Market falls can’t dash HSBC’s hopes

Thursday, May 15, 2008
The Hong Kong and Shanghai Banking Corporation (HSBC) remains optimistic about Viet Nam’s economy and stock market in its latest report.

Reports and forecasts good for…?

HSBC’s reports about Viet Nam, including the latest one, show that its experts consider Viet Nam an attractive market in the long term, and recommend purchasing shares.

In the controversial April 7 report by HSBC on investment strategies in the Asian market in Q2, HSBC wrote that Vietnam, together with Japan, the Philippines and Australia, were ‘markets better avoided’ due to macroeconomic uncertainties. The report lowered the forecast VN Index to 600 points by the end of this year instead of 1,000 points as it previously forecast.

However, in general, HSBC has not changed its perspective on Vietnam’s market. It believes Viet Nam a market with long-term potential and one that will see cheap stocks.

The optimism about Viet Nam’s market once again could be seen in the latest report. Moreover, HSBC said that the stock prices had hit the bottom at the 500 point threshold.

Released on May 8, HSBC’s report said that the stock market has stopped sliding since the Government took drastic measures to rescue the market in March.

However, the stock market found other ‘new bottoms’ after HSBC made the conclusion with the VN Index falling to 475.5 points on May 14.

The VN Index increased slightly in April by 1%, much lower than the 8% increase of MSCI of Asia-Pacific, not including Japan, and the 14% increase of H stocks on China’s market. The everyday trading volume was also modest, at $21mil, just less than 1/3 of that at the end of 2007.

Foreign investors continue buying Viet Nam’s shares, $122mil worth in April and $59mil worth in March.

HSBC thinks that risks still exist in the short term as macroeconomic problems still cannot be settled. The inflation rate of 21% over the same period of last year, increased trade deficit and the fact that the Government has lowered the economic growth rate, all worry investors.

According to HSBC, one of the key factors that will influence the market is the profit of listed companies. The EPS is expected to reach 20% this year and next year, the P/E of listed stocks in 12 months will be 11.8, which shows cheap stocks in a market with potential.

However, the report has reminded investors that Dragon Capital has forecast a much lower EPS for this year and the next year, 3% and 7%, respectively.

In fact, the profit gained by listed companies was very satisfactory in Q1. Most of the 15 companies with the biggest market capitalisation value saw high profit, except securities companies. HPG, for example, had an EPS as high as 451%, while power shares, especially DPM, had the EPS of 77%, VSH 72%. Meanwhile, the Saigon Securities Incorporated (SSI) saw a minus EPS (-75%).

HSBC, once again, advised foreign investors to purchase Vietnamese stocks for long-term investments, saying that the current difficulties are just temporary.

The listed companies that focus on their main business fields and do not jump into other fields, including Vinpearl and Vinamilk, have emerged as attractive stocks, according to HSBC.

In this report, HSBC did not make a forecast about the VN Index. (TBKTVN