The dong has fallen more than 5 per cent against the US dollar this year, but the decline is much lower compared to other currencies. — Photo zing.vn

HA NOI (Biz Hub) — Viet Nam's shares are heavily influenced by financial moves in global markets, but experts are keeping a positive outlook for the domestic market in the last months of 2015 – a view that is backed by solid performance of the economy and business sector.

This was the main focus of an online discussion about the outlook of Viet Nam's stock market under the impact of foreign exchange (forex) and global oil volatility, which was hosted yesterday by the Dau tu Chung khoan (Securities Investment) newspaper.

"Investors should keep a long-term view of investment activity," said Hong Tuan, senior analyst at MB Securities Co. "Despite the short-term volatility, the market development always keeps in line with the economic prospect and earning outlook of listed companies in the long run."

According to Tuan, the domestic economy is on the right track of recovery with the annual GDP growth expected to reach 6.4 to 6.5 per cent by year-end. Inflation remains at a low level, and stable interest rates are supporting business production.

The dong has fallen more than 5 per cent against the US dollar this year, but the decline is much lower compared to other currencies.

Meanwhile, the earnings prospect of listed companies was positive, Tuan said, with the average growth rate expected to be 13 to 15 per cent in 2015. Valuation of Vietnamese shares also is relatively cheap, with a price-earning (P/E) ratio of 9 to 10 times, compared with popular ratios of 15 to 20 per cent of other countries in the region.

The Vietnamese stock market took a big hit in early August following the Chinese stock rout and steep fall of its currency. The VN-Index lost about 7 per cent in August.

P/E of more than 50 per cent of listed companies have dropped below 8 times, and the average market return is about 8 per cent this year, higher than the current yearly deposit interest rate at banks.

"I think low valuation of stocks will have a certain appeal to investors in comparison with other assets in the long term," said Dao Hong Duong, head of analysis division at PetroVietnam Securities Incorporated.

According to many analysts, the US dollar will not be attractive in the long term as the US-denominated deposit interest rate is currently low at just 0.75 to 1 per cent per year, while the greenback is predicted to rise about 3 to 5 per cent in upcoming years.

Regarding realty asset, the recent development has been seen in only several segments, particularly apartments for low- and middle-income earners. On the other hand, the profitability prospect of the real estate sector will also drop along with a large supply of products being launched in the future.

However, analysts also warned about the market volatility in the short term as the domestic market is being influenced by many external factors, including an impending interest rate hike by the US Federal Reserve (Fed) and losses of global oil.

"I think the Fed will unlikely raise interest rates in September," said Nguyen Xun Binh, deputy director of analysis at Bao Viet Securities Co.

Binh pointed out three obstacles to the Fed's decision, including an inflation rate currently below its target of 2 per cent, depreciation pressure of the Chinese currency and signs of easing monetary policy of European Central Bank.

Even if the Fed lifted its rate of less than 0.5 per cent, this would have little impact on the monetary policy of Viet Nam's central bank this year because this factor was accounted for in the central bank's recent currency devaluation, Binh said.

The State Bank of Viet Nam has devalued the dong by 3 per cent this year, while also expanding the dong's trading band from 1 per cent to 3 per cent at commercial bank after China let the yuan fall more than 5 per cent in August.

Bui Quoc Dung, head of the central bank's monetary policy department, said the national balance of payment could turn deficit in the latter half of the year if exports did not improve. However, with the current foreign currency reserve of $37 billion and 10 tonnes of gold, the central bank would have resources to stabilize the exchange rate until the first quarter of 2016.

According to Doan Thi Thanh Truc, analysis director at Viet Dragon Securities Co, investors have taken action to prepare for the Fed's decision in recent months. Capital inflows in the emerging markets declined from $40 billion in July to $35 billion in August. These figures were much lower than the monthly average of $60 billion in previous years.

"If the Fed hikes interest rates, the domestic market will likely be affected in several sessions," Truc said. "The market movements later will depend on prospects of Viet Nam's economy, as well as the performance of listed companies." Truc said. — VNS