For Vietnamese stock investors, the return from the Lunar New Year break has been almost as bad as for their Chinese counterparts.

Mounting concerns that trade disruptions caused by the coronavirus outbreak will have a deep impact on the Southeast Asian nation have pushed the benchmark VN Index down more than 6% since Jan. 30. That’s the world’s worst plunge after the slide in Chinese shares. The Vietnamese gauge is down 9.4% from a November high, and is still mired in a bear market that began in 2018.

“Vietnam’s push towards international trade connectivity in modern times has turned it into an essential global value-chain hub, especially in the manufacturing sector,” SSI Securities analysts said. “Hence, any major global disruptions from other key suppliers such as China could pose a big threat to growth here.”

The virus that has killed more than 490 people in China has infected at least nine in Vietnam, where the government has taken measures to prevent the disease from spreading further. Prime Minister Nguyen Xuan Phuc ordered a freeze of visas for Chinese tourists, directed the suspension of Vietnamese workers traveling to China and discouraged Vietnamese citizens from cross-border trade and travel.

With China delaying the reopening of land borders and travel restrictions, Vietnam expects agriculture exports to its northern neighbor will be hit hard. The country also relies on critical imports from China, such as textile products and machinery for its factories.

At the same time, lower valuations will create opportunities for investors who want to accumulate stocks at reasonable prices, said Chris Freund, partner at Mekong Capital Ltd. The VN Index now trades at 12.8 times estimated earnings for the next 12 months, the lowest since August 2017 and below the three-year average of 14.8 times, data compiled by Bloomberg show.

The Vietnamese benchmark never recovered from the plunge that sent it into a bear market in 2018. It’s 23% away from the record high hit in April that year, and the impact of the new virus may further impede any potential rebound.

“Depending on how long it takes to control the coronavirus pandemic in China, the near-term economic impact on Vietnam will be negative, given the trade and tourism links with China,” said Ruchir Desai, a fund manager at Asia Frontier Capital.

By Nguyen Kieu Giang & bhishek Vishnoi, & Michelle Jamrisko - Bloomberg - 5 février 2020