Hanoi (VNS/VNA) - Vietnam’s stock market is expected to continue to grow,helped by strong economic growth and increasing local liquidity. The positiveoutlook will attract foreign investors back to the market, according to HSBC.

In the AsiaFrontier Insight - Vietnam report, the research team from HSBC believe thatforeign investors cannot ignore Vietnam’s market any longer as it offers afavourable risk-reward opportunity in one of the most resilient growtheconomies and the market’s liquidity is rising.

Foreignownership limits are the main problem for foreign investors but the bankbelieves that it is not a deal-breaker. Of 30 biggest companies in the VN30basket, 24 still have room for foreign investors. 

Anothersupporting factor is stocks that have already reached FOL can be bought bypaying the difference in prices. HSBC reports that as these stocks generatedstrong profit growth but are traded at cheaper prices compared to other Asianpeers, the gap between prices is not big. And even though they're slow, policyreforms are underway which has a positive effect on the market. 

Lastly,valuations are attractive, the report says. The VN-Index is trading at a12-month forward price-to-earnings ratio (P/E) of 15.1x, a 5.3 percentdiscount on its five-year average, and at a 12-month forward price-to-bookratio (PB) of 2.5x, a discount of 2.9 percent.

Theeffective containment of COVID-19 has led to a strong rebound in economicgrowth and continued strong domestic liquidity, boosted by new individualinvestors.

"Whilethis increases volatility risk, we do not see a major correction risk.With deposit rates falling and gold prices under pressure, there are not manyalternatives for this volume of liquidity,” says the report.

The brightoutlook of the stock market on economic recovery was also confirmed by strongcorporate results in the first quarter of 2021, with revenue rising 24.8 percentyear-on-year and net profit up 51.8 percent. 

As of April,the market benchmark VN-Index jumped 12.4 percent compared to the beginning ofthe year, outperforming all the major regional benchmarks. The index alsobroke the psychological barrier of 1,200 for the first time, a level itfailed to reach during previous bull markets in 2007 and 2018, the report says. 

Despite thestrong growth, foreign investors kept fleeing from the country's stock marketsince early 2021./.