund which focuses on Vietnamese shares, heldportfolio value of $438 million in Vietnamese equity as of the end of May thisyear, of which 94 percent is in stocks and 6 percent in cash.
The return of foreign capital has assisted domestic investor inflows in drivingthe benchmark VN-Index up 28 percent since April, making it the second-bestperformer globally.
Attractive equity market
Apple Inc is one of the most prominent names wanting to transfer a part of itsproduction activities to Vietnam.
A supportive local currency and the acceleration of tensions between theworld’s two biggest economies in the US and China are drawing investors’interest in Vietnam as a cheaper supply-chain alternative to China. Apple isamong global giants that have moved in to make use of the country’smanufacturing power.
The Vietnamese dong was among the best-performing Asian currencies this year,down 0.2 percent versus the US dollar.
Andy Ho, head of Investment Department of VinaCapital, told news sitetinnhanhchungkhoan.vn that foreign investors were attracted to the Vietnameseequity market as they hoped to capitalise on promising earning prospects in theemerging country.
Governments of emerging countries, including Vietnam, had decided to inject atotal capital flow of 6 trillion USD into their economies to ease pandemiceconomic pain, Ho said.
Foreign investors who can access this capital were paying more attention to theVietnamese equity market, which offers greater returns than investmentopportunities in their country, where bonds are offered at negative interestrates, deposit rates stay below zero and dividend payout ratios are only from 1to 2 percent, he said.
In Vietnam foreign investors could enjoy dividend payout ratios of 3 to 4 percent,bond interest rates of 3 to 4 percent and deposit interest rates of 6 to 7 percent,Ho said.
The political situation and business environment in Vietnam remained stable, hesaid, adding that with a population of some 90 million, purchasing power wouldincrease exponentially, attracting many businesses as well as domestic andforeign investors.
According to Ho, developed countries pumping about $6 trillion into theireconomies would help boost the recovery of the global stock market. Forexample, in 2017, the VN-Index soared by nearly 50 percent after the EuropeanCentral Bank issued 1 trillion USD in new-printed money./.
VNA
