Over-reaction of the Vietnamese stock market to new COVID cases
The Vietnamese stock market has reacted fiercely to the country’s new COVID-19 infections. There have been no new locally acquired infections in the country for three months and all possible cases of infection from abroad have first been subject to mandatory two-week quarantine. In this way, it has been possible to keep local infections completely out of the country for the last three months.
In less than a week now, however, about five local infections have been identified in the Đà Nẵng area and they have been obtained, apparently, from people who have entered the country illegally. This news of new cases has shocked Vietnamese who were already accustomed to normal life after the epidemic.
The impact on the stock market has been severe. On July 16, the Vietnam Stock Exchange Index recorded an index level of 876 and at the time of writing this NOW letter, the index is, including morning’s decline, at 789 points. The stock market has come down ten percent in a very short time.
Vietnam’s GDP growth outlook for 2020 remains the same (+ 3-5%), and the 2021 economic growth outlook and earnings estimates for listed companies now offer for the purchase of cheap stocks. PYN Elite’s core companies (20 largest positions and 85% of the portfolio) have a P/E of 7.9 in 2021 and a P/E of 6.5 in 2022.
We are currently working to make stock purchases with our cash. Among other things, the fund’s EUR/USD forward contracts have generated some additional cash as the currency pair moves in the right direction.