Credit Suisse and JPMorgan pick stocks to buy in a high-flying Asian market

Published Wed, Dec 29 202110:11 PM ESTUpdated Wed, Dec 29 202111:48 PM EST

Vietnam's stock market has had quite a run in 2021, with the benchmark VN Index rising 34.6% over the course of the year. But analysts still see further gains ahead for some stocks, including two with 40% upside. The VN Index closed at 1,485.82 points on Wednesday. JPMorgan analysts see it rising to 1,700 by the end of 2022, around 15% higher according to a Dec. 3 note. The bank listed three catalysts that make Vietnam stand out in Southeast Asia. First, the country is planning a fiscal boost of up to 10% of gross domestic product. Part of the stimulus will come in the form of tax breaks and increased infrastructure investment, analysts added. "We expect the stimulus to not only have immediate impact on stocks' bottom line, but also enhance long-term growth with accelerate infrastructure spending and improved business confidence," the note said. Vietnam has also benefitted from supply chain shifts, and manufacturing and trade are likely to continue growing over the next few years, JPMorgan said. The last catalyst is a potential upgrade of Vietnam's status from a frontier market to an emerging market. The bank's analysts said the market infrastructure upgrade in 2022 is likely to meet the requirements of stock index providers MSCI and FTSE. "Any reclassification movement would trigger a market rally driven by fund inflows, in our view," the note said. 'Multi-year bull run' HSBC analysts also expect Vietnam's market to be upgraded in the coming years, and said investors should start positioning themselves for it. The bank's Dec. 3 note said stocks in the country will also benefit from strong growth, low inflation and rising foreign direct investment, among other factors. "It is easy to see why we think the Vietnam market is set for a multi-year bull run," analysts wrote. Credit Suisse said the market's forecasted price-to-earnings ratio is still attractive. The acceleration of the vaccine roll out and a successful economic reopening will in part support market performance in 2022, analysts wrote in a Nov. 29 note. While there have been concerns over access to the market for foreign investors due to limits on ownership, HSBC said laws that went into effect in January should reduce restrictions. The bank also noted that only a few large-cap stocks in the VN30 Index have reached their foreign ownership limits. "In short, Vietnam is now an investable market," HSBC said. Sector and stock picks JPMorgan said it likes consumer discretionary, real estate, information technology and bank stocks in Vietnam. The property sector will benefit from infrastructure spending, while tech will gain from digitalization, the note said. Vietnam's banks offer the best structural growth opportunity in the region, JPMorgan added. The analysts' top pick is Techcombank, which is expected to see growth in earnings per share and market share. JPMorgan also said Vietcombank is a "core portfolio pick," while Asia Commercial Bank is set to continue to deliver consistent growth and high return on equity. Here are its predictions for three banks: Techcombank: Price target of 70,000 dong, upside of 42.6% from Wednesday's close Vietcombank: Price target of 115,000 dong, upside of 44.7% from Wednesday's close Asia Commercial Bank: Price target of 40,000 dong, upside of 18.3% from Wednesday's close Credit Suisse also likes consumer, property and financial stocks. Vinhomes Joint Stock Company, a large residential developer in Vietnam, is uniquely positioned to capture the growth opportunities from a rising middle class and strong urbanization trends, analysts wrote. Mobile World Investment Group is an "attractive consumption proxy," given that its portfolio includes mobile phone, consumer electronics and grocery stores. Vietnam Prosperity Bank has "best-in-class profitability" and its subsidiary, FE Credit, is a market leader in consumer finance, analysts wrote. Here are Credit Suisse's predictions: Vinhomes Joint Stock Company: Price target of 103,563.34 dong, upside of 26.8% from Wednesday's close Mobile World Investment Group: Price target of 158,000 dong, upside of 17.6% from Wednesday's close Vietnam Prosperity Bank: Price target of 43,111.58 dong, upside of 24.1% from Wednesday's close — CNBC's Eustance Huang contributed to this report.

This photo from Oct. 2021 shows motorcyclists waiting at a Covid-19 border checkpoint between Ho Chi Minh City and Long An province, in Ho Chi Minh City, Vietnam. The country's benchmark VN index has fallen around 14% year-to-date as of Monday's close.

Maika Elan | Bloomberg | Getty Images