Merrill Lynch misunderstands Vietnam: experts

17:57' 16/07/2007 (GMT+7)

VietNamNet Bridge – Merrill Lynch’s report on the gloomy prospects for Vietnam’s stock market has immediately caused a dramatic fall in the market. However, local securities experts say that it is just a unilateral report and does not reflect the real situation in Vietnam. Not reliable… According to Dominic Scriven, Director of Dragon Capital, an investment fund management company, the report shows that Merrill Lynch does not have good understanding about Vietnam’s market. The information that Merrill Lynch used to make its report was provided by only several securities companies in Vietnam. He said that the suggestions Merrill Lynch made would just conform to its clients who have short-term vision. “Strategic investors have another way of thinking,” he said. Huy Nam, a securities expert, also said that the recommendations suggested by Merrill Lynch would be used internally only: i.e. for Merrill Lynch’s clients; and the conclusions by Merrill Lynch reflected the institution’s subjective way of thinking. In the report released on July 5, Merryll Lynch expressed a very pessimistic view of Vietnam’s stock market and mentioned the possibility of the group withdrawing its capital from Vietnam. Mr Nam said that it was not the right method to assess the market based on the P/E index only. He said that it was quite a normal thing if the market stopped for some time after a long period of developing. He stressed that the P/E of more than 30 as the report said just occurred with several share items, while the real P/E was just 20 or a little higher for the majority of share items, meaning that the market was remaining attractive enough to investors. Dragon Capital has calculated that the P/E will be 26 in 2007and 22 in 2008, which shows that it is worth investing in Vietnam’s stocks. Merrill Lynch has suggested withdrawing capital from Vietnam to inject in China, a market with big potential with a P/E at below 19, and EPS at more than 20%. Director General of the Saigon Securities Incorporated (SSI) Nguyen Duy Hung said that he personally found Vietnam more attractive than China as a destination for investment. Mr Hung said that the P/E was not the most important factor investors should consider. Vietnam’s stock market is still in its first period of development, while the Chinese market has experienced a long development period. As China’s stock market has been well developed, there are not many opportunities to own blue chips at reasonable prices as available in Vietnam. “Investors should keep calm when they get information. They should know their purposes for investment and their capability before making decisions,” Mr Hung said. … but worth thinking over Though saying that Merrill Lynch’s report was not reliable, experts said that Merrill Lynch’s comments on the massive additional share issuance were worth considering. The report said that the habit of issuing additional shares by Vietnamese companies has resulted in the low EPS, at 10% (the higher the EPS, the more profit shareholders can get). Mr Scriven from Dragon Capital said that Vietnamese companies did not always weigh pros and corns well when deciding to issue additional shares, especially bonus shares. Mr Hung from SSI shared the same view, saying that enterprises should only issue more shares if they had better business performance. In fact, companies often rush to issue more shares when business is not as good as expected. An investor on An Binh Securities Company’s trading floor said that the pessimism of Merrill Lynch was worth thinking about. The report may be the group’s reaction to the unstable policies on market management: for example, the central bank suddenly tightening the loaning for securities investments. The director of a securities company has said that the report, which has been published on mass media, will make the market waver. The VN Index lost 19.9 points this morning, closing at 995.83 points. (Source: Viet Nam Net)