Merrill Lynch does u-turn on Vietnam stock market, pulls out
US financial and investment giant Merrill Lynch, which was recommending the Vietnamese stock market last year, has pulled out of it saying it is overvalued.
In a report July 5 it said its exposure to Vietnam had fallen to zero because of the “eroding” market.
It also suggested China as an alternate to its clients.
The 1,000-point mark was a psychological support level for Ho Chi Minh City’s VN-Index but there was nothing to carry the index much above it.
The VN-Index gained 145 percent last year after rising by 85 percent in the previous two years. It has risen by 35 percent this year.
Companies’ profits would grow by 20 percent this year but their EPS (Earnings per Share) by only around 10 percent since many firms had heavily diluted their equity with repeated issues.
The market’s current P/E (Price/Earnings) ratio was around 40 while it was just 18.9 percent in China.
There were no more factors left to push the market up except a forthcoming initial public offering (IPO) by giant bank Vietcombank later this year.
But IPOs could be postponed if the market continued to be volatile.
Last October Merrill Lynch had issued a report saying Vietnam was its top priority in Asia. Since then, the index has risen 212 percent against 45 percent for the Asia Pacific region.
But analysts in Vietnam said Merrill Lynch’s report was tailored for its short-term clients though it might still have an impact on the local market.
Dominic Scriven, director of Vietnam-focused fund Dragon Capital, said the recommendation showed that Merrill Lynch was yet to understand the Vietnamese market.
Long-term investors would have a quite different view on the market.
An analyst at a HCMC-based investment fund, who wished to remain unnamed, said the recommendations were merely personal opinions of Merrill Lynch researchers.
It did not mean investing in Vietnamese securities had become unprofitable.
A State Securities Commission official said investors should get used to different comments made by investment institutions, and should consider them while making investment decisions.
Thanh Nien - July 16, 2007.
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