VinaCapital: More than 70% of Vietnamese stocks have low valuations like during the crisis

VinaCapital made this comment in its market valuation report published on June 4. According to this fund, VN-Index is currently trading at a valuation based on the stock price-to-earnings ratio (P/E) of about 13 times, while this year’s profit growth is expected to reach 15%. If just looking at the general index, this valuation is not too low.

“However, more than 70% of stocks on the market are trading below the 10x P/E level, an area that usually only appears during periods of crisis,” VinaCapital’s report stated. This unit believes that the strong increase of codes belonging to the Vingroup ecosystem, the group accounting for nearly 30% of VN-Index’s capitalization, causes the rest to have cheaper valuations than the general index.

VinaCapital’s analysis department said that the fact that most of the market has low valuations is completely contrary to reality. Vietnam’s economy remains resilient and technology exports continue to increase strongly.

Besides valuation, the profit growth momentum of businesses is also considered a bright spot by this fund. In the first quarter, after-tax profits of listed companies improved by 51% over the same period, far exceeding market expectations of 15%.

If Vinhomes’ surge is excluded, the whole market’s profit still goes up by about 30%, twice as high as investors’ expectations. This shows that businesses have good fundamentals when the US-Iran conflict has a strong impact on the global economy. Growth momentum also occurred in many industry groups, including: real estate, materials, retail, energy and essential consumer goods.

Another point mentioned by VinaCapital in the report is that Vietnam’s stocks still do not fully reflect the impact of the ongoing reforms. These factors include improving the operating efficiency of state-owned enterprises, the ability to meet upgrade criteria, and policies to deal with slow-moving real estate projects.

VinaCapital assesses that these changes may not have an immediate impact on stock prices. However, the new policies will be gradually realized through improved liquidity and an increased number of listed companies.

From a capital market perspective, this is an important layer of information in the context that foreign investors are still net sellers. From the beginning of the year to the end of May, foreign investors net sold more than 54,100 billion VND.

Foreign cash flow withdrawing from the market is a drag, but not the only variable that governs the outlook for Vietnamese stocks, according to VinaCapital. If liquidity improves, the upgrade process changes and the supply of newly listed businesses increases, the current low valuation level may be viewed differently.

Besides advantages, VinaCapital also pointed out some macro challenges for Vietnamese stocks such as transportation disruptions in the Strait of Hormuz, increasing trade deficit, inflation risks…

According to data from the Department of Statistics (Ministry of Finance), in the first 5 months of the year, Vietnam’s total import-export turnover of goods reached more than 445 billion USD, up 25% over the same period last year. After 10 years of maintaining a trade surplus (2016-2025), Vietnam’s trade balance of goods reversed to a trade deficit of 13.8 billion USD in the first 5 months of the year.

Meanwhile, VinaCapital also recorded that Vietnam’s trade deficit (trade deficit) increased from about 3% of GDP to over 6% of GDP in mid-May, equivalent to about 13 billion USD. According to this fund, the war in the Middle East contributed to this index increasing by more than 2 percentage points, because oil prices and the yuan both increased sharply.

However, the majority of Vietnam’s trade deficit comes from increased purchases of raw materials and means of production to serve high-tech goods. This is a point that VinaCapital considers quite important, explaining why the currency and stock markets are somewhat not too concerned about the imbalance of the trade balance.