Which stocks to watch out for in September?

Investors could raise proportion of stocks in their portfolios if VN-Index drops to 1,280-1,300 points seen as supporting zone, said VNDirect. Photo: Quoc Tuan

Rebound in liquidity

VN-INDEX inched up 1.4% in August (data as of 30 Aug 2021) after recording a sharp correction of 7% MoM in the previous month. Investor sentiment remains weak as longer and stricter nationwide lockdown protocols have been adopted in HCMC and Hanoi.

At the end of the 30 Aug 2021 session, the VN-INDEX stood at 1,328.14pts, up 1.4%. However, the index still recorded a 20.3% YTD increase. On the contrary, the HNX-INDEX and UPCOM-INDEX recorded an 8.4% MTD and 7.2% MTD increase, respectively. 

The liquidity of the stock market rebound strongly in August as investors jumped into stock markets amid a more attractive market valuation. Total liquidity in 3 main bourses rose 15.3% MoM to VND30,177bn/session, up 363.2% YoY, of which the daily trading value on HOSE reached VND24,350bn/session, up 10.8% MoM. Meanwhile, the daily trading value on HNX and UPCOM climbed to VND4,057bn/session, up 36.8% MoM and VND1,790bn/session, up 42.2% MoM, respectively. 

It is noted that the cash flow flooded into real estate, brokerage, chemicals, construction, and transportation …, and ran away from banking, steel, and retail.

“Money ran into small and mid-caps in Aug. Liquidity of VNSML (representing small caps) surged 90.1% mom, resulting in an impressive increase of 10.6% MTD of VNSML Index. Liquidity of VNMID (representing mid-caps) rose 69.9% MoM while VNMID Index inched up 0.4% MTD. On the other hand, the money ran away VN30 (representing large caps) with daily liquidity falling 4.1% mom), resulting in a decline of 2.4% MTD of VN30 Index”, VNDirect said.

Market valuation remains attractive

VN-INDEX is currently traded at 15.7x of trailing P/E, slightly below its average 3-year trailing P/E of 16.2x, and about 17% discount from its peak in June. Even though VNDirect lowered FY21 earnings growth, it believes the market has partially factored in the downside risks of the current Covid-19 wave and will look for an FY22 growth story. “We maintain our 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, notably, the market will be supported by the increasing retail participant and abundant cashflow shifting away from deposits amid low-interest rates” VNDirect stressed.

This stock company expected the VN-INDEX to gradually recover and may fluctuate in the range from 1,280-1,380 points in September 2021. “The 1,280-1,300 points would be a strong supporting level for the VN-INDEX in September. Investors could raise the proportion of stocks in their portfolios if the index drops to the supporting zone”, VNDirect recommended.

In VNDirect’s view, 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. Meanwhile, upside catalysts include the made-in Vietnam Nanocovax vaccine will be approved sooner than expected.

Despite short-term headwinds, VNDirect is still optimistic about the prospects of export-oriented segments; ie: textile, seafood, wooden product, rubber, and steel. Logistics and industrial property are also key beneficiaries in this theme. Stocks to watch out for are STK, VHC, HPG, KBC. The retail sector will enjoy the most post-pandemic, while Vietnam could allow international commercial flights from the beginning of 1Q22, which could lead to the strong recovery of tourism, accommodation & catering service, and aviation since 1Q22. So VNDirect recommends investing in PNJ, VRE.

Besides, this stock company believed infrastructure development ramp-up would be one of the critical measures to boost economic growth. Meanwhile, energy infrastructure will take the spotlight in the next 2 years. ACV, GAS, POW, HHV could be beneficiaries.