Stock investment for the long run

VN-Index recovered to 1,150 points in mid-October after many days of downtrend.

>> VN-Index to trade in range of 1,200-1,250 points at year end

Many shares are trading at modest prices, although the Vietnam stock market's P/E ratio remains appealing, at around 14x.

Impact factors

Concerns about fluctuations in the USD/VND exchange rate or rumors about the State Bank of Vietnam withdrawing 100,000 - 200,000 billion VND from the banking system caused the stock market to fall sharply in September, when the VN-Index fell from 1,150 to around 1,100 points.

Market awareness and investor psychology are two major factors that constantly drive the stock market to vary significantly. If the stock market is extremely "sensitive" to even little changes in the economy, then GDP growth, monetary and fiscal policies, and so on can frequently have a significant influence on the VN-Index/VN30. Cash inflows and transactions by local and overseas investors have an instantaneous influence on investor behavior and psychology. In the short term, this looks to be the most intriguing and challenging to anticipate.

This year, in addition to the State Bank of Vietnam's continuous rate cuts, contrary to the global trend of continued rate hikes or keeping interest rates at high levels, the USD strength has affected the USD/VND rates, thereby affecting the Vietnam stock market.

Make a bottom and then recover

When the VN-Index rallied from 1,105 to 1,110 points in early October, it appeared that the stock market had bottomed out. The stock market will likely be in recovery mode in 4Q23, with the VN-Index ranging between 1,150 - 1,180 - 1,200 and 1,250 points before rising to 1,280 - 1,300 points by year's end.

When a series of stocks in the retail, banking, and securities industries, such as MWG, SSI, VCB, ACB, VNM... recovered well, as well as many stocks are projected to climb in the near period, such as VPB, PLX, STB..., the movements of the largecaps, especially shares in VN30 are extremely noticeable. Furthermore, banking equities are exhibiting indications of revival. This may aid the VN30 and VN-Index in returning to its prior highs.

Shares expected to lead the market

According to business performance figures for the first nine months of this year, listed enterprises in the fields of technology stocks, chemicals, oil and gas, retail... had strong growth compared to the same period last year, including PVS, FPT, BMP, HPG, GMD VNM...

>> VN-Index hits 4-month low on sell-off force

However, many shares in the utility, power, real estate, and other industries have diminishing revenue/profit. Although the VN-Index and VN30 may move narrowly with a little gain scenario, the stock market's dissimilar developments will remain the backbone.

Cash flow will be directed to shares of oil and gas, chemicals, telecommunications, steel, industrial real estate, fisheries, and textile firms, and investors may invest in equities such as IDC, FMC, TNG, DGC, PVS, ELC....

An suiteble strategy needed

Divergent stock market moves in 4Q23 may prompt investors to buy shares for short-term trading and concentrate on listed firms with strong business performance prospects and inexpensive valuations, particularly those with high trading value.

However, the fourth quarter of 2023 is also a favorable time for buying and holding stocks for a period of 3 - 6 - 9 months and for the entire year 2024 because the price of many stocks is still low, and the P/E ratio of the Vietnam stock market is still at an attractive level of about 14x, which is suitable for value investors.

To boost investment efficiency, investors must pay attention to portfolio management and share allocation. Furthermore, it is vital to analyze the portfolio on a regular basis in order to lower the proportion by taking profits or selling shares that were acquired erroneously or do not have significant growth potential. Furthermore, investors should focus on purchasing and keeping shares of companies with a lot of upside potential or firms with strong revenue and profit growth prospects.

Besides resolving the question of which stocks to buy? When should you buy that stock? How long should you keep that stock? Many investors want to know how to manage an investment portfolio to obtain consistent and adequate profitability.