US tapering likely to benefit VN

Saturday, Dec 21, 2013 11:29

Hoang Anh Gia Lai Group's Plaza in Da Nang City. The company is among a group of stocks which may be affected by the US Fed tapering. — VNS Photo Doan Tung

HA NOI (Biz Hub) — The reduction of the US Federal Reserve's US$85 billion stimulus package to $75 billion won't directly impact the Vietnamese stock market, but will affect foreign capital inflows.

The Fed's decision, according to analysts, was reasonable, as the US economy has improved, with positive GDP growth and declining unemployment.

The reduction is also seen as a preventive action against an asset bubble, when housing prices in the US had climbed 11 per cent and the Dow Jones gained 26.45 per cent since the beginning of this year.

The Fed will probably continue to taper and is expected to terminate its quantitative easing by the third quarter of 2014.

According to MB Securities' Hoang Cong Tuan, the tapering would boost US government bond yields, indicating the Fed's confidence in the continuing economic recovery. Also, foreign investment would not be massively withdrawn from emerging markets, including Viet Nam, Tuan said.

In the long term, a stronger US economy will have a positive impact on Viet Nam's economy, because the US remains Viet Nam's largest trade partner.

Tuan said that only a number of stocks with weak business results during the first nine months of this year would be easily exposed to exchange-traded funds' (ETFs) offloading.

They could include PetroVietnam Construction (PVX), food processor Bourbon Tay Ninh (SBT) and property developers Tan Tao (ITA), Hoang Anh Gia Lai (HAG) and Dic Corp (DIG).

"In addition, although the selling trend remains in many emerging markets, it has ended in Viet Nam," added PetroVietnam Securities Co analyst Dao Hong Duong.

The price to earnings and price to book ratios of Viet Nam's stock market are among the lowest in Southeast Asia. This is one of the factors that limit money withdrawals from the market.

Hoang Thach Lan, head of MHB Securities Co's brokerage service, was more cautious, saying short-term foreign investment could be withdrawn since the market had absorbed a large value of indirect investment.

"However, I expect the amount of indirect investment next year will be poured into the Vietnamese stock market, rather than than moving out," he said. — VNS

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