Don't overlook growth investing

CTR, VEA, IMP, DBD, ITD, ABC, etc. are equities to watch in June.

The Vietnam stock market has had the greatest "sublimation" moments since the beginning of this year, with figures showing that the VN-Index regained over 40 points in May and that the stock market's rise may continue in June.

New expectations

Perhaps this year, Vietnam's economy will struggle to meet the target growth rate, and GDP will likely only hit 5.5-5.6%. Due to decreased demand, the Vietnam Manufacturing PMI fell to 45.3 in May 2023 from 46.7 in April, reflecting the sixth worsening in business conditions in the previous seven months and the biggest drop since September 2021. New orders fell at the highest rate in 20 months, while export orders fell for the third month in a row. Thus, the statistics from the first five months of this year have disclosed all of the dismal messages about the economic future, with the anticipation of receiving more optimistic signals towards the end of the year.

The Federal Reserve's warning of a rate decrease plan beginning in November 2023 paved the way for a scenario in which central banks throughout the world lower interest rates. In addition, the State Bank of Vietnam has reduced policy rates for the third time this year. From May through the end of the year, policy rate cuts in the context of falling inflation are also boosting the stock market.

The enormous capital flow entered the stock market, boosting VN30 stocks, big-cap firms, and notably banking stocks. All of this has caused the VN-Index to rebound to 1,100 points and may climb up to 1,150 - 1,200 points in June, rather than drop as many "rumors" predicted.

What stocks suck cash flow?

According to stock market movement records throughout the years, whenever the stock market begins a fresh rally, the VN-Index confirms the uptrend after a protracted downturn, and the basic stocks, or blue chip stocks, are the leading stocks. Stocks in finance, banking, oil, and chemicals were the first to benefit, with trade values rising. This year was no exception, with the VN-Index rising from 1,030 - 1,040 points to 1,090 points. Many stocks sucked cash flow, such as securities stocks (SSI, BVS, VND, BSI...), banking stocks (VCB, TCB, MBB, VPB, VIB...), oil and gas stocks (PVS, PVC, PVD...), engineering and construction stocks (VCG, CII, LCG, FCN, CTI...).

Construction stocks, financial stocks, and oil and gas stocks are likely to be the most preferred groups, as they benefit not only from cash flow shifting to the stock market, but also from promoting public investment at the end of the year, with key oil and gas projects such as Block BO Mon, Blue Whale,...

Furthermore, because the story "inflation peak, interest rate peak, stock bottom" is still accurate, more cash will have to flow into the stock market. Because when investor mood becomes "untied," market liquidity rises and undervalued equities quickly move to higher heights.

Prioritizing growth investment

Stocks in finance, securities, insurance, oil and gas, and steel will be eligible for value investment if the market price is lower than the P/E and P/B ratios. This is the recommended investing strategy not only for professional investors, but also for new and amateur investors.

However, it should be highlighted that there is still room for growth investing, particularly in June of this year. The group of stocks ideal for growth investing is a proposal for investors who favor high levels of growth in the revenue and profit of enterprises.

Growth investment is frequently allocated to equities with a stable continuous return, as opposed to those with variable revenue and profit (steel, chemical, petroleum, and so on). VNM, FPT, DHG, HAX, etc. are examples of growth stocks in technology, telecommunications, car services, consumer products, and medicines.

In addition to achieving the normal requirements for growth investment, such as debt-to-assets ratio, profitability, and attractive values, the revenue/profit growth rate must also be satisfied. When considering investing in these stocks, keep attractive cash dividends in mind. CTR, VEA, IMP, DBD, ITD, ABC, etc. are equities to watch in June.