With risks come big rewards

VNStockNews.com - Vietnam’s stock markets are expected to offer investors numerous rich rewards in 2010 despite some dark clouds on the horizon.

Vietnam’s equities markets ended a difficult 2009 with the VN-Index surging 56.8 per cent on-year, becoming one of the world’s best performing indexes.

Looking ahead, market analysts may claim 2010 will be another good year for the stock market as an economic recovery apparent. Given the achievements of 2009, there are significant growth potentials for the domestic economy and stock market in 2010.

Economists have forecasted Vietnam’s gross domestic product (GDP) growth rate this year could reach 6.5-7 per cent, fuelled by domestic consumption and export recoveries, and inflation at approximately 8-9 per cent. Pham Thanh Thai Linh, Bao Viet Securities Company’s (BVSC) chief equities strategist, said that fiscal and monetary policies in 2010 would aim to stabilise the economy, creating favourable conditions for enterprises.

“Once the domestic economy stabilises and picks up, the stock market, the barometer of the health of the economy, will have the conditions for development,” Linh told VIR. Linh said besides economic prospects, the equities market could also be supported by policy changes from the market watchdog State Securities Commission, including regulations on margin trading, T+2 transactions and intraday trading. Such policy changes will open a new stage in development of Vietnam’s stock market, narrowing the gap with other regional stock markets.

“Given the above-mentioned elements, we hold the view that 2010 could be a year without such strong economic development as seen in 2009 but the economy will be more stable and steadily recovers,” said Linh.

Josephine Yei Pheck Joo, Ho Chi Minh City-based SaigonBank Berjaya Securities’ chief executive officer, viewed 2010 a challenging year because the horizon was uncertain. Inflation, trade deficit, currency instability and foreign exchange market pressures were reportedly big concerns.

“The VN-Index may not move much as compared to 2009, particularly if lending is limited and inflation is a concern,” said Joo, adding that Vietnam’s stock market was still too small due to low liquidity for major foreign institutional investments. “But initial public offerings would continue as the world’s economy recovered.”

Thang Long Securities Company’s deputy general director Quach Manh Hao said that after a year of loose monetary policies and cheap money pumped into the economy, the government wanted to keep its money supply and credit growth at a modest level. “The cautious monetary policies should cause liquidity concerns in the first half of the year and thus we see a gloomy picture for stock market performances in the first half of 2010,” said Hao.

Hao said while 2010 might be another good year for equities, Vietnam’s market was more about investors’ psychologies and money flows. “The government has implemented several good policies regarding interest and exchange rates which will benefit the economy. We thus believe that the second half of 2010 should be much better than the first.”

Linh said inflation would rise and be more uncertain in 2010 relative to 2009. “But, we believe it will still be under control. We expect the consumer price index to rise by 8-9 per cent in 2010 and the basic interest rate at the end of 2010 will reach 9-10 per cent.”

Linh said due to monetary tightening measures, investment inflows into the economy and the stock market would gradually contract. Nevertheless, he noted, the measures would not impact too heavily on the stock market because they would target economic stability. “This mechanism is necessary to protect the economy from the phenomenon of bubble assets and stabilise the market on its long-term uptrend,” he said.
Joo argued inflation would not be nearly as extreme as 2008 and global commodity prices would not go back to levels seen in 2008.

“Nevertheless, the tightening of monetary policies is needed to control credit system growth and stabilise the economy in the long run. It is a painful decision, but a right and beneficial one for the country,” Joo said.

For investors, particularly retail ones, he said, 2010 might not be an easy year to enjoy rewards. “My suggestion is to keep cash. There are always investment opportunities available. Investing needs discipline and an understanding of the macro-economy and the micro-economy of the stock invested.

“Take profits whenever a particular stock giving a return outperforms the market or other stocks. One can never buy at the lowest and sell at the highest point.” Linh believed investors with a clear investment strategy and medium or long-term view would achieve good results in 2010. “Besides holding a medium and long-term vision, investors should combine flexible portfolio restructuring by switching to leading market sectors in each development phase of the VN-Index,” Linh noted.

Hao said market trends were more important than any specific stock picking and so the right decision at right time was the rule of success, but caution was needed in the first half of 2010.

“Safe investing means investors should focus on highly-liquid stocks and limiting the use leveraging for investments. Investors should follow trends, rather than bet money in any situation they are not confident with,” Hao added.