In the Asia Frontier Insight - Vietnam report, the research team from HSBC believe that foreign investors cannot ignore Vietnam’s market any longer as it offers a favourable risk-reward opportunity in one of the most resilient growth economies and the market’s liquidity is rising.

Foreign ownership limits are the main problem for foreign investors but the bank believes that it is not a deal-breaker. Of 30 biggest companies in the VN30 basket, 24 still have room for foreign investors.

Another supporting factor is stocks that have already reached FOL can be bought by paying the difference in prices. HSBC reports that as these stocks generated strong profit growth but are traded at cheaper prices compared to other Asian peers, the gap between prices is not big. And even though they're slow, policy reforms are underway which has a positive effect on the market.

Lastly, valuations are attractive, the report says. The VN-Index is trading at a 12-month forward price-to-earnings ratio (P/E) of 15.1x, a 5.3 percent discount on its five-year average, and at a 12-month forward price-to-book ratio (PB) of 2.5x, a discount of 2.9 percent.

The effective containment of COVID-19 has led to a strong rebound in economic growth and continued strong domestic liquidity, boosted by new individual investors.

"While this increases volatility risk, we do not see a major correction risk. With deposit rates falling and gold prices under pressure, there are not many alternatives for this volume of liquidity,” says the report.

The bright outlook of the stock market on economic recovery was also confirmed by strong corporate results in the first quarter of 2021, with revenue rising 24.8 percent year-on-year and net profit up 51.8 percent.

As of April, the market benchmark VN-Index jumped 12.4 percent compared to the beginning of the year, outperforming all the major regional benchmarks. The index also broke the psychological barrier of 1,200 for the first time, a level it failed to reach during previous bull markets in 2007 and 2018, the report says.

Despite the strong growth, foreign investors kept fleeing from the country's stock market since early 2021./. VNS

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