With
its extremely cheap stocks on offer, Vietnam, rather than Indonesia, will be a
great place to invest in this year, according to Forbes Magazine.
In an article recently published on Forbes
Online, Peter Cohan recalls his visit to Singapore in January 2012 where he met
with a hedge fund manager having invested in many Asian companies for years.
The hedge fund manager said that Indonesia
used to be a great place to do business, but the best opportunity in the region
in 2012 is to invest in Vietnam.
He studied the Vietnamese stock market and
found 20 stocks with Price/Earnings (P/E) ratios of 2, cash flow growth of 14,
and dividend yields of at least 12.
Cohan explained that a stock is cheap if its
cash flow – the money left over after paying expenses – is growing faster than
the P/E ratio.
A stock is a reasonable value if the ratio
between a stock’s P/E and its earnings growth or Price/Earnings to Growth (PEG)
is 1.0 or below. By that measure, stocks in Vietnam are very cheap at 0.14 –
dividing the P/E of 2 by the cash flow growth of 14.
In addition, Vietnamese stocks offer a very
high dividend yield.
Their 12 per cent yield is extremely high –
particularly compared to the sub-1 per cent rates that we are used to earning
on our bank accounts, Cohan noted.
According to Cohan, the downward trend in the
Vietnamese stock market in 2011 offers the chance for private equity investors
to buy stakes in some of the country’s biggest companies and the purchase is
benefitting investors.
Cohan concluded that there are opportunities
for businesses to invest in the banking, food and beverage industries in
Vietnam, as its population increasingly moves from the lower to middle class
income level and banks and food companies are willing to meet their demands.
VOV
Business & Investment Opportunities
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