VietNamNet Bridge - Despite a lot of unknowns and current bad performance, analysts still believe a 7-12 percent increase of the VN Index can be reached in 2016.

 

The stock market would be full of challenges and unknowns, Tran Thang Long, head of the analysis division of BIDV Securities (BSC), said at a workshop on market prospects on January 19.

Long said the challenges would come because the US FED has begun its roadmap of raising the prime interest rate, which means the ‘low-cost capital’ era is over.

2016 is expected to be an eventful year with the election in the US. Meanwhile, the Chinese economic slowdown and the Chinese policy on devaluing the renminbi will also impact  the global economy.

Despite a lot of unknowns and current bad performance, analysts still believe a 7-12 percent increase of the VN Index can be reached in 2016.

BSC has predicted significant adjustments in both the dong/dollar exchange rate and the dong interest rate in 2016, believing that the exchange rate adjustment could be up to 5 percent, or even 8 percent in case China devalues the renminbi by more than 6 percent against the US dollar.

Vietnam is expected to have a trade deficit of $4-6 billion this year, GDP growth rate of 6.7-6.9 percent and budget deficit of 6 percent.

With such factors, the Vietnamese stock market is expected to have an unstable foreign portfolio investment and increase in supply of shares brought by scheduled IPOs.

Long warned that bigger difficulties would be seen in the second half of the year because of seasonal impacts. 

The liquidity would be weaker at the end of each quarter because it is the time for ETF funds to review their portfolios.

BSC has recommended investors prepare cash and get ready for foreign investors who would sell more than buy in 2016 as a result of the expected weaker dong and the FED policy on raising interest rate.

If Vietnam does not show clear policy on the ceiling foreign ownership ratios in Vietnamese enterprises in 2016, the big volume of shares from IPOs and equitization will not sell.

However, BSC can see many factors which could push the market up. 

These include improved business performance of enterprises and EPS (earnings per share), which could increase by 5-15 percent. The PE (price/earnings ratio) would be 10-12, or 8.3 in the worst scenario.

Meanwhile, Maybank KimEng Vietnam, in its latest report, has predicted that despite risks, the Vietnamese stock market will still grow by 7-12 percent this year.

The prediction was released after the securities company compared Vietnam and other regional markets, economic potential and medium-term analyses.


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