How will the VN-Index move in March?

On February 28, 2022, VN-INDEX closed at 1,490 points, (0.8% mtd).

The VN-INDEX dropped to the month-lowest level of 1,472.0 points on Feb. 14, responding to geopolitical tension between Russia and Ukraine. On February 28, 2022, VN-INDEX closed at 1,490 points, (0.8% mtd). Liquidity weakened after the Tet holiday with an average trading volume of 3 main bourses of VND25,956bn/session (-22.4% mom; 61.7% yoy). In VNDirect’s view, the Vietnam stock market is relatively volatile following the Ukraine crisis, the taper tantrum, and the mixed impact of energy and commodity price hikes.

Historical statistics show that war and geopolitical tensions mostly affect the stock market in the short term, within 2-3 weeks after the event takes place. Specifically, S&P 500 declines during such events average around 4-6%, with the market quickly recouping its losses and returning to an uptrend within 2-3 months. stock market, together with ASEAN stock markets, seemed to have experienced limit ed impact during times of global conflict. Thus, VNDirect thinks any correction could provide a good entry point to accumulate stocks.

Foreign indirect investment (FII) may continue to be net withdrawn in 1H22 following the FED rate hike, but the impact on the Vietnam stock market is minimal thanks to (1) the government's implementing flexible fiscal and monetary policy to support the economic recovery; (2) solid foreign direct investment; and (3) strong domestic capital inflow into the stock market.

VNDirect believes there is also opportunity in the midst of geopolitical chaos. First, Vietnam ramps up the re-opening of international flights and tourism; which will bode well for the recovery of the aviation and retail sectors. Second, as the annual shareholder meeting season has kicked off with 2022 business guidance to be revealed. "We expect HOSE-listed companies’ earnings to grow by 23% yoy." Industrial goods and services, retail, and property development are the three most profitable industries in terms of earnings growth.And lastly; we see some sectors that ride on the commodity price hike, including oil & gas; urea producers, and galvanised steel exporters", VNDirect said.

This stock company is still confident about the market outlook in the medium-term, underpinned by: (1) the stronger recovery of Vietnam’s growth engines, including foreign-direct-investment (FDI) and the service sector (tourism, transportation); (2) a new financial stimulus package to be launched; and (3) the valuation of Vietnam’s stock market looks attractive in the long term. It expects the VN-INDEX to fluctuate in the range of 1,460-1,560 points in March 2022.

VNDirect thinks that the stock market correction is an opportunity for investors to increase the proportion of stocks held for the target of medium-term holding within the next 3–12 months.

"Upside catalysts include the stronger-than-expected recovery of aviation and tourism, and higher-than-expected 1Q22 earnings growth of listed companies. Potential downside risks to the market include (1) the Fed cutting policy rate more aggressively than expected and (2) Russo-Ukrainian tension persisting, "VNDirect said.