Earlier in 2019, at Forbes Vietnam’s request, fund managers and expert analysts picked their 5 favorite stocks. They shared some similar viewpoint in stock selection, mostly of industry leading companies. 12 months later, 4 of these stocks increased by 30-60%, 5 by 10-20% and 3 fell by 5%. What will the fund managers’ taste be for 2020?
MACRO IN 2020: As neighboring countries economic growth are slowing down, Vietnam is having a fast growth rate, not only in exports but also in domestic consumption and tourist count which contributes to increase in GDP. Asia Development Bank (ADB) recently forecast Vietnam’s GDP growth for 2019-2020 period to be 6.9% and 6.8%, compared to previous prediction of 6.8% and 6.7%. Thanks to Vietnam and EU Foreign Trade Agreement (EVFTA) and instability of US and China trade relations, Vietnam is in a strategic position to prepare its best for opportunities.
We can see in recent years, Vietnam National Assembly and Government has made great efforts in building an attractive investment environment, along with changes in policies regarding securities and corporate governance law to attract capital from foreign investors.
MOST PROMISING SECTORS: In my opinion, the most promising sectors include consumption. Another sector with potentially high growth is tourism. In the first 11 months of 2019, foreign tourist count reached 16.3 millions, increasing by 15.4% from the previous year. Transportation and logistics are also sectors predicted to do well this year, in addition to agriculture, construction.
ASSET ALLOCATION: I believe that blue chip stocks are still top choice for 2020 due to high liquidity, transparent corporate governance and specific targets for growing directions of each company.
5 FAVORITE STOCKS: HPG, KDH, PNJ, ACV, FPT.
MACRO IN 2020: Vietnam has proven its ability to counter against external economic volatility in 2019 and its upside for policy adjusting to weakening global economy. 2019 was a year in which Vietnam experience particular stability in its macro economy. Its ability to attract direct and indirect investment capital is well maintained.
Moreover, government is making efforts in changing the institutions in favor of business activities and promoting public investment in 2020, once they start removing barriers to state capital investment during 2018-2019. All of the above let me to the idea that Vietnam will maintain a stable macro economy and high economic growth rate in 2020.
During the last months of 2019, risks from US economic recession has dwindled, with US-China trade relations reaching agreement that shows better signs of global economy in the next years. However, I think Vietnam still need to stay on alert to be able to response to external macroeconomic changes. I maintain the view spoken to Forbes Vietnam in the 2018 year-end interview that Vietnam is a bright spot in keeping macroeconomic stability and attracting investment this year.
MOST PROMISING SECTORS: As I have said early 2019, banking sector has shown strong growth in comparison with market average (near 30% compared to market average at near 10%). I believe this trend will continue in 2020 with higher differentiations between banks that have abundant financial resources, low cost of capital, strong distribuion system and diversified financial products.
In addition, there are also opportunities for banks with investment strategy in technology to lower operational expense and increase customer segment quality. Retail sector will benefit from mega trends – urbanization and growing middle class.
Besides, technology sector is also attractive as the trend of digitalization is still growing inside and outside of Vietnam. This sector is forecasted to maintain average annual growth rate of 18-20% from now to 2026, opening many opportunities for companies operating in this business .
ASSET ALLOCATION: I view that investing in open-ended funds at the moment will have the optimal return as banks continue to lower deposit interest rates, real estate slows down because of legal matters and stock market becomes more stabilized, becoming an effective channel to raise capital for the economy.
Stock market has an average growth rate of 12-14% in the last three years. Conservative investors could look to investing in bonds with average annual return at 8-9%, which is still far better than savings at the moment. Also, investors can invest in index ETF funds because of their advantages in transparency, convenience and low cost.
5 FAVORITE STOCKS: MWG, FPT, PNJ, VCB and TCB.
MACRO IN 2020: 2020 will be a positive year for Vietnam’s economy with 7% GDP growth. Macro indexes will remain stable inflation and exchange rate will stay under control as investment in infrastructure increases and interest rate might be adjusted downward.
Population’s youth and middle class’s growth along with the dynamic private economic sector and foreign investment will be the fundamentala drives of Vietnam’s resistance against risks from a volatile outside world.
Vietnam continues to be an attractive spot in the gloal investment map with EPS growth of 15% and P/E of 11. However, with the development of ETF index fund both inside and outside, Vietnam will not be able to steer clear of impacts from unkwown reasons from large markets like US, EU and China, as well as the trend of cashflow net withdrawal in emerging and frontier markets.
MOST PROMISING SECTORS: Following record earnings growth in 2018 and 2019, banking remains a sector with high profit growth. Meanwhile, retails maintains its fast growth thanks to higher demand and network expansion.
Real estate continues to acknowledge high return from previous years’ projects and high price level due to scarce supply in 2019. Industries involved in tourism activities, e-commerce and import-export also show potential for growth.
ASSET ALLOCATION: Stocks of companies with long term growth potential, capped foreign ownership and low valuation are still a favorite asset type. Meanwhile, in such an unpredictable year when both stability and flexibility are required in investing, bonds and derivatives are also effective hedging tools.
5 FAVORITE STOCKS: MWG, FPT, PNJ, KDH, MBB.
MACRO IN 2020: the world’s economy will has an easier year as many countries have loosened their policies for economic stimulus. This wave of stimulus will be maintained and even increased in some countries, including China absolutely. US-China trade talks, Brexit and US government election will be three major risks in 2020, even if the first two has shown certain progress in December 2019..
From the supply side, private economy sector is rising strongly thanks to proper state policy. This wil be an important drive of the economy together with FDI for not only 2020.
MOST PROMISING SECTORS: In a slightly improved economy in 2020, most sectors would maintain same growth as in 2019 such as consumptions, textile, footwear, furniture, transport and warehousing, logistics, utilities. Some will show more improvement like agriculture or construction and building materials.
Agriculture experienced low growth in 2019 due to El Nino’s effects. In 2020, weather will be more favorable, benefitting agriculture and related industries, services such as breedings, fertilizers, plant protection. Faster public investment disbursement will increase demand for construction and building materials like stones, steel, cement.
ASSET ALLOCATION: Improved economy and lower global risks in 2020 will make gold price (and other safe assets like Japanese Yen) hard to rise. Tightened credits for real estate will create certain barriers for this market. Yet, disbursement of public investment and infrastructure development promotion will create advantages for certain segments.
2020 is predicted to be the year of corp bonds as both government and businesses are focusing on developing the market. Cashflow will move from savings to bonds, despite its relative disadvantages in scale and attraction to the former’s. Investing in stocks appears a better option when interest rate falls and economy grows.
Nonetheless, index wouldn’t grow too much as the entire economy as well as stock market is in the accumulation phase to breakout in the next years. Thus, stocks investment can only work with the right companies that have high growth. More stocks and bonds, less savings and no gold will yield better return in 2020.
5 FAVORITE STOCKS: No reccomendation.
MACRO IN 2020: Vietnam is in the most balanced and stable growing stage in the last 20 years, keeping GDP growth at 7% with low inflation and stable exchange rate. The basis for this stability comes from cautious and reasonable money regulation of state bank, together with narrowing and improving the efficiency of public investment and state economy sector.
Meanwhile, growing momentum is still maintained and improved thanks to the ability to attract FDI and develop strongly of private sector. This positive macrorelation is likely to go on in 2020, making Vietnam one of the fastest and most stable growing economy in the world.
For 2020-2025 period, we can expect a fast developing stage of the economy with two big internal drives: urbanization and growth of middle class.
When it comes to risks, the conflict between the two giants US-China as China’s economic growth is slowing and US faces the risks of recession are the risk that could affect Vietnam’s macro stability, especiall in the second half of 2020..
On another hand, Vietnam’s economy still faces notable risks related to a few weak banks that needs handling, exploding growth of corp bonds and capital mobilization with ensured high yields, and risks regarding large scale startups with fast growth but prolonged loss.
MOST PROMISING SECTORS: In a fast growing economy like Vietnam’s, opportunities for growth are nearly open to all sectors from banking, real estate, construction to consumption, retails, tech and exports.
Therefore, selecting businesses that could make use of this opportunity to grow, expand market share, increase comoetitive advantages and operational efficiency will be important for investors. Stocks will remain a big proportion in my portfolio. This proportion might change when warning signs of global recession become more visible.
5 FAVORITE STOCKS: MWG, HPG, VCB, ACB, VHC.
MACRO IN 2020: Vietnam’s economy is in the longest growing and stabilizing phase in the last 20 years. In 2020, I think economic growth will continue, macro factors such as interest, inflation and exchange rates would be maintained at a fair level.
Infrastructure investment is an important thrust to Vietnam’s economic growth in recent years. During the last two years, for many reasons, state budget expenditure on infratructure investment has come to a halt. Yet, 2019 could be considered the lowest point of state capital spent on infrastructure. We might not be able to expect a strong recovery in 2020 but we can at least recognize that the worst are behind now.
About FDI flow, I think it might slow down in short term but nothing we should worry about. First, FDI decreasing is inevitable, as Vietnam has received too much FDI compared to our economy’s scale and attracted many big projects. Our level of FDI disbursement over GDP is the highest in the world.
On another hand, since capital flows to infrastructure has halted, infrastructure supporting manyfacturing has not caught up with capital inflows to Vietnam recently. Therefore, slowing FDI inflow is reasonable.
Real estate market faces a few particular negative factors in short term such as some condotel developers not delivering commited return. However, according to our calculation, this product’s scale is not large compared to the entire real estate market so the impacts will be partial, mostly in terms of psychology.
MOST PROMISING SECTORS: Following 2019, banking sector continues to grow this year. Consumptions and retails also has strong foundation to develop based on the demand of a population of 100 millions. As mentioned, real estate has a few dark spots that are not systemic and can be overcome.
ASSET ALLOCATION: In 2020, I think that stock is still the channel with the best return. Short term volatility is unpredictable but market is at a good price range. Don’t think about the short term period of six months or a year, think about a further future instead.
There are bank stocks trading below book values with ROE higher than 20% and annual growth about 18-20%, very attractive for long term investment. There are also companies with P/E 10, annual growth 30%, operating in market with huge upside. Many stocks are currently unreasonably undervalued.
5 FAVORITE STOCKS: MWG, FPT, ACB, VCB, VPB.
MACRO IN 2020: In my opinion, in 2020 Vietnam’s macroeconomy will continue to be stable and have good growth. With exports maintained, FDI and remittance on the increase, exchange rate is predicted to remain stabilized in 2020.
State bank’s keeping credit growth under control, restricting credit to risky segments like real estate will help keep a stable macroeconomy and low inflation.
Stable macroeconomic outlook will keep Vietnam’s GDP growing well when domestic economic structure is getting more efficient as foreign economies are slowly bouncing back and central banks continue their monetary easing measures.
MOST PROMISING SECTORS: Retails and necessity will be sectors with most growth potential. The reasons is that Vietnam is in a stage where per capital income is growing strongly, workforce structure is shifting heavily from agriculture to industrial zone and service, leading to many people’s raise in income from very low to average level, increasing their purchasing power.
For example, rural workers switch to industrial workers because of large FDI investment, people move from countryside to urban areas to join service industry; in rural areas, land accumulation and application of science into production help increase productivity and income there.
With Vietnam being in the early stage of increasing purchasing power, essential goods will be the most consumed products. Thus, retails and necessity will be segments that benefit the most from growth of the middleclass in Vietnam.
ASSET ALLOCATION: In a stable macroeconomy with low inflation, gold will no longer be a good option to invest in 2020. Besides, real estate will stay quiet due to State bank’s tightening capital inflows to this market.
As macro background is solid in 2020 and stock market is being under valued in recent years, I will allocate majority in stock market, about 90%, and the rest in savings or cash.
5 FAVORITE STOCKS: MWG, FPT, VCS, DGW, HPG.