Dear Sven,
I’ve been living in Saigon for a number of years now, and have always been interested in using a bit of my money to buy shares in the Vietnamese stock market. I’ve read that the government will lift the restrictions on the purchase of local stocks by foreign investors starting September 1. I feel that this new development, coupled with the new decree allowing foreigners to purchase property in Vietnam for the first time will have a positive effect on stock prices. Could you help me with a brief description of which stocks to look out for, and how to go about investing?
Starting September 1, 2015 the government will lift the previous cap of 49% ownership by foreign investors on listed stocks, which could bring a large amount of fresh capital into Vietnam, and can indeed have a positive effect on stock prices. It is, however, important to note that this will not apply to certain sectors, such as banking and real estate, where the government is likely to maintain a certain amount of control.
This is Vietnam’s biggest easing on foreign capital inflows since 1990. The country realizes that it has to remain competitive when it comes to direct foreign investment to compete with other ASEAN countries, and to be considered a robust emerging market. Vietnam is making a strong case for being granted emerging market status by global equity index providers, pushing for an upgrade from frontier market status. After years of macroeconomic mismanagement, economic growth picked up to 6% in 2014, and is expected to soar above 6% again during the course of 2015, making Vietnam an attractive location for foreign investment.
There are two stock exchanges in Vietnam: the Ho Chi Minh City stock exchange, and Hanoi stock exchange. Most consumer goods and real estate companies trade on the HCMC exchange, while it seems many financial services and oil companies trade in Hanoi.
After doing a bit of research on stocks listed in HCMC, I’ve found a few individual stocks which might be considered a relatively safe option for newbie investors in Vietnam. Number one is Masan Group. This company has a market capitalization of over USD1 billion, meaning it is less prone to price risk. Many local analysts project the company’s earnings to increase in the next few years, and forecast stock price growth for the remainder of 2015. The company operates in the consumer goods sector, which is benefiting by an increase in consumer spending due to wage and employment growth. Second is Vinamilk. Another consumer goods player, the company has a market cap of over USD1 billion and has earnings growth projections for the next few years, which are positive. Thirdly, VinGroup, which operates in the real estate sector, is another big company that is projected to perform positively.
If you are looking for something a bit more risky, then Nam Long group (real estate) might be for you. This company has a lower market cap and price than the three previously mentioned, however it is also projected to have positive earnings growth.
If you want to buy shares directly on the market, you could get in touch with some local brokerages. The main ones are: Saigon Securities, Thang Long Securities, Sacombank Securities, and UP Bank Securities. They could probably set up an online brokerage account for you, or possibly assign you a personal stock broker.
Although there are many attractive aspects of the Vietnamese market for prospective investors, it is important to note that the proposed new laws have been described as vague, and the effect on the market might only be fully understood after a prolonged period of time. If the Vietnamese market behaves anything like some Asian markets (China is a great example), which are driven by herd sentiment and consist of mainly individuals and speculators who participate in the market, it could be an extremely risky place for an individual to park money. It might be better to stick to seasoned, value-driven markets like the US and Europe.
