VN-Index: versus 2009 bottom

Has VN Index hit a bottom yet? A comparation of current vietnam stock market bearish level versus 2009 bottom tell us the bears are still here, StoxPlus’ research showed.

Why this topic?

Many investors have been comparing current stock market with that in late 2008 and early 2009 amid high inflation, limited cash flows, corporate struggling to survive and VN Index logged the bottom of 235.5 on Feb 24,2009.

Some believed current bearish level is the same or even more bearish than that of 2 years ago as VN Index has been distorted heavy-weighed blue chips such as MSN, BVH, VIC and the corporate fundamentals have changed.

StoxPlus has conducted a high-level analysis using valuation multiples, stock prices, and market liquidity to measure level of pessimism as at May 11, 2011 versus that as at Feb 24, 2009.

Data:

Table 1: Criteria for measuring bearish sentiment as at May 11, 2011 versus that as at Feb 24, 2009

Creteria	Unit	11/05/2011	24/02/2009
VN-Index		483.5	235.5
Number of stocks		284	152
Valuation multiples:
P/E average	time	11.1	9.5
P/B average	time	3.1	2.1
Stock prices:
Number of stocks traded under VND10,000 par value	%	(80/284)      28%	(52/152)      34%
Number of stocks traded under BV	%	(111/284)      39%	(105/147)      71%
Lowest share price traded	VND	(FPC) 3,000	(VHG) 4,700
Highest share price traded	VND	(VIC) 132,000	(DHG) 99,000
Market liquidity
Volume	Shares (Mln)	21.6	11.6
1 month average volume	Shares (Mln)	23.8	7.5
Turnover	VND (Bln)	536	278
1 month average turnover	VND (Bln)	536	157

Analysis:

1. Current market trailing P/E average of 11.1x, higher than 9.5x as at Feb 24, 2009, these P/E data are calculated excluding stocks with negative EPS and stocks with excessive P/Es which is 5 times higher than the average.

2. 28% of listed stocks are now traded under VND10,000 par value compared with 34% as of Feb 24,2009. This indicated that share prices are likely to fall further if other factors such as macro conditions, cash flows, earnings do not improve.

3. 39% of listed stocks are now traded under their book values compared with 71% as of Feb 24,2009. Besides, P/B average is now 3.1x, higher than 2.1x as at Feb 24, 2009. This means that the current average price level is not as low as that in early 2009. Besides, corporate book value tends to fall on share dilution in the past 2 years including VND21 trillion shares in 2009 and VND55 trillion shares in 2010.

4. Dirt cheap stock prices: FPC, the lowest price traded stock on HOSE, closed at VND3,000 a share on May 11, 2011 and VHG was traded at VND4,700 a share as of Feb 24,2009. FPC share price was not enough to pay one-time motor parking ticket and often said to be “cheaper than vegetable”.

5. Liquidity: 1 month average market liquidity now is 3.4 times higher than that of 2 years ago while the number of stocks listed was 1.87 times higher. This indicated that liquidity now is better than that in 2009.

Conclusion:

Current Vietnam stock market with VN Index at 483.15 as at May 11 close has not yet been as bad as when it hit 2009 bottom of 235.5 on Feb 24 from valuation aspects.

The conclusion of the research is based on valuation multiples, share prices, and liquidity. To better measure the bearish level and the future trend, other factors such as government policy, corporate ability to access credit, interest rates, margin call and selling pressure from securities companies and even investor confidence index, volatility index must be considered.

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Tags: vietnam stock, Vietnam stock market, VNindex