VietNamNet Bridge – MB Securities estimates that if Vietnam is upgraded into a secondary emerging market, it will be able to attract $4.5 billion worth of capital.
Hoang Cong Tuan from MBS said at a workshop on the prospects of Vietnam’s stock market several days ago that Vietnam may be put on MSCI’s watchlist for upgrading to an emerging market by June 2020.
He believes the possibility of joining MSCI Emerging Market is high. Under MB Securities’ positive scenario, the announcement about the upgrading could be released by June 2021.
The proportion of Vietnam’s stocks in MSCI index basket would depend on the capitalization value and the market liquidity at the time of being upgraded. It is still too early to estimate the amount of capital.
However, MBS estimates that, if the upgrading had been announced in December with the proportion of 0.3 percent, the foreign capital flow would have been worth $4.5 billion.
Vietnam’s economy will continue growing more rapidly than ASEAN and emerging markets. Positive predictions have also been given for listed enterprises. The current valuation of the Vietnam’s market is 13-14x, relatively low compared with other regional countries.
Real estate shares
Industrial real estate is a very hot market segment in 2019 thanks to the expected strong FDI inflow. Vietnam’s FDI attraction is getting better as the business environment has improved considerably. Vietnam has jumped by 24 grades in the last three years to 69th, according to the World Bank.
In the first 11 months of 2018, foreign investors registered $30.8 billion worth of FDI. Samsung, LG and other corporations have been present for more than 10 years in Vietnam, creating high demand for IZ land in the north.
As for the apartment market, MBS believes that the low-cost segment will be especially attractive in the context of the oversupply of high-end products and tighter credit. Some real estate developers have shifted to focus on the market segment as they believe the number of people who have demand for accommodations is very high.
The credit growth rates in 2018 and 2019 are expected to be modest, 16 and 15 percent, respectively, as the watchdog agency’s response to the FED’s monetary tightening policy and more cautious approach to credit control.
MBS believes that the net interest margin would go flat in 2019 because of interest rate increase, competition among retail banks, the secondary debt pressure and the application of Circular 16.
Consumer goods & retail
The rapid urbanization in Vietnam will lead to a rapid increase in urban consumers, which helps accelerate the switch from traditional to modern retail channels.