20160118_BSC_Vietnam Sector Outlook_EN_2016_Part2_Public

Since BSC started our annual sector reports in 2012, with quarterly review in 2015, never did the sector selection become so challenging. For the year of 2015, there was rarely any stock index that could close in blue zone, if calculated in USD. While emerging markets and frontier markets experienced deep falls such as Straits Times Index-Singapore (-15%), SET Index- Thailand (-14%), JCI Index-Indonesia (-12%), Vietnam stock market achieved the 5th highest growth among Asian countries, with a 6.1% increase in VN-Index. In the period 2012-2015, the downward trend and the low level of interest rate, combined with low raw material prices was the fundamental growth driver for businesses. However, interest rate is currently at its bottom and is likely to increase slightly in 2016. The rise in interest rate, along with other factors, has caused earning growth depending largely on the internal growth drivers of businesses.

2016 will be a year of expectations and changes, with challenges and divergence from the global economy as well as the escalation of geopolitical, affecting stock market’s cash flows. To consider the stocks’ attractiveness, growth of core business should be assessed together with outside factors. BSC’s assessments on investment theme, sectors and timing for 2016 are based on respectively analysis of (1) Policies and information that affect sectors in 2016 and (2) business cycle and acceptable level of sector valuation.