Will steel stocks "catch the wave"?

HSG's earnings is also predicted to rise significantly in 2024

Capital flow spreads slowly

Mr. Ho Huu Tuan Hieu, an Investment Strategy Expert at SSI Research, stated that the stock market (STC) saw a favorable upswing last week, with the VN-Index hitting 1,181 points. However, the fall in liquidity persisted, putting the average liquidity back to 12,000-13,000 billion VND each session, which corresponds to the time at the end of October and beginning of November 2023. This contrasts with the growth in the second part of December, early January 2024, when liquidity fluctuated between 20,000 and 25,000 billion VND each session.

Notably, cashflow is concentrated in a few large-cap firms, limit ing capital's dispersion to smaller stock groupings. Despite significant score improvements, there is little unanimity on the status of major industrial groupings and equities, with local money concentrated in banking. This is a trait that investors should take note of in the near future.

Looking back on the market over the last week, there was one bright spot: money is returning to companies such as vital consumer items. This return is heavily focused on Mobile World Investment Corporation's MWG shares, since the Board of Directors authorized a capital expansion plan for Bach Hoa Xanh of 5-10%, which is projected to be completed in the first half of 2024. This is the long-awaited news for MWG shareholders, and it is also the basis for the stock's roughly 10% climb over the last week.

"The recent variations in capital flow suggest that market liquidity has diminished, sending the average value of matching orders down below 15,000 billion VND each session, indicating a period of liquidity comparable to calmer market stages. Typically, in this sector, the market will fall or move sideways, but the current situation is unusual in that money is heavily concentrated in the group of large-cap firms, particularly banking stocks. However, after capital has exited the banking stock group, it will migrate to another large-cap group. At this point, we can progressively distribute to Midcap stocks while waiting for money to migrate, but this will be a time-consuming and potentially risky process," said Mr. Hieu.

Expectations in the steel sector

Mr. Truong Thai Dat, Director of Analysis at DSC Securities, feels that investor mistrust leads to long-term price increases in the market. When this skepticism fades, the market may experience "stagnation," indicating a less dynamic era ahead.

During the January 22 trading session, the securities stock group remained in a decline, the banking stock group progressively differentiated, and the steel stocks showed positive indications. Strong capital inflows have lifted steel codes. Specifically, HPG stock saw exceptional liquidity in the market and grew by around 1.5%; HSG increased by 2.4% and placed third in the market with 14.36 million units matched; and NKG stock increased by more than 2%.

According to SSI Research's 2024 steel industry forecast research, the steel industry is predicted to rebound significantly, with overall steel consumption rising by more than 6% over the previous year and domestic demand growing by almost 7%.

Specifically, the domestic market began to recover by the end of 2023, when consumption volume grew by 13% over the same time, despite a 20% fall in the first eight months of 2023. This rebound is linked to improved macroeconomic conditions as well as a comeback in the real estate sector.

This also recalls a previous boom cycle in which construction steel consumption climbed by roughly 3% in 2013 compared to 2012's low, generating optimism for a consistent growth trend in the steel sector.

HPG and HSG are two equities that have received favorable ratings. HPG is predicted to recover 80% from before due to gains in both consumption volume and profit margin. Consumption volume is predicted to rise by 11% in 2024. The company's market share in the building steel industry is also predicted to rise from 34.8% in 2022 and 32.5% in the first seven months of 2023 to about 37% lately, owing to a rebound in the export channel and lower output from competitors.

HSG's earnings is also predicted to rise significantly in 2024, with spectacular growth of up to more than 20 times that of the record low in 2023. The local market is projected to recover faster than the export route. Notably, HSG's debt has fallen to a low level of 2.3x in fiscal year 2023, indicating a substantial improvement over prior years.