What opportunities from the Vietnam stock market in October?

VNDirect expected the VN-INDEX to expand recovery and may fluctuate in the range from 1,280-1,380 points in October. Photo: Quoc Tuan

On October 2, 2021, Vietnam recorded 5,490 COVID-19 cases, the lowest number of daily infections in more than 2 past months. It is the fourth consecutive day that the number of new cases gradually decreased.

The number of daily new cases could decline further in October thanks to a higher vaccination rate. Until October 3, 2021, Vietnam has fully vaccinated around 10.82% of its population, while around 34.81% has been partially vaccinated. VNDirect estimated that Vietnam would receive an additional 80-90 million doses by end-2021, thus lifting the vaccination rate to 50-60%. Additionally, the made-in-Vietnam vaccine, Nanocovax, is at last-mile phase 3 trials. Meanwhile, Vietnam has also successfully produced Sputnik-V vaccine domestically after receiving technology transfer from a Russian partner. Thanks to advances in research and self-producing of vaccines, Vietnam could increase its vaccine autonomy since the fourth quarter of 2021.

Hanoi and several localities across the country have eased some social distancing measures after seeing a sharp decrease in the number of daily new infections last month. Specifically, Hanoi allowed some non-essential services such as barbers, book stores, clothing shops, shopping centers, and restaurants (for takeaway) to reopen. Accordingly, retail and recreation mobility at the national level has seen a steady recovery over the past few weeks. The government also laid out a roadmap for reopening factories and industrial parks across the country to promote the economy’s recovery.

VNDirect expected the Vietnamese economy to steadily recover in 4Q21 thanks to (1) high demand for Vietnam’s export products, (2) the reopening of some non-essential services following a high vaccination rate, and (3) support packages from the government.

“Earnings of several sectors such as Oil & Gas, Real Estate, Retail, Food & Beverage and Banking could bounce back strongly in 4Q21 while profits of Brokerage and Steel companies remain strong”, VNDirect forecasted.

This stock company maintains 2021F EPS growth of listed companies on HOSE at 26%. For 2022F, it expects the EPS growth of listed companies on HOSE to remain strong at 21% YoY. Some sectors could see a strong improvement in earnings growth, including Industrial goods and Services, Real Estate, and Oil & Gas. For 2023F, it forecasts EPS growth of listed companies on HOSE at 18% YoY.

VN-INDEX is currently traded at 16.3x of trailing P/E, slightly above its average 3-year trailing P/E of 16.1x, and about 15% discount from its peak in Jun. VNDirect believed the market would have partially factored in the downside risks of the current Covid-19 wave. The market now is switching to focus on the story of earnings recovery in 4Q21 as well as the FY22 outlook. This company maintains its FY22/23 earnings growth of 21%/18% driven by a strong recovery of export-oriented sectors and the bounce-back of oil & gas and property. Thus, market valuation is attractive now.

VNDirect expected the VN-INDEX to expand recovery and may fluctuate in the range from 1,280-1,380 points in October. The 1,280-1,300 points would be a strong supporting level for the VN-INDEX in October. Meanwhile, potential downside risks to the market include lower-than-expected FY21 earnings outlook due to prolonged outbreak and potential stricter and longer lockdown protocols to be adopted to prevent the spread of coronavirus. Upside catalysts include faster vaccine rollout and domestically produced vaccines being brought to market sooner than expected.

This stock company prefers banks with the following characteristics: strong ability to expanding lending activities amid low credit demand; well equipped to enhance the weight of non-interest incomes; solid asset quality and strong provisioning buffer. Amid the less intense deposit competition and ample liquidity, it prefers banks that have opportunities to increase their exposures to individual lending which will enjoy better asset yield. VCB, TCB, and ACB are its top picks for the sector.