Will banking stock prices continue to increase?

06:00 | 05/07/2021 Economy

(VEN) - Banking stock prices witnessed a dramatic surge in May, contributing to an increase in the VN-Index.

will banking stock prices continue to increase

Banking stocks contribute to the gains in the VN-Index

Dramatic increase

With massive capitalization, banking stocks play a key role in the market and contribute to record highs on Vietnam’s stock exchanges.

According to the BIDV Securities Company (BSC), the highest target price for Vietcombank’s share (VCB) is VND135,000 per share. Many other codes have a target price of over VND60,000 per share, such as BID (VND67,000 per share), CTG (VND69,500 per share), TCB (VND71,500 per share) and VPB (VND90,100 per share). MBB and ACB shares are valued at over VND50,000 per share, while those of STB, SHB, LPB and OCB at more than VND30,000 per share.

Petri Deryng, portfolio manager and board member for the PYN Elite Fund, said banking and real estate sectors were top performers in May and are likely to be even higher in the coming months. Currently, PYN Elite Fund’s largest holding stocks include Vinhomes (13.6 percent), Nam Long (four percent), Vincom Retail (eight percent), MB Bank (9.6 percent), HD Bank (9.3 percent), TP Bank (8.9 percent), VietinBank (8.7 percent), and VN Diamond (10.3 percent).

will banking stock prices continue to increase

The gains in the VN-Index and HNX-Index since the beginning of the year are mainly attributed to banking stocks. Currently, both indexes are at the highest level in the history of the Vietnamese stock market. The dramatic increase in banking stock prices was attributed to impressive business results in the first quarter and positive prospects for the second quarter, dividend payments and stock issuance increasing the capital of both domestic and foreign investors.

With the current price-earnings ratio (P/E) about 18.5, the VN-Index is considered attractive, reflecting the significant room for the Vietnamese stock market’s growth.

Maintaining medium- and long-term growth

According to the Vietnam Investment Securities Company (IVS), most banks saw more positive business results in the first quarter of 2021 compared to a year ago. In particular, their profits increased sharply due to the management of bad debts.

Plans for large capital raising have also contributed to the banking stock price hikes in 2021. According to SSI Research, about 16 banks plan to increase their charter capital with total value of up to VND82.7 trillion, including VND61.8 trillion through stock splits, VND18.3 trillion through private placement, and VND2.6 trillion through ESOP issuance.

Financial-banking expert Nguyen Tri Hieu said that at the macro-development level, each bank’s plan closely follows and contributes to the development strategy of Vietnam’s banking sector. Vietnam aims to have at least 2-3 banks in Asia’s top 100 largest banks in terms of assets and plans to have 3-5 banks listed on foreign stock markets by 2025. In addition, all banks are required to have equity capital in accordance with Basel II standards - a set of banking laws and regulations issued by the Basel Committee on banking supervision to enhance competition and transparency in the banking system and make banks more resistant to market changes. These factors will contribute to ensuring the stable growth of banking stocks.

However, experts are also issuing warnings about the speculative cash flow into banking stocks that has raised prices higher than some stocks’ reasonable valuation, and advising individual investors, especially new ones, to be cautious.

Nguyen The Minh, director of Analysis Division at the Yuanta Securities Vietnam Limited Company, said banking stocks still have a positive outlook in medium- and long-term.

Thanh Thanh