13.02.2023, 20:09

Opportunities out there for careful and savvy investors


At VIR’s roundtable on new investments amid new volatility on February 7, Le Duc Khanh, director of Investment Capability Development at VPS, assessed that in the context of tight cash flow due to banks’ increasing of interest rates, the stock market in 2023 may have no chance to reach the peak like 2020-2021 period. However, it will likely experience less pressure as the US Federal Reserve slows down the interest rate hikes and domestic interest rates are already high.

“The monetary policy adjustment is likely to happen in the third and fourth quarters,” Khanh noted.

According to him, the stock market will reflect the economic cycle about 2-3 months in advance. As the current market still needs a period to accumulate, the year 2023 would see difficulties but also opportunities, and this is the time to restructure the portfolio.

“In 2023, the general market will not be as important as industry groups. Investors should carefully sift through cases of sudden revenue and profit growth, not to mention mergers and acquisitions that would lead to stock price increases. We can expect a few specific stocks to increase by 20-100 per cent,” Khanh said.

Regarding industry groups that have growth potential, he expects them to be utilities, construction, construction, banking, and electricity.

As for gold, Tong Quoc Dat, senior market strategist at Exness, noted that in times of economic difficulties, the price of gold tends to increase and become a good investment channel for those who want to protect their assets.

“When inflation increases, the price of gold usually goes up. At the same time, the amount of gold in the world is limited, so its price will continue to increase as demand increases,” Dat said. “Despite the recent volatility in the market, gold remains a stable investment, and some experts believe the first quarter of 2023 is a good time to trade or invest in gold. Gold will continue to be a safe haven asset throughout the year.”

Cash flows from foreign funds

Last year witnessed a spectacular return of foreign cash flows, with a net disbursement value of VND29.24 trillion ($1.23 billion). Interestingly, foreign investors disbursed the most when domestic investors seem to have lost confidence and are turning away from the market.

Quan Duc Hoang, chairman of A+ Fund, pointed out that a large part of foreign cash flow comes from revolving activities of funds operating in the Vietnamese market such as Dragon Capital and Vinacapital.

“Despite difficult situations, I have yet to see investment opportunities like now in the past 30 years, as many Vietnamese enterprises are operating smoothly and generating good profits. But we have yet to take thorough advantage of opportunities from free trade agreements,” Dat assessed.

The chairman of A+ Fund noted that it is more important to attract large organisations to invest in Vietnam’s stock market. A survey conducted by A+ Fund showed that most foreign funds are willing to invest in the Vietnamese market. This proportion was previously only 40 per cent.

There are still barriers that caused professional investment funds to be reluctant in their decisions, including the maximum ownership rate for foreign investors, emerging market and frontier market portfolios, and issues in finding the right partners. However, with the assessment of the Vietnamese economy in the years to come, money will definitely come in.

“We don’t want hot cash flow and investors who wait to bottom fish then leave, but investors who would stick with the Vietnamese market. The number of funds should not be of concern, but the type of investors and investment value should be carefully considered,” Hoang said. “What Vietnam should expect is access to long-term funds, with a 10-15 year vision.”

Hoang Nguyet Minh, senior director of Commercial Leasing at Savills Hanoi, assessed that foreign investors have always considered Vietnam as a potential real estate market, with investors from South Korea, Japan, Europe, and the US willing to inject money using all available capital and without a loan. “But they have no way to pour capital when the legal corridor has not brought enough peace of mind,” she said.

Currently, foreign investors mainly focus on the group of commercial real estate services and office buildings, while neglecting housing projects. The Savills representative explained that the reason is that the legal corridor for the former segments is much clearer. This creates a level playing field, as foreign enterprises are allowed to own an office building for a period of 50 years, the same as Vietnamese enterprises.

With the housing segment, the legal process is quite long and complicated, from applying to invest and land auction to approval and house ownership certificate issuance.

“Domestic enterprises themselves are not confident enough when going through all these stages, let alone foreign investors who are new to the Vietnamese market,” Minh commented.

Vietnam currently applies a ceiling of 30 per cent of apartments in a project allowed to be sold to foreigners. Up to now, most projects in Hanoi and Ho Chi Minh City with good locations and good legality have maxed out, with the allocation for foreign investors always the first to sell out.

“The biggest concern for foreigners in the real estate market right now is legality. The demand is always there. Once the law is improved, real estate prices will be stabilised at a more reasonable level. This is an opportunity for investors with good cash flow who are willing to invest in the long term,” Minh said.

New opportunities

According to Vu Huu Dien, director of Investment Advisory at Dragon Capital, the steel sector will revive as a result of China’s opening and substantial public investment in 2023.

In addition, if Vietnam could adopt the advanced infrastructure from the Korean Stock Exchange and allow intraday trading in 2023, the trading volume would expand dramatically, attracting numerous international investors. Thus, securities companies will flourish as a result,” Dien noted.

“Buying corporate bonds issued by reputable firms with a duration of less than 1.5 years and yielding about 15 per cent would be a viable option for investors as well. 2023 is the right time for stock picking with good and transparent listed companies,” Dien said. “On the flip side, it will take cryptocurrency a long time to mature into a stable investment. For this reason, retail investors should stay away from derivatives and cryptocurrency.”

Nguyen Minh Tuan, founder of TOPI, a multi-asset investment and personal finance management platform, emphasised the better that legal risks and counterparty risks are managed, the greater profits that may be achieved.

At the moment, when interest rates are high, the value of investment in crypto assets, bonds, equities, and other financial instruments will decline. Investors need to do research to determine whether or not the interest rates for the next six months have reached record high.

“It’s not the market that retail investors should worry about. Rather, it’s their individual risk profile and how their money is allocated. You shouldn’t put your money into cryptocurrency, for instance, if you’re not willing to take on significant risk,” he said.

“Portfolios may be rebalanced periodically such that 80-90 per cent is allocated to long-term investments and 10-20 per cent is allocated to short-term trading. A long-term investing horizon is, however, the only certain way to success. Fund certificates are an ample option for those who lack stock market expertise,” Tuan added. “In general, this year’s equity market focus will be on the public investment sector.”

Le Minh Phuong, deputy general director of AIMS Futures Vietnam Trading pointed out, “Because of the bidirectional nature of the derivatives market, possibilities abound, yet they are never without their share of inherent dangers.”

Around 32 sectors, including metals and agricultural goods, are now under licence of the Mercantile Exchange of Vietnam for commodities trading.

In the current tumultuous market, all of which influence the ups and downs of commodity prices, there are increasing possibilities in the commodities derivatives trading market.

“Moreover, due to a great deal of regulation shifts and economic upheaval in the year 2023, investors should pay close attention to the energy and agricultural markets, as well as the businesses that operate within these two areas,” he said.

Dragon Capital also remains optimistic that the Vietnamese market will move higher in 2023. Specifically, China’s re-opening will also lead to a revival of real estate construction in that country, and Vietnam’s government will follow through on its ambitious plan to increase infrastructure construction spending by half this year, to circa $30 billion.