Thailand eyes Vietnam stocks

At the recent “Investment in Vietnam” seminar held by Maybank Kim Eng in Bangkok, more than 300 institutional and retail investors displayed strong interest in presentations on Vietnam. 

One of the speakers was Dr Niwes Hemvachiravarakorn, a veteran investor dubbed as the “Warren Buffett of Thailand” thanks to his successful investment throughout the past 19 years.

“This is the right time for you to invest in Vietnam, as stocks are still cheap and the country is slated to grow by 6%, compared to the 3% forecast for Thailand. Vietnam’s growth trajectory is similar to Thailand 30 years ago, so if you missed the opportunity to invest in Thailand then, it’s time to go to Vietnam,” he told investors at the seminar.

To this point, Supath Bhromsaard, who has invested in the Thai stock market for 30 years, agreed with Dr Hemvachiravarakorn. Bhromsaard noted to VIR that Thai stocks have become expensive as the market develops, and he will soon branch out to Vietnam as a more affordable alternative.

According to the Stock Exchange of Thailand, the total market capitalisation of all listed Thai stocks is US$406 billion, amounting to more than 100% of the country’s GDP. After 41 years of development, the stock market has attracted 720 listed firms and reached a daily turnover of US$1.15 billion.

Price-per-earning ratios have been on an upward trend for the past five years, currently standing at an average of 21.96.

This is a stark contrast to Vietnam, where the 20-year-old stock market only takes up 38% of the GDP and liquidity has remains slow at US$171 million, one-tenth of Thailand’s figure. Vietnamese stocks, which trade at 16 times over earnings, are indeed cheaper than their Thai counterparts.

Sukit Udomsirikul, head of research at Maybank Kim Eng Thailand, said that Vietnam’s growth story has many similarities with Thailand 20 years ago, as a fast-growing economy with a surge in young middle-class consumers. The rapid speed of urbanisation, manufacturing, and consumption in Vietnam resembles Thailand in the past.

“Vietnam has opened itself to the world thanks to the ASEAN Economic Community and various other trade deals. Thai corporations like Siam Cement, Central Group, and Singha realized this well beforehand, which explains their recent slew of takeovers of Vietnamese companies. Now it’s time for financial investors to follow suit and seek ‘another Thailand success story’ in Vietnam,” Udomsirikul told VIR.

Fund managers echoed this statement, saying that Vietnam’s attractive growth rate and cheap valuations of stocks are drawing them to the ASEAN neighbour. Their favourite stocks belong in the sectors where Thai corporations have already conducted mergers with Vietnamese firms, such as consumer services, manufacturing, retail, and materials.

However, despite their overall optimism about Vietnam, Thai investors still have reservations about the transparency of Vietnamese companies. According to Jarasrak Watanasingha, vice president of Kasikorn Asset Management, Vietnam has yet to follow international standards on corporate governance and financial reporting, making it difficult for Thai funds to assess potential investors.

“In Thailand, all firms are evaluated based on World Bank standards and the ASEAN Corporate Governance Scorecard. The majority of listed firms build their financial reports based on the International Financial Reporting Standards (IFRS). These standards [haven’t been] applied in Vietnam yet,” said Watanasingha, Vietnamese stocks currently take up 10% of K-AEC, a new US$25 million fund by Kasikorn Asset Management.

Similarly, Pikun Phitya-isarakul, the private fund manager of Phillip Securities, acknowledged that it was hard to meet directly with top executives in Vietnamese firms, in contrast to Thailand, where company leaders always make the effort to meet face-to-face with potential investors.

“I think Vietnamese companies should be more open towards foreign investors. Firstly, they should release detailed and updated information in English, rather leaving this task to brokers. Secondly, foreign investors should have better access to top management to understand the firm’s vision and strategy,” Phitya-isarakul told VIR. She currently manages US$20 million of segregated portfolios on Vietnam.

Meanwhile, Monthol Junchaya, chief investment officer at One Asset Management, noted that the Vietnamese market should grow in size to attract large funds from Thailand.

This can be achieved with faster equitization of leading state-owned companies-pushing them to list and making further state divestments, as in the cast of Vinamilk, Mobifone, and Sabeco.