Which stocks will attract cash flows in 4Q24?

These two sectors, with substantial capitalizations, are regarded as cornerstones of the VN-Index, having a combined influence on the Vietnam stock market.

On October 31, banks and securities equities continued to rise. Several banking stocks had large advances, including CTG (2.73%), LPB (1.23%), and VCB (2.07%). In real estate, VHM increased by 0.85%, VIC by 1.34%, DXG by 0.3%, and KBC by 0.19%. The top ten stocks that had a favorable influence on the VN-Index were primarily from banking and real estate, with VCB leading with 2.6 points, followed by CTG with approximately 1.3 points and VIC with more than 0.5 points.

Several big banks and real estate corporations have just declared good profitability for the third quarter of 2024. Banks with notable profit increases include VCB (18%), CTG (35%), and BIDV (10%). Real estate enterprises such as NVL had a rapid profit gain of more than VND 3 trillion, while KBC's profit increased multiple times. Total market liquidity hit VND 19,269 billion, nearly matching that on October 30. Foreign investors continued to buy, with net purchases in VPB of almost VND 88 billion and CTG of around VND 43 billion.

Regarding stock performance in these two sectors from now until the end of 2024, MBS Securities anticipates that the banking sector will experience stable profit growth due to the recovery of business activities. Bad debts of listed banks in Q3 2024 are expected to remain unchanged as corporate loans continue to drive credit growth in Q4 2024, while banks will slow down provisions in the latter half of the year.

As a result, the provision buffer is expected to decline as provisioning slows and bad debts continue to be written down. Listed banks' net earnings in Q3 2024 climbed by 16.5% year on year, providing essential support for total market profit growth, with some banks seeing considerable increases, such as HDB (up 44%) and TPB (up 35%), owing to strong loan growth. VCB and CTG both increased by 40% from their low starting points within the same time period.

According to Viet Dragon Securities Corporation (VDSC), the banking sector would continue to drive growth alongside the recovery in manufacturing and retail, resulting in a 28% post-tax profit gain for the VN Index.

The banking sector's growth drivers include a slight Q3 NIM (Net Interest Margin) increase compared to the previous quarter as asset quality improved; credit costs no longer have a significant impact on profits; credit growth of monitored banks, which account for 75% of total industry profits, is estimated to be 10.5% YTD or a 19.4% increase YoY. These factors are predicted to help the Vietnamese stock market hit new highs as market valuations remain at ordinary levels.

For the real estate (RE) sector, MBS Securities anticipates regional differentiation. Q3 2024 business results will vary among companies depending on location. By the end of H1 2024, apartment supply in Ho Chi Minh City remained limited, with new supply mainly from high-end projects with clear legal frameworks, often developed by well-resourced foreign developers or subsequent phases of previously launched projects. In contrast, Hanoi saw new supply surge by 176%, reaching 10,841 units – the highest level in five years. Prices in this area have also risen significantly, catching up with the South as prices increased by 22%.

Thus, with three key real estate laws coming into effect, MBS suggests that local governments need time to establish official land pricing tables, which will help accelerate project timelines. Real estate firms with a focus on the Southern market, such as NVL and DXG, are expected to report favorable Q3 results as new projects go on sale. Some firms with completed legal documentation, such as KDH and NLG, may have an advantage depending on sales timing. Real estate companies with projects concentrated in the North, like VHM, may continue to benefit from high liquidity and a solid legal framework. This trend indicates that cash flow is likely to continue favoring banking and real estate stocks as pillars until the end of the year.

Experts also recommend investors pay attention to ongoing efforts to improve regulatory frameworks to address barriers and promote stock market development with the goal of upgrading its status. The draft amendment of the Securities Law, expected to be passed in the 8th National Assembly session, would mark a milestone for the Vietnamese stock market's upgrade outlook in 2025, as assessed by FTSE and MSCI.

Additionally, China has announced economic stimulus measures that, if successful in revitalizing growth, would have a spillover effect on Vietnam given the substantial trade between the two economies.

Looking ahead to the rest of Q4 2024, analysts predict the VN-Index to achieve new highs, indicating Q4 earnings growth and a P/E ratio of 15-15.5. Short-term market concerns include growing tensions in the Middle East, which might challenge the VN-Index's P/E trading range of 13.5 times, perhaps pushing the index back to about 1,230 points before recovering.

As a result, experts advise investors to build portfolios with quality growth stocks, including banks and companies with growth drivers such as banking, technology, financial services, or companies with expansion projects or development potential, with a focus on banking and real estate as the three stock exchanges' largest-cap sectors.