20180212_BSC_Vietnam Sector outlook_2018_EN

Emerging Market is expected to be the main attraction for 2018’s market cashflow. In the circumstance of favorable conditions of the global stock market in 2017, economic reform and economic growth are taking place in many Asia emerging countries, stocks are in a correction period of which price level is higher than the previous period (2015 - 2016) and have strong growth prospects when comparing ROE of emerging countries (about 11.5%) with developed countries, while PB is only around 1.8 which is much lower than that of developed countries (about 2.45x).

Vietnam - The stock market is changing in terms of Quantity and Quality. Ending the 2017 vibrant year with VN-Index increased by 48% which is listed among the list composed of highest stock market growth rate, and also the highest growth rate in many years. With a return to the 10-year peak since 2007, BSC forecasts that the market would break its peak in 2018 in terms of both index and liquidity. The market also has a change in quality, accompanied with the amount of (1) the presence of leading enterprises after the IPO process, listing floor (upcom on HNX, HSX), (2) Divested state capital also makes a significant change in term of quality. Corporate capital affecting the VNIndex and VN30 will also see many changes, creating a new game to attract investors including both individual investors who are trapped in low interest rates, and institutional investors who are gradually being convinced by the growing potential of Vietnam. However, the market is not completely positive in 2018, the risk remains in many sectors of the market, and the excitement of individual investors may leads to higher uncertainty than 2017. As usual, we analyzed that the stock market would continue to diversify and opportunities only appear to investors who are well-prepared on investment topics of 2018.

Similar to previous year, BSC usually offers investment topics, evaluating the overall opportunities, helping investors have more options throughout the year. For the year 2018, BSC maintained a positive view on the market in general and raised the following topics:

First, the opportunity from Equitization, the issuance of shares to the public and new listing. As of 11/2017 only 22/44 corporation are expected to be equitized in 2017, and thus, the number of equitized firms pushed through 2018 is relatively large.

Second, the opportunities from divested state capital leading enterprises. According to the Decision No. 1232 / QD-TTg, in 2018, some noteworthy divestments were PLX (expecting a minimum divested rate of 24.86%), ACV (a minimum divested rate of of 20%), DVN (a minimum divested rate of 29.98%), Lilama - LLM Vietnam Machinery Installation (a minimum divested rate of 46.88%), VGC (a minimum divested rate of 20.62%). In addition, SCIC's divestment portfolio will also attract major interests in DMC, BMI, VCG, NTP, BMP, FPT, and VGT.

Third, the change of orders in VN30. 2017 is the first year that the majority of investors fail to make their return rate equal equal or larger than the main indicators; causing new cash flow entered the index funds.

Fourth, the banking wave. In 2018, banking stock will continue to grow significantly and had a major effect on VNIndex.

Fifth, real estate continues to grow in the middle segment and FDI inflows. Circular 19/2017/TT-NHNN creates more medium and long-term lending sources, and thus stimulates growth momentum for real estate and construction sector.

Sixth, prices of basic commodities increased, such as oil and gas, steel, rubber. BSC forecasts oil prices will hardly fall sharply in 2018,