HO CHI MINH CITY: Concerns about the ability of Vietnamese companies to access credit have been severely weighing on the VN-Index but the issue is mostly restricted to the property sector, Michael Kokalari, chief economist at investment fund VinaCapital, says in a note.
The demand for new housing units in Vietnam is still strong and prices are still affordable, and so the prices of real estate stocks are likely to recover if and when the government takes action to ease credit conditions.
The market recently got the first inkling that such an easing could be in the works, which sent stock prices soaring.
November 16 was a dramatic day for the Vietnamese stock market. The VN-Index plunged by more than 4% soon after opening but ended the day up over 3% on hopes that the credit crunch concerns, which made Vietnam one of the worst performing markets in the world this year, could be abating.
Fears that the credit problem affecting developers could spread to other sectors hammered the index, which fell by as much as 42% for the year as of last week.
It was driven by declines of 50% in real estate stocks and 40% in bank stocks, given that the combined weightage of the two sectors in the VN-Index is 55%.
The VN-Index dramatically underperformed its regional peers in Indonesia, Malaysia, Thailand and the Philippines owing in part to concerns about the ability of property companies to pay over US$5bil (RM22.5bil) of maturing debts in 2023.
“We believe Vietnam’s stock market is now overestimating the impact of recent tightening of credit conditions for the country’s real estate developers.
“It is important to note that real estate development contributes less than 10% of Vietnam’s gross domestic product (GDP) in contrast to nearly 30% in China.”
VinaCapital analysts directly canvassed several industrial companies and concluded that the current credit crunch primarily impacts property and some smaller companies.
But large industrial companies seemingly continue to have access to credit albeit at higher interest rates. — Viet Nam News/ANN