HSBC stoic as stock market plunges

Saturday, May 17, 2008
Hong Kong Shanghai Banking Corp (HSBC) most recently announced the periodic report on the salutation and prospect of Vietnam's economy in general and forecast on Viet Nam's finance and stock market in particular, in which the foreign bank still kept optimistic on Viet Nam.
Reviewing regular reports of HSBC about Vietnamese stock market, it is easy to see that the bank's experts always consider Viet Nam to be an attractive market in long-term and proposed an increase in purchase.
In the arguable report on April 7 concerning the investment strategy in Asian market for the second quarter of 2008, HSBC assessed that Viet Nam, along with Japan, Philippines and Australia are better-avoided markets due to macroeconomic instability. The report also caused shocks as forecasting that VN Index could be down to 600 pts by the end of the year instead of the previously predicted 1,100 pts.
However, it is not for this HSBC will change its point of view on Vietnamese market because just in that report, Vietnam was still regarded as the highly potential market in long-term thanks to a reduction in share prices. In addition, HSBC proposed to increase the capital allocation ratio into Viet Nam from 0.5% to 1%.
In the latest report released on May 8, the foreign bank continues keeping optimistic about the future of Vietnamese market in long-term. Besides, it is notable that HSBC believed Viet Nam's VN Index plunged to the bottom already.
At least Vietnamese stock market stopped declining after the government offered market support measures in March, and VN Index seemed to drop to the bottom of 500 pts, cited the May 8 report. But, right after the assessment, the stock market still saw the new bottom level showing that VN Index yesterday May 14 remained at 475.5 pts.
Regarding the stock market situation last month, HSBC's statistics showed that the VN Index within April surged by 1%, much lower than the 8% growth of MSCI of Asia Pacific market excluding Japan and 14% increase of Chinese market's H shares.
About transparency, Viet Nam market's average trading value remained small at only US$21 million each day, not equalling to one third of the figure by the end of 2007.
As usual, foreign investors are active buyers as for Vietnamese shares with the net purchase of US$122 million in April against US$59 million in March.
Given predication on market prospect, like previously publicised reports, HSBC continued saying that many potential risks still exist in Vietnamese stock market in short-term once instabilities in macro-economic policies have not been solved yet.
The current inflation rising by over 21% against the same period of last year along with the increasing trade deficit, government's economic growth target will be factors making domestic investors to be on knife-edge.
In this time, HSBC's experts also concerned a new investment channel in Viet Nam as from the stock market slumped and the real estate market became less brick. That is gold investment.
According to the foreign bank, the key factor affecting to the market in some recent months is whether listed firms' profit have to suffer affects from the current economic situation.
It is supposed that EPS of 2008 and in the following year only could grow 20% while price to earning (P/E) ratio of STC listed firms over next 12 months will be 11.8 times, representing a cheap share price in the market in long-term. These figures were announced in the April 7 report.
Written in the latest report, Dragon Capital forecasted EPS growth could be 3% only this year and 7% in 2009. If the growth rate declines, above assessments on Vietnamese stock market will not be exact any more.
At present, most of 15 largest capitalisation companies excepting securities brokerages all reported a high profit growth during the first quarter of this year, led by HPG with the EPS growth of 451%, followed by energy sector shares especially DPM with EPS growth of 77% and VSH 72%. The biggest loser was SSI with the EPS of—75%, according to HSBC's May 8 report.
Once again HSBC advised foreign investors to gather Vietnamese shares for long-term reserve. Notably, listed firms namely Vinpearl and Vinamilk with good quality are that focus on their key sectors and do not expand to other fields such as banking or gold business, which are emerging to become attractive shares.
Especially, in the latest report, HSBC did not give any forecast on VN Index. Perhaps, the bank's experts still maintained the 600 pts forecast level. (TBKTVN)