Asia’s best performing stock market is having its worst month in more than two years, with a $14 billion loss in the value of Vietnam’s equities since April 6’s record high.
Alan Richardson, portfolio manager at Samsung Asset Management, whose fund has outperformed 94 per cent of its peers on a five-year return basis, said the “market has peaked” after the nation’s benchmark index gained 130 per cent from a low in 2016 through a record high on April 6. The fund sold a majority of its Vietnam equity holdings in March.
Emerging market stocks and currencies are suffering the brunt of investors’ jitters as a surge in US Treasury yields overshadowed easing trade and geopolitical tension. The MSCI Emerging Markets Index is poised to drop for a third month, the longest losing streak since a four-month rout that ended in February 2016.
“There appears to be currency pressures in the Asia region. I have yet to see the market price that in for Vietnam,” said Hong Kong-based Mr Richardson. Vietnam’s benchmark index fell 1.7 per cent as of 9:51am in Ho Chi Minh to its lowest level since February 13.
A stocks rally and a privatisation programme by the government has also led to a flurry of companies seeking to tap the capital markets amid rising foreign-direct investment and accelerating economic growth that boosted the nation’s benchmark. The VN Index rallied 48 per cent in 2017 and climbed another 22 per cent this year when it reached its April 6 record.
Techcombank, a Vietnamese lender backed by Warburg Pincus, is seeking to raise about $922 million. This would be Vietnam’s biggest initial equity offering ever, surpassing mall operator Vincom Retail JSC’s sale in October, data compiled by Bloomberg show. Luxury property developer Vinhomes JSC, which started gauging demand for its offering last week, could raise as much as $2 billion, exceeding Techcombank, Bloomberg News reported last week.
These potential offerings could also be the reason behind the selloff as investors divest current holdings to use capital for the upcoming IPOs, said Joshua Crabb, head of Asian equities at Old Mutual Global Investors.
"IPOs are coming in at slightly cheaper valuations to some and with better growth prospects,” said Mr Crabb.
About $536m of foreign inflows so far this year has boosted the market to a record while valuations surged to 20.7 times its 12-month forward earnings in January, the highest ever on record. The gauge currently trades at 17.7 times of earnings compared to 15.3 on the MSCI Southeast Asia Index.
"It has been a lot more volatile recently. The market has done very, very well,” Mr Crabb said.
