Vietnam still an attractive market, with more FDI expected: HSBC

Vietnam remains an attractive market, as trade tensions are expected to bring more foreign direct investments (FDI) into the country and create more jobs, according to a report by HSBC analysts.

A combination of strong economic growth, stable currency, contained inflation and strong FDI flows are likely to give its equity market a boost, they added.

HSBC analysts maintained a "positive" view on Vietnam, with earnings growth to provide some support to evaluations.

In its outlook, HSBC economist Noelan Arbis expects growth of 6.5 per cent this year, taking into account projected weaker external demand. Vietnam grew 7.3 per cent in 2018, from 6.9 per cent a year earlier.

Long-term fundamentals for Vietnam remain strong, with a movement in supply chains and manufacturing to Vietnam expected to boost investment and increase exports in the medium term, said HSBC.

However, risks to the economy loom. In the banking sector, even though asset quality is improving, concerns on legacy issues around asset quality remain, according to the report.

In terms of trade, exports - a major engine of the economy in recent years - have already shown signs of slowing down. Investors would need to be cautious if a major slowdown in global trade materialises, said HSBC.

In addition, if the global environment turns murky and there's capital flight from emerging markets in general, Vietnam could be at risk.

Finally, HSBC analysts said that Vietnam needs to encourage more long-term infrastructure investors, otherwise roads, rail and ports will "lag behind growth".