Recent correction drives VNIndex to cheapest valuation since April 2020

Long term outlook remains positive while short term volatility may continue

Vietnamese stocks have been experiencing a correction in recent weeks due to a confluence of events, both domestic and exogenous, that have shaken investor confidence and turned sentiment negative. Growing uncertainty in the global economic recovery post-COVID has been driven by increasing concerns on inflation and central banks’ actions to reign in inflation, the outbreak and continuance of the war in Ukraine that has further exacerbated commodities prices as well as the zero-COVID policies in China which have resulted in lockdowns in key cities which is further stretching global supply chains. On the domestic front, notable legal actions taken against several large players on the market for stock price manipulations and the cancellation by the SSC of bonds, valued at over 437m USD, issued by a private real estate company, have caused negative sentiment to take hold of the market. While the actions by the regulators in Vietnam to address some of the nefarious actions in the market have, and will, undoubtedly cause short term pain in the market, overall, the increased transparency and levelling of the playing field for all investors will bode well for the long term development of the financial markets. 

The combination of the market correction and a drop in liquidity make it difficult to pinpoint when the bottom of the market will be reached. For that reason, we believe shorter term traders should follow a cautious approach and perhaps take an opportunity to restructure portfolios in favour of companies that maybe have been oversold during the market pull back.  For longer term investors, this correction provides an opportunity to buy into solid companies with positive outlooks at discounted prices to the beginning of 2022.

View details in full report below.