Vietnamese stock market to benefit from fast-paced vaccination in H2: PYN Elite

PYN Elite reported solid optimism among listed companies in Vietnam. Photo: tinnhanhchungkhoan.vn

The resurgence of COVID-19 caused the VN-index to drop 7 per cent in July, and PYN Elite dipped by 5.5 per cent.

However, the VN-Index still gained 18.7 per cent year-to-date, being the second-best-performing index in Asia, topped only by Mongolia which enjoyed a commodity boom.

PYN Elite climbed 16.6 per cent year-to-date, driven by MB (up 71 per cent), HDBank (up 42 per cent), and VN Diamond (up 48 per cent).

Furthermore, the Ho Chi Minh City Stock Exchange has deployed a new system from FPT, which tripled capacity and eased trading constraints.

On the other hand, Vietnam's macro figures are softening. The Purchasing Managers' Index (PMI) remained at 45.1 in July, as social distancing orders reduced factory capacity utilisation and disrupted supply chains. Retail sales decreased 19.8 per cent on-year, industrial production increased by 2.2 per cent on-year, exports slowed to 8.4 per cent on-year.

“Vietnamese companies are not too worried. They shared with us that it is already the fourth wave that both government and companies had experienced. Although Vietnam has currently a very low vaccination rate, companies are confident vaccinations will accelerate in the latter half of 2021 from the deals that have been negotiated by the government,” PYN Elite wrote in its latest monthly review annoucement.

“Our colleagues and friends in Vietnam are generally satisfied with government work on active tracing, testing, vaccines, supporting packages, to name a few. This is a sharp contrast to Thailand, where we had several heated street protests amid ever-increasing cases,” the fund added.

Specifically, VN Diamond gained 48 per cent year-to-date both on underlying companies’ solid first-half profit growth, and local share price catching up to narrow “foreign premium”.

"On average, VN Diamond companies reported 50 per cent year-to-date profit growth in H1 and completed 53 per cent of our full-year forecast. We expect VN Diamond companies' profits to grow 25 per cent year-to-date in 2021 and 21 per cent compound annual growth rate in the period of 2020-2023," PYN Elite added.

Last month, the fund also acknowledged that Vietnam was particularly vulnerable due to the fourth wave of the COVID-19 outbreak. The situation in terms of vaccinations remains poor, but efforts in recent weeks have improved both vaccination readiness and vaccine availability.

The strict lockdown measures now in force will slow economic growth during the third quarter. Earnings growth forecasts for listed companies for 2021 will have to be adjusted, although the increase is still expected to be 30-40 per cent.

“However, we believe that the Vietnamese government will be able to both curb the infections and ramp up vaccinations in a reasonable time. As a result, economic growth will be able to accelerate again in the autumn, and the stock market will continue its upward trend. In our opinion, it is these shares of companies focusing on the Vietnamese domestic market that have the greatest potential for outperformance in 6 to 12 months, although the next few weeks may still be difficult,” the fund commented in July.