VN stocks struggle to find growth momentum amid disease, expected lower earnings

Inside a shopping mall in Ha Noi after the coronavirus broke out. Retail and logistics are among the sectors that took some hit from the virus outbreak. - Photo vietnamnet.vn

The benchmark VN-Index on the Ho Chi Minh Stock Exchange ended last week at 940.75 points, a weekly gain of 0.44 per cent.

The benchmark index recovered from a sell-off in the previous week as investors reacted to the possibility of a coronavirus pandemic.

The VN-Index plunged a total of 6.38 per cent between January 30 and February 3. The collapse wiped out the entire growth the benchmark had made during the year.

During the three-day sell-off, the Vietnamese stock market lost a total of US$13.5 billion in market capitalisation.

The worst-hit sectors included mining and energy, transportation and logistics, agriculture and aquaculture, seafood processing, aviation and tourism, retail, and food and beverage.

Banking and financial, technology, retail and real estate were also affected by bad market sentiment.

But the sell-off helped bring stocks to lower price levels and triggered investors to buy in on beliefs for long-term growth at local companies.

Bank stocks made strong gains to lift the market such as Vietcombank (VCB), Vietinbank (CTG), HDBank (HDB), VPBank (VPB) and Sacombank (STB).

Following the banking sector were technology, real estate, mining and energy, seafood processing and agro-aquaculture.

But it is not easy for the VN-Index to advance in the coming week as the growth momentum has weakened and the market sentiment could be dampened easily, according to analysts.

Coronavirus, its development and its impact on the global economy will still be the major concern for investors, traders and market regulators.

Governments have taken some measures to take control of the outbreak caused by coronavirus but this is not the peak of the disease, specialist Nguyen Hong Khanh at Vietnam International Securities Co (VIS) warned.

The market sentiment would rely on the daily news, he said, adding the major concern for investors across Asia now is how and when the virus is contaminated.

The negative developments of the stock market in the last seven trading days after Tet (Lunar New Year) reflected the expectations on the impact the coronavirus may have on the global economy, Nguyen Anh Khoa, specialist at Agribank Securities Co (Agriseco), said.

“If there is no good news about whether the disease is totally controlled, risks still persist,” he told tinnhanhchungkhoan.vn. “The disease may continue in months and it is hard to predict how the market would go.”

The VN-Index is widely expected to approach 950 points this week, however, the growth would be bouncy and there will be some struggles, the analysts said.

Aside the developments of the coronavirus, another thing could bother investors is first-quarter earnings reports.

Listed firms are forecast to deliver lower year-on-year earnings reports for the first three months of 2020 as their sales have been dragged down by the coronavirus.

The sectors that could see a downtrend in quarterly corporate earnings include transportation and logistics, agriculture and aquaculture, seafood processing, aviation, tourism, retail, and food and beverage.

The disease has definitely been dragging both Viet Nam’s economy and stock market, specialist Nguyen The Minh at Yuanta Securities Co said.

“The Q1 GDP growth will likely lag behind the first quarter of 2019” as the service, agriculture and trade industries are widely seen the worst-performing, he said.

It may take a long time to restore investors’ confidence in the local stock market as the developments of the disease is still unpredictable, he said.

According to the Ministry of Planning and Investment, Viet Nam’s 2020 GDP could grow 6.09 per cent if the coronavirus is not controlled within six months and 6.27 per cent if the disease is controlled within the first quarter.

Agriseco analyst Khoa said it is still early to measure the impact of the coronavirus on the global and Vietnamese economies.

But as an open economy and a neighbour to China of which the economy has also been weighed down, the disease's impact are unavoidable to Viet Nam, he said.

Analysts hope that the disease would only weigh on the economy in short term, saying that the decline of local stocks is often an opportunity for investors to look for cheap but high-quality items on the stock market.