This photo from Oct. 2021 shows motorcyclists waiting at a Covid-19 border checkpoint between Ho Chi Minh City and Long An province, in Ho Chi Minh City, Vietnam. The country’s benchmark VN index has fallen around 14% year-to-date as of Monday’s close.
Maika Elan | Bloomberg | Getty Images
Vietnam’s stock index has fallen more than 10% this year, and one portfolio manager says now is a “good time to consider investing in Vietnam.”
As of Monday’s close, the VN index has fallen close to 14% for the year — a sharp reversal following two years of blockbuster gains for the benchmark index in the earlier phase of the pandemic.
Those losses, however, are largely in line with its global peers as investors largely reposition for safety against a backdrop of rising interest rates and fears of a potential global recession.
Dragon Capital, a Vietnam-focused investment firm with $7 billion in assets under management, says valuations in the country are now cheap, and have forecast earnings per share growth of over 20% in 2022.
Vietnam’s banking and retail sectors are looking attractive, said Thao Ngo, portfolio manager at the firm on Monday.
Banking stocks have a big potential for growth in the mass market segment as more than half of Vietnam’s population is currently “underserved” in banking, while retail stocks are set to see a strong recovery in earnings from post-pandemic pent-up demand, she explained.
“Our investment strategy is to deliver long-term growth for investors,” Ngo said on CNBC’s “Squawk Box Asia.”
“We have been focused on the three key theme[s] at the moment: Firstly is the urbanization, middle class formation and also strong domestic consumption.”
Bullish on Vietnam
The portfolio manager outlined multiple reasons why Vietnam stocks are a good bet.
The Southeast Asian economy has seen been among the economies with the highest GDP growth in recent years, and Dragon Capital sees that momentum continuing. In 2020, the Vietnamese economy topped even China, and did not see a single quarter of economic contraction despite the global pandemic.
Political stability and macro policy, along with factors such as the rapid growth of Vietnam’s middle class create a “strong platform” for the country to see GDP growth of 6% to 7%, said Ngo.
“This year, the government also target the GDP will increase by 7% and in the first quarter we already achieved 5%,” she added. “We’re on track to achieve that.”
While inflation is a big concern globally in countries like the U.S. and UK, Vietnam appears to have it “under control” for now, Ngo said.
Vietnam’s consumer price index increased 2.6% in the first four months of the year, and Dragon Capital sees the full year figure coming in around 4% to 5%.
“We think our government will have a strong effort to keep … CPI stable,” she said.
