SCB CIO foresees Vietnam's economy continuing its upward trajectory this year driven by three key factors: export sector recovery, increasing foreign investment, and robust domestic consumption. Supported by monetary and fiscal easing measures, the government targets GDP growth of 6.0 - 6.5%. SCB CIO has shifted his stance on Vietnam's stock market from Neutral to Slightly Positive, advising gradual investment as listed companies' profits rebound and the market eyes an emerging market status. Due to high volatility, investments should be managed within an Opportunistic Portfolio, aligning with individual risk tolerance levels.
Dr. Kampon Adireksombat, First Senior Vice President and Team Head of
the CIO Office at Siam Commercial Bank (SCBCIO), has forecasted that in 2024,
Vietnam's economy will likely experience growth, propelled by the export sector
and sustained foreign direct investment (FDI). The Vietnamese government has
set ambitious targets for GDP growth, aiming for 6.0% - 6.5%, while also aiming
to keep inflation within the range of 4.0% - 4.5%. SCB CIO anticipates three
key factors driving the Vietnamese economy this year: 1) the recovery of the
export sector; 2) the expected rise in FDI, alongside potential measures from
Vietnamese authorities to assist companies following the implementation of the
Global Minimum Tax (GMT), easing concerns among foreign companies; and 3) a
probable uptick in domestic consumption, bolstered by monetary and fiscal
easing measures, which are crucial for sustaining continuous growth in the
Vietnamese economy.
While the real estate sector has displayed
signs of gradual recovery, there remains a risk of bond payment defaults.
However, after the government introduced various support measures—such as
reducing the policy interest rate and allowing a two-year deferral for real
estate debenture repayments—SCB CIO believes that the sector has likely
surpassed its lowest point. Moreover, the passage of the Land Law draft by the
Vietnamese legislature on January 18, 2024, ahead of market expectations for
June 2024, is anticipated to further bolster the sector. This draft law,
effective from January 1, 2025, will empower real estate developers to
negotiate land purchase prices directly with landowners, eliminating the need
for official price determinations, and thereby fostering a conducive
environment for robust growth in Vietnam's real estate sector.
In terms of the banking sector, it stands to
benefit from the economy's return to an upward trajectory. The State Bank of
Vietnam (SBV) has set a loan growth target of 15% for the year, signaling
confidence in the economic outlook. Despite the relatively high proportion of
non-performing loans (NPL), the peak for the formation of stage 2 loans—those
showing early signs of repayment weakness but not yet classified as NPLs—is
likely to have passed. Consequently, provisions for the next period are
anticipated to decrease, thereby supporting banks' operational performance in
the upcoming period.
Dr. Kampon further indicated that SCB CIO has
adjusted its view of the Vietnamese stock market from Neutral to Slightly
Positive. This adjustment is due to the observed upward trend in the
profitability of listed companies, which is expected to continue as exports
recover and FDI continues to improve. Additionally, the gradual recovery of the
real estate sector, coupled with the government's passage of the Land Law bill
to enhance liquidity for real estate, has contributed to this adjustment.
Moreover, the valuation of the Vietnam stock market presents an interesting
opportunity, with the price-to-earnings multiple (P/E) currently trading at
10.1x, lower than the 5-year average by approximately -1 standard deviation. Furthermore,
there exists the potential for the Vietnamese stock market to be upgraded to an
emerging market status and included in the calculation of the FTSE index. The
cancellation of the pre-funding system, which currently mandates foreign
investors to hold 100% of the trading value in cash one day before completing a
transaction, would enhance the likelihood of inclusion in the FTSE Emerging
Market Index by 2024.
SCB CIO suggests
considering investment in the Vietnamese stock market via funds employing a
Bottom-Up strategy, while maintaining a cautious approach regarding portfolio
allocation. Given the current classification of the Vietnam stock market as
still relatively marginal or that of a newly developed country characterized by
high volatility, investments in this market should be designated as part of an
Opportunistic Portfolio—an additional portfolio tailored to prevailing market
conditions. This Opportunistic Portfolio is typically allocated between 20% to
40% of the total investment portfolio. This allocation strategy accounts for
the inherent volatility of the Vietnamese stock market, allowing investors to
adjust proportions based on their risk tolerance levels. By segregating
investments in this manner, any adverse outcomes in the Vietnamese stock market
are less likely to significantly impact the Core Portfolio, which constitutes
the primary long-term investment portfolio.
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