The market’s forward price-to-earning (P/E) ratio has declined from 14.1 to 10.9 since April, tracking the 23 percent drop by the benchmark VN-Index.

The fund’s founder, Petri Deryng, said the crash came as "a complete surprise" as there was news of robust earnings growth and valuations were modest.

Vietnam’s valuations are now irrational with a forward P/E ratio of 10.9 though Q1 earnings growth was 31 percent and the forecast for the full year is 19-29 percent, he said.

Vietnam’s five-year historical rolling P/E has been 16.5, and even topped 20 during periods of strong earnings growth, he pointed out.

"The outlook of the global stock markets cannot be ignored when assessing the possible timing of the bull runs of the Vietnamese market, but at these valuations Vietnam offers a stable economy and extremely cheap stocks," he said in a note published Thursday.

Vietnam’s stock market was affected by the conflict in Ukraine and the fall of the Nasdaq, but the crash was mainly caused by the government's probe into stock manipulation and the arrest of key players, he said.

"Local investors’ portfolios were badly hit, and due the severity of the crash, the selling pressure spilled over also to blue chips."

PYN Elite Fund said its portfolio was badly hit by the recent crash despite posting positive growth in the first quarter.

Source: VNE