4Q22 stock market: Expecting a mid-term rebound

By the end of 2022, the VN-Index is predicted to be close to 1,330 points.

>> The VN-Index is under downward pressure

The Vietnam stock market recovered halfway through the third quarter of 2022 after experiencing severe declines, with many stocks falling to appealing prices due to easing commodity prices and positive movements on global stock markets due to the expectation that the Fed will slow down on rate hikes.

As the second half began, the VN-Index began to decline in tandem with the international stock markets due to mounting concerns about rising inflation, the economic recession, rate hikes, geopolitical tensions, and pressure on domestic exchange rates. The VN-Index nudged up 0.86% between July and September, although liquidity fell by 27% during that same time.

Vietnam stock market has maintained its allure given cheap P/B and relatively low P/E when compared to other regional rivals. Notably, during the VN-Index's fall sessions, overseas investors were net purchasers while regional markets experienced heavy selling pressure.

As seen by the strong correlation between the P/E ratio of the VN-Index and the S&P 500 during the pandemic crisis, the Vietnam stock market closely tracked the movement of the US stock market. Over the past two years, the global stock markets have been troubled by mounting concerns about the Covid-19 pandemic's effects, China's zero-Covid policy, soaring inflation in rich nations, the economic slowdown in the US and EU, aggressive rate hikes by central banks, etc.

>> 2022 stock market outlook: VN-Index could hit a new record

VN-Index was not immune to the negative effects of external forces and experienced corrections in 2022, despite the fact that Vietnam's economy exhibits underlying strength with 2022F GDP growth of 7.5% and the inflation rate kept in check well below 4%.

External considerations are considered in order to keep navigating the domestic market due to the extreme unpredictability of the global economy in the final three months of the year. However, Mr. Tran Duc Anh, Head of Macro & Strategy at KB Securities, anticipates that due to Vietnam's strong corporate earnings growth and macroeconomic stability, the outlook for the market's overall EPS growth would beat that of developed nations that are at risk of recession. The stock market in Vietnam will therefore perform better than many other regional and global markets.

By the end of the year, Mr. Tran Duc Anh predicts that the average EPS increase of the companies listed on the Ho Chi Minh Stock Exchange (HSX) would be 18.3% YoY. In response to mounting worries about external pressures and rising domestic interest rates, he simultaneously changes the target P/E to 13x. By the end of 2022, the VN-Index is predicted to be close to 1,330 points.

“Key factors that could scuttle our forecast include the collapse of the domestic bond market, the depreciation of the VND against the USD, unchecked global inflation, central banks' accelerating tightening of monetary policy, the downturn of major economies, and China's economic stagnation", said Mr. Tran Duc Anh.

FPT, GMD, MWG, PNJ, QTP, IDC, PVT, DHA, GAS, and DXG are KB Securities' top picks for its bull basket in 4Q22 based on the aforementioned opinions.