Vietnam’s stock market 2020: A promising year ahead

In the investment strategy report of 2020, VNDirect Securities Company (VNDS) said that most of the market concerns have been reflected in prices, the company is cautiously optimistic about the stock market outlook this year.

Specifically, VNDS forecasts Vietnam's GDP growth to reach 6.8% in 2020, of which manufacturing sector increases by 10%; exports increased by 8.5% and domestic consumption increased by 8.5%. Inflation may be higher due to rising pork prices but will remain below 3.2%, creating room for the State Bank of Vietnam to loosen monetary policy by 2020.

The pressure on VND depreciation is insignificant, thanks to the trade surplus and abundant foreign exchange reserves. Although the FDI group continues to lead the economy, the manufacturing sector in the private sector is taking off with many major projects underway.

With most of the concerns reflected in prices, the VN-Index may reach 1,160 points in 2020.

The stock market in 2019 had been out of sync with the macro economy due to the fact that the actual profit of listed companies was lower than expected and the boom of high – yield corporate bond market that had partly attracted cashflow.

Illustration of Vietnam's stock market in 2020.

In 2020, VNDS estimates the profit of listed companies to increase by 18%, higher than 13.7% in 2019. With the goal of upgrading the stock market, Vietnam will need at least 2 more years to be upgraded to an emerging market in MSCI. In addition, the proportion of Vietnamese stocks in the MSCI Frontier Index basket is expected to increase after Kuwait is upgraded, which will help attract new capital flows from abroad into the market.

With a positive expectation, the retail and food & beverage (F&B) sector will continue to shine thanks to strong domestic consumption growth and consumer optimism. Secondly, under the support of government policies, the rise of private capital inflows can help the manufacturing and technology industries take off in 2020. Thirdly, logistics and industrial zones continue to benefit from FDI growth and trade mobility. Finally, flexible monetary policy will be able to bring the banking industry into the focus of investment in 2020.

VNDS forecasts that theVN-Index will increase by 20.7% compared to the end of 2019; Based on the P / E ratio (2020)of 15.3x. The top investment sectors recommended by VNDS are retail, F&B, manufacturing and logistics.

On the other hand, the risk posed by VNDS is the risk of global economic recession and the instability associated with the US-China trade war.