Vietnam Dragon Brings Bargain-Hunting Investors

As we anticipated last week, Vietnam’s stock markets have risen impressively in the first few days of the year of the dragon.  The surge is not an anomaly, and the growth in the markets will continue through the year for the reasons we outlined when the markets were closed all last week for Tet, the Vietnamese New Year. 

In the first four days of the dragon year, the VN Index is up 7.7%; it closed Thursday above 400 for the first time since early November.  Vietnam’s two public equity markets had been among the world’s worst performing over the previous two years, and before that they experienced a wild ride in which the VN Index peaked at 1170 in 2007 and bottomed at 235 two years later.  

The Vietnamese markets in Hanoi and Ho Chi Minh City have begun a banner year for both economic and sentimental reasons — and because stocks are available at bargain prices.  The year of the dragon brings out Vietnamese optimism when economic conditions seem to signal recovery in business profits.  

Moreover, stock in specific companies that are highly profitable is available at prices rarely seen in the developed world.  Some examples:

    • Mekong Fisheries (AAM), a processor and exporter of frozen fish in Can Tho, has a P/E ratio below 4 and pays a dividend over 20%. 
    • Saigon Garment Manufacturing (GMC), makes apparel for men and women and has a P/E ratio of 3 and 12% dividends. 
    • PetroVietnam General Services (PET) is a diversified company that provides lodging, storage, real estate, employment, and travel services.  It’s price-to-earnings multiple is below 3 and falling, its price-to-sales ratio is below 0.1, and dividends are nearly 13%.

These three companies are on the market for about $1 per share or less, and they are typical of the bargains available in the year of the dragon in Vietnam.

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