Vietnam Valuations Look Reasonable: Ho Chi Minh City Securities

Jun.04 — Stephen McKeever, head of institutional markets at Ho Chi Minh City Securities, discusses Vietnam stocks, what’s driving the gains and where he’s finding opportunities. He speaks on “Bloomberg Markets: Asia.”

What’s driving that optimism valuation’s looking cheap still yes good morning uh thanks for having me on here uh yes look i think the market’s really been driven mostly by by liquid by liquidity but also with a strong fundamental backdrop namely very strong corporate earnings growth and valuations which we think still look very reasonable relative to regional

Regional peers when you take a look at the rally it’s been driven pretty much by retail investors pretty much the same story for a lot of the markets uh this year will they continue to to lift uh vietnam stocks considering that foreign investors have been making an exit for what about eight weeks now indeed i mean we actually saw close to 600 million dollars of

Net foreign selling in in may so you know foreigners have been uh taking profit uh in selected names given the strong move in the market although we don’t think the selling is necessarily reflective of uh broader foreign investor sentiment which we think remains very positively disposed towards vietnam given the strong uh long-term structural growth story uh

But yes i mean the market has been driven very much by by retail and uh we think the key is domestic liquidity and the fact that uh bank deposit rates are at uh and vietnamese government bond yields are at record lows so you know people are essentially being forced to uh to invest into the equity market to some extent to to to to generate returns and we’ve seen

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The same phenomenon in in many other uh markets and and jurisdictions and i guess that’s the uh that’s the intent of of of policymakers i guess is to uh encourage risk investment and risk assets and that’s it’s just fascinating right you see these millennials retail investors they’re they’re setting up trading accounts at remarkable speeds and then you have them

Using some of these trading smartphone apps to buy stocks as well stephen do you see this as a potential turning point in the market i certainly hope so it’s been a fantastic market for it’s been a fantastic backdrop for for brokers uh you know i i was saying to some investor i do the investor relations for uh hsc uh we are publicly this is the company our our

Ticker is hcm uh i was telling investors on our last earnings call that i hadn’t seen a better outlook for a broken business since i was at goldman in the first quarter of 2007 this really is a fantastic market environment for for uh for brokers and we we’re seeing something like a hundred thousand new retail accounts being added every month that’s what we’ve

Been seeing uh essentially since the uh since the the uh advent of the of the lockdown here the first lockdown here that happened uh back in march uh that was really the catalyst for this explosion in uh retail trading activity and you mentioned about the the foreign investors the net outflows we’ve seen for eight straight months that’s the longest streak we’ve

Seen on record what’s keeping them away at the moment and what do you see as the catalyst for for overseas investors to return yeah again i think the selling that we’ve seen is a little bit misleading it’s actually very concentrated in a number of names uh specifically vena milk uh a big consumer products company uh that’s seeing a lot of uh of foreign selling i

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Think in that case uh because of the company’s slowing top-line growth a couple of uh big holders have essentially capitulated and that accounts for a lot of the selling than that hua fat which has been a phenomenal performer this uh the last 12 months up over over 100 percent uh probably the world’s best performing steel stock uh certainly one of the world’s

Most profitable steel companies um that we’ve seen a lot of profit taking in in that name uh over the last uh and that’s picked up noticeably over the last few weeks as the stock price continues to go up but again retail has come in and retail is absorbing that foreign selling and the other name where we’ve seen a lot of selling is vietnam bank which is one of

The state banks and there you know there was a cell down there uh by a strategic shareholder uh and that’s been ongoing over the last 12 12 months and and that that also accounts for a lot of the salary but broadly speaking i think foreign investors are very favorably disposed towards vietnam and we’ve seen a lot of buying particularly in financials and banks

Stephen i just want to jump in here i mean there’s a huge consumption story here right because we know that about 30 percent of the population will be in the middle class by 2025. how do you how do you position for that i think you know you’re quite right and again you know incomes are rising and uh there’s a very high level of household formation strong demand

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For everything from building products to consumer consumer appliances to uh tourism and travel related services so there’s a virtuous circle here of of consumption and investment in vietnam and in addition to that we have a very strong fdi story a very strong supply chain relocation story and and as a result of that a very strong export growth story so i think

The vietnamese economy is really like firing all cylinders and uh the only thing it really lacks is capital you know the vietnam big population 100 million people one of the biggest agricultural producers in the in the in the region if not the world it’s got land it’s got labor but it doesn’t have enough capital and that’s where foreign investors come in

Transcribed from video
Vietnam Valuations Look Reasonable: Ho Chi Minh City Securities By Bloomberg Markets and Finance