Dragon Capital Sees Attractive Valuations in Vietnamese Equities for Long-Term Investment

Dragon Capital, a leading asset management firm in Vietnam, forecasts continued short-term market volatility but analyzes that many companies have reached attractive valuations, presenting opportunities for 2-3 year long-term investments. In a letter to investors dated July 29, the firm noted that the Vietnamese stock market is causing investor concern due to widespread selling pressure. The VN-Index, a benchmark for the Ho Chi Minh Stock Exchange (HOSE), has broken through several key psychological levels, losing nearly 15% from its historical peak. While it has recovered to the 1,700-point mark in the last two trading sessions, the risk of further correction remains. Dragon Capital attributes the current correction to a confluence of mostly short-term factors. The market's Price-to-Earnings (P/E) ratio is currently at 11.9 times, significantly lower than regional markets like Thailand (16.1), Malaysia (15.2), and Singapore (17.3). The trailing P/E (over the last 12 months) has at times fallen to around 10 times, near a 10-year low. The firm suggests that numerous industry-leading stocks have fallen to multi-year lows, offering opportunities for investors. For example, in the banking sector, stocks like VCB, CTG, EIB, and TPB have hit one-year lows, while in the securities sector, SSI, VIX, and VCI have declined. In real estate, KDH temporarily returned to late 2022 price levels, and NLG to early 2023 levels. PNJ, a retail company, hit a nearly six-year low since October 2020 due to legal and governance risks before showing strong recovery signs. Furthermore, some stocks are trading at valuations comparable to the period after the US announced its countervailing duty policy in April 2025, meaning they are at their lowest in about a year and a half. Dragon Capital believes the current price levels create opportunities to accumulate shares of companies with strong fundamentals, stable profit growth, and high asset quality for a 2-3 year investment horizon. "From the perspective of valuation and corporate earnings, the margin of safety for many investments has improved, despite the presence of short-term risks," the Dragon Capital analysis team stated. They observed that despite the sharp correction in the VN-Index, there are no corresponding signs of decline in corporate earnings. Many listed companies continue to maintain positive business results, and the profit outlook for the entire market for this year remains positive. Economic indicators such as credit growth, domestic consumption, and investment are also showing improvement. A noteworthy signal, according to the fund, is the registration of stock purchases by internal shareholders and leaders of many companies. These transactions span various sectors, including securities, retail, food, export, residential real estate, and industrial parks. Dragon Capital views this as "a signal reflecting the positive assessment by insiders of the medium and long-term prospects of the businesses." However, they caution that these transactions should be considered alongside asset quality, profit outlook, cash flow, and company valuation, rather than as an independent indicator. Regarding future trends, the fund's experts stated, "We cannot assert that the market will fully recover within a few months." Short-term volatility may continue as the market assesses factors like liquidity, geopolitics, trade policies, and the business outlook of individual companies. However, based on historical data, Dragon Capital expects strong recovery rallies to occur when uncertainty decreases and confidence is gradually restored. They cited instances where the VN-Index increased by 23-76% in the 12 months following periods of significant volatility such as COVID-19, corporate bond crises, exchange rate pressures, and tariff policies. Their member funds also saw accumulations of 28-85% during the same periods. "During this period, we continue to focus on the intrinsic value and long-term prospects of businesses, rather than short-term market fluctuations," the investment fund wrote. Established in 1994, six years before the Vietnamese stock market's inception, Dragon Capital currently manages over $6 billion in assets across various equity, bond, balanced, and ETF funds.