BSC_Vietnam Marco Market Outlook_EN_2018

After the period of rapid price rise in 2017, blue-chip stocks are overvalued, and may limit the growth prospect of the market in 2018. Investment trend can switch partly to the auction of equitisation and sale of government’s ownership in large public companies. These stocks with the sector of newly listed banks will be the new force for the market to keep its uptrend. In 2017, the derivative market came into operation with the first product of future contract. However, when the market size got larger, demand for investment rose, new products such as warrant, equity future, option, … and synchronized solution to shorten liquidity interval, consequently aiding demand, increasing liquidity, and making the market improve the capability of absorbing large capital inflows becomes urgent. These changes simultaneously helped Vietnam’s security market satisfy MSCI’s criteria about the capability of rising rank in 2019. We will make some forecasts about the security market and the investment strategy in 2017

About VN-Index, VN-Index is forecasted to be from 785 to 1,053 at the end of 2017; the market may increase to a high price level in 2nd quarter (1,165 points). Newly listed large enterprises are the new growing force of the market.

About the developments of market in 2018, the uptrend will last until the first half of 2018. The market performance during the rest of the year will be complicated, depending largely on the foreign capital flows.

About the security investment sectors in 2018, (1) Large enterprises will be equitized and listed; (2) On the recovery phase of world commodities such as steel, oil, …; (3) The sector improves related to the business cycled such as Banking, Construction, Real Estate, and Technology; (4) Defensive stocks with high dividends, sectors with stable long-run potential growth, blue-chips stocks will continue to be the force leading the market. (5) Fundamental stocks undervalued in mid-cap and small-cap stocks; (6) Sectors concentrating in domestic consumer goods growth such as retail, material, beverage, pharmacy, airlines, …

The economy remains the growth rate over 6.5%. GDP overcame the trough phase of average 5.88% growth rate in 2011-2015 periods. The forecast for growth rate is 6.5%-7.0% average in 2016-2020 periods. Income per capita in 2017 is approximately 2,550 USD and is expected to be 3,200-3,500 USD in 2020. 10% of the population belongs to middle class and is expected to rise to 50% in 2035 according to WB. Consumption is the important part of growth, changing the economic structure.
Population rising more than 1 million in 2017 and maintaining the golden population structure created advantage to the economic growth in the next 10 years. According to the statistics by United Nation, Vietnam population is approximately 95.58 million, increasing 1.06 million in 2017, accounted for 1.27% world population and ranking as 14th in the world. Average age of the population is 31 years old, urbanization rate is 34.7%. Population aging from 15 to 64 is 65.82 million, accounted for 69.3% population. Population over 45 years old is 20.1 million, equivalent to 21.1% labor force and will shift to be dependent in the next 10-15 years. The golden population opportunity is the force for economic growth in the next 10 years.  
 

Business environment improvement, deregulations of procedures and barriers. Ministry of Industry and Commerce first moved by cutting 675 investment conditions, accounted for 55.5% investment and business conditions. The business environment sharply rose 14 ranks from 82 to 69 in a total of 190 economies. The number of newly registered companies was more than 125,000 businesses, making record and rising nearly 20% compared to 2016. FDI into Vietnam rose with more than USD 33 billion. The total trade volume exceeded 400 billion USD with the average growth rate of over 21%.
 

FDI continued to the most important force of economic growth. During the 10-year period from 2008 to 2017, registered FDI and average annual disbursement were USD 20.6 billion and USD 12.6 billion respectively, especially rapidly increasing in 2017 to around 30.3 and 17.5 billion USD. Vietnam participated in the global production chain, continued to attract FDI thanks to government’s preferential policies, many signed FTAs, and the low labor cost. Together with export and consumption, FDI will still be the bright spot and the pillar of the economy for the next many years.
 

Stock market size will exceed 70% GDP in 2018 and will be highly likely to reach the 80% GDP target earlier than 2020. 2017 is the year of many records, the index returned to the peak 10 years ago, the trading volumes reached record, foreign sector purchased the most in the last 10 years, and especially the market capitalization rose sharply. The market capitalization in 2017, estimated to be 68.7% GDP, increased to 89.4% compared to 2016. The wave of equitization, listings of public companies, banking sector, and large private companies will make the market capitalization to surpass 70% GDP and may reach 73-75% GDP in 2018. The target of 80% GDP in 2020 is possible and likely to be reached earlier. With this market capitalization target, Vietnam’s stock market gets close to the common level of the surrounding countries’ stock market.