In its market strategy note for September, VNDirect Securities Corporation forecasts the Vietnamese stock market to regain its upward momentum with daily COVID-19 cases peaking out.
|The VN-Index is expected to recover in September and fluctuate within the 1,280-1,380 points range |
Market valuation is currently attractive, VNDirect reported, and the market will be supported by increasing retail participation and abundant cashflow shifting away from deposits amid low interest rates.
Positive factors for September include that infections likely peaked in late August and will slow down thanks to drastic movement restrictions and rising vaccination. Additionally, liquidity rebounded strongly in August, suggesting that investors are willing to jump into the stock market when the opportunity arises.
Ho Chi Minh City has imposed stricter movement controls since August 1 with nearly all non-essential businesses closed, while factories operate with reduced staff on-site. At the same time, Hanoi, Danang, and other southern provinces have also banned public transport and intercity bus services, and closed all non-essential businesses.
So far Vietnam has fully vaccinated around 2.5 per cent of its population, and partially vaccinated around 17.4 per cent. The country expects to receive an additional 80-90 million doses by the end of 2021, lifting the vaccination rate to 50-60 per cent. Additionally, the "Made in Vietnam Nanocovax vaccine is nearing the end of phase 3 clinical trials.
The securities firm expected the VN-Index to recover in September and fluctuate within the 1,280-1,380 points range. “Investors could raise the proportion of stocks in their portfolios if the index drops to the support zone. We prefer leading companies in real estate, including both residential and industrial park real estate, building materials, logistics, port, and export-oriented companies," VNDirect said.
For 2022, VNDirect expects the earnings per share growth on the Ho Chi Minh City Stock Exchange (HSX) to grow 21 per cent on-year. The index for 2021 is expected to drop to 26 per cent (instead of the previous forecast of 30 per cent) due to heavy disruptions from the fourth wave of the pandemic in the second half.
The market witnessed turbulence in August as the VN-Index bounced back to 1,370 points then corrected and closed the month at 1,328, up 1.4 per cent month-to-date on August 30. Investor sentiment remains weak as longer and stricter nationwide lockdown protocols have been adopted.
Liquidity rebounded strongly in August as market valuation turned more attractive. Total trading transactions of three main bourses rose 15.3 per cent on-month to VND30.2 trillion ($1.3 billion) per day, up 363.2 per cent on-year.
In August, the money ran into small and mid-caps. The liquidity of small caps surged 90.1 per cent on-month, resulting in an impressive increase of 10.6 per cent month-to-date for the VNSML Index. The liquidity of mid-caps rose 69.9 per cent on-month to bring the VNMID Index up 0.4 per cent month-to-date. On the other hand, the daily trading volume for large caps dropped 4.1 per cent on-month, leading to a 2.4 per cent month-to-date decline for the VN30 Index.