Equity Analysis /

Vietnam 2020 investment strategy

    Lam Nguyen
    Hoang Nguyen
    Rong Viet
    31 December 2019
    Published byRong Viet

    In our 145-page strategy report we cover all angles of the Vietnam investment case in 2020. Top-down, we highlight the global and domestic macro drivers, as well as upcoming index changes as Vietnam becomes a dominant weight in FM indices. Bottom-up, we assess the trends in each sector, while in our stock-by-stock analysis of our entire coverage we provide detailed forecasts, investment rationale and operating risks for the coming year. 

    Macro tailwinds. The Vietnamese economy should continue to grow steadily and we forecast it to match the government's target of 6.8% YoY. 

    Forecast earnings and EPS growth of listed companies will recover to double digits after a flat in 2019. However, domestic capital flow into the stock market will still be relatively limited, due to the influence from regulations to limit capital flows into high-risk assets such as securities and real estate. 

    The largest risk to the stock market still comes from geopolitical developments and the global trade, rather than the country itself. However, investors may have become accustomed to both the disappointment of unfulfilled expectations and the fluctuations of global factors. The impact on market sentiment, therefore, will not be too strong. 

    We forecast that the VNIndex will fluctuate in the range of 950 – 1,120. With capital flows likely to be less abundant in 2020 than in late 2016 to early 2018, investment should be aimed at businesses with organic growth from core businesses. We expect the increase of the VN-Index in 2020 to be moderate and closely related to fundamentals rather than due to multiple expansion.

    2020 will continue to favour bottom-up investment strategy. The main drivers should be domestic consumption and infrastructure investment, and companies exposed to these factors should benefit. Yield seekers also have some attractive options.

    Our preferred stocks in 2020 include MWG, SMB, VPB, NLG, QNS, PVD, HPG, PVS, IMP, DRC, BID, and BMP.