Sept. 29 (Bloomberg) -- Vietnam’s benchmark stock index may rally as much as 27 percent next year as a rebounding economy and slowing inflation prompt investors to pour money into shares, according to Thang Long Securities Joint-Stock Co.
The Ho Chi Minh City Stock Exchange’s VN Index may reach as high as 550 “at some points” next year, Quach Manh Hao, deputy chief executive officer at Thang Long Securities, the nation’s third-largest brokerage, said in an interview in Hanoi. The gauge closed at 433.97 yesterday.
“I have a bullish view on the stock market from now until the middle of next year,” he said. “Inflation has peaked, while the economy is expected to rebound and borrowing costs are coming down.”
The VN Index has risen 0.3 percent this quarter, the only advance among Asian benchmark indexes tracked by Bloomberg, as consumer-price gains slowed and the central bank cut its repurchase rate in July after nine consecutive increases. The government is aiming for gross domestic product growth of 6.5 percent and inflation of less than 10 percent next year, it said in separate statements in June.
The stock gauge has tumbled 10 percent this year as inflation accelerated to the fastest pace among 17 Asian economies tracked by Bloomberg. Shares on the index traded as low as 8.9 times estimated earnings in the week ended Aug. 12, the lowest since March 27, 2009, when the gauge began a seven- month rally and more than doubled to a peak of 624.10 in October that year.
Growth slowed in the first three quarters of 2011 after the government pushed up borrowing costs earlier this year in a bid to curb price gains. For the nine months through September, the economy expanded 5.76 percent, down from 6.54 percent in the first three quarters of 2010, according to General Statistics Office figures released on Sept. 24.
“It seems that the situation can’t be worse, and we actually have seen that cash flow into the stock market has improved,” Hao said. The Ho Chi Minh Stock Exchange is the second-smallest of 16 in Asia-Pacific tracked by Bloomberg, and more than 14 times smaller by market capitalization than Southeast Asia’s largest exchange in Singapore.
The State Bank of Vietnam has increased the repurchase, refinancing and discount rates to stem credit growth and slow inflation. The central bank raised the repurchase rate in nine steps from 7 percent at the start of November last year to 15 percent in May 2011, before cutting it in July to 14 percent.
Consumer prices climbed 22.42 percent in September from a year earlier, easing from a 23.02 percent gain in August, according to figures released by the General Statistics Office.
Inflation in Vietnam “has been staying at a high level” and “lasting for a long time,” Vu Duc Dam, chairman of the statistics office, said on Sept. 26. The government will “firmly” pursue its tight monetary and fiscal policies until the end of the year, Dam said.
“Monetary policy is a bit tighter, but it also shows the determination of the government in stabilizing the economy,” Hao said.
Hao recommended investors buy stocks of companies in sectors such as construction materials, food and beverage or logistics.
--Editors: Matthew Oakley, Richard Frost
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