Monthly Market Outlook

For years to come, investors will look back at 2020 as one of the most turbulent years in modern history, with the Covid-19 pandemic causing the largest shock to the global economy in decades. Unprecedented fiscal and monetary responses have fueled massive liquidity driven rallies in the share markets, while rapid vaccination developments have increased the likelihood of a near-term recovery. The Vietnamese stock market was characterized by a short-lived bear market for just the month of March, and then recovered at a velocity that defied most expectations for the remainder of 2020 - closing the year at its highest level since April 2018. 

November distinguished itself as one of the best months of the year for global equities, and Vietnam was no exception. The VN Index gained 8.4% to 1003.08 points, marking the fourth consecutive months of gains in a row. Markets were pleased by the announcement of three COVID-19 vaccines, which acted as a further market impetus to the post-US election rally. Election day has come and passed in the US, and the transition process from Trump to a Biden administration is now underway as the world awaits certification of the US election results. The Vietnamese stock market has heated up, as the psychological resistance barrier of 1,000 points was broken successfully during the last week of November.  Retail investor sentiment remained extremely strong, as evidenced by historical high liquidity as well as record level of new share trading accounts opened during the month (41,080 new accounts, up 13% MoM, being the highest monthly level since Dec 2017). 

The VN Index maintained its upward trajectory and extended gains by 2.24% to 925.5 points last month, marking October as the third consecutive increase month in a row. October was strong during the first three weeks, bolstered by resilient Q3 corporate earnings and the announced proposed re-weighting of Vietnam by MSCI (MSCI Frontier Index) from 12.5% to 28.8%. The proposal is expected to be executed in five  steps, beginning with the departure of Kuwait from the Index in December. There were also hot topic events, such as state-owned bank stock dividend plans, and companies announcing their intention to list on HOSE. The market re-tested the 960 level during last week of October, as investors took profits from the rally.  

Strong and effective measurements in Vietnam to contain the virus and mitigate the impact on the economy have been an irresistible draw to investors. Higher than expected Q3 GDP growth (2.62% vs. the 1.04-1.69% earlier expected by the Ministry of Planning and Investment) and resilient exports & record trade surplus  in the first nine months of the year with a stable VND culminated in a resilient September. The VN Index rose during the first week of September, as large cap and full-foreign room stocks continued rally on the back of newly raised fund from Taiwan. The market surged again during the last two weeks of September, supported by banks (boosted by effect of dividends; shares with plans to moving to the HOSE; and on M&A speculation) and other blue chips such as VNM, HPG, VIC.  The VN Index closed the month at 905.21 points, gaining 2.7% MoM. 

After a correction in July came about from an unexpected return of Covid-19 to Vietnam, the VN Index nevertheless staged a strong rally in August, gaining 10.43% and closing the month at 881.65 points. Although the number of infected cases rapidly increased from 546 to 1044 in August (with more fatalities reported; in the double digits), the Vietnamese government applied a targeted approach to the situation that is more flexible from the earlier April nationwide lockdown. Strict social distancing measures were put in place only for the coastal city of Danang and a few other select provinces (Quang Nam, Quang Tri, and Hai Duong). As the areas affected were more limited in scale, investors thus were more complacent this time around in their reaction to coronavirus news and its effect during the month. Liquidity averaged $222 mn USD in August via order matching across 3 bourses, up 16% MoM and 43% YoY. In August, foreign investors acted diametrically opposite to the confident sentiment of local investors, and registered a net withdrawal of $159 mn USD during the month. Top selling tickers were CTG, HPG, VCB, VRE, and VNM while top buys were VHM, PLX, FUESVFVND, PHR, and HDB. It has been observed that outflows were mostly from the portfolio restructuring of active funds. Meanwhile, ETF net inflow was $18.35 mn USD during the month, mostly via the Diamond ETF.

The market corrected again in July, with the VN Index closing at 798.4 points (-3.24% MoM) and extending YTD losses to -16.92%. Investors reacted negatively as new COVID-19 cases in the coastal city of Danang were announced on 24th July after 99 consecutive days with no new coronavirus cases the entirety of Vietnam. However, we did observe less of a panic mindset among investors during the 2nd correction, as market participants seemed to have learned lessons from the previous panic in March. With a second wave of Covid-19 in Vietnam, and a complicated global pandemic situation, investors understand that this virus will be with us for an extended period of time in contravention to previous perceptions. A number of vaccines look promising and are entering the next phase of trials. Still, we are quarters away from a resolution for this virus and the markets are pinning their hopes on a return to normalcy. 

After a strong rally in May, the VN Index stalled in its ascent and corrected by -4.55% in June, ending the month at 825.11 points. YTD, the VN Index lost -14.14%, at 825.11 points so far. As the return of the equity market had been 30% in just 2 months (April + May), short-term investors strongly took profit, even regarding companies that boast resilient Q2 earnings such as HPG, SSI, DPM, PHR, and VNM. Although Vietnam real GDP growth in Q2 ended up on a positive growth note of 0.36% YoY, beating consensus of a contraction, the market took this as just an initial signal of severe impact from Covid-19 upon the whole economy as there is a belief  that Covid-19 impact will last into coming quarters. In other words, the robust rally in the domestic stock market over the last few months might reflect an expectation on the economy outlook that is too far from reality. Additionally, outside of Vietnam, there is still a palpable fear in the air of rising cases towards the second-wave of Covid-19 in key economies such as China, the US, and Japan, among many, many others. 

Unlike the traditional expectation of poor performance in stock markets every May, this year challenged the time honored adage of “sell in May and go away”. Defying historical expectations, the equity market rally extended into May, with the VN Index closing the month at 864.47 points, up +12.4% MoM. YTD, the VN Index has lost only -10%. With a recovery of 31% from the bottom seen on 24th  March 2020, Vietnam’s stock market is one of the best performers amongst Asian peers according to Bloomberg. Exemplary containment efforts by the Vietnamese government, which paved the way to the initial success story of the reopening of the domestic economy, has reassured investor confidence. Liquidity significantly soared across 3 bourses, coming to $224 mn USD in May (+27.6% MoM and +62.6% YoY). Retail money continued to dominate the market. This recent surge might be channeled from other forms of investments (such as business, property, gold or savings) to the stock market. During Feb-Apr 2020, the total of newly opened securities accounts reached 87,000, nearly half of total new accounts for all of 2019. Many of these new participants are first time investors.  Up to April 2020, there were 2.47 million stock trading accounts in Vietnam, just accounting for 2.5% of the total population.  The reduction in fees for 20 out of the 22 securities companies in the market were rolled out as a supporting measure, and favorable margin packages introduced by securities companies were also catalysts to attract investors recently. 

After a severe jolt in March, the Vietnam stock market rebounded strongly in April, gaining 16.1% to 769.1 points.  Although COVID-19 continued to spread globally, the infection curves have been trending towards a flattening, and countries are planning to reopen their respective economies. Vietnam has also restarted its economy after 3 weeks of a strict stay at home request, followed by imposed social distancing norms. Local investors (many of them which had withdrawn from the market since Q4 last year, others that for years did not activate their trading accounts and some of them are the first time investors) have come back the market with gusto. Their strong bottom fishing activities searching for bargains have driven the market up despite strong selling from foreign investors. Local investors accounted for 86% of total trading value in April, higher than the level of 84.5% in 2019. Unlike institutional flows which normally go to large cap stocks, retail money flow selectively channels capital to mid-cap stocks and sectors that have specific narratives and catalysts driving growth prospects, in segments such as industrial parks, fertilizers (beneficiaries of low oil price), construction and construction materials (beneficiaries of accelerated public investments), or consumer staples (such as pork, rice, home & personal care). Foreign investors exhibited sharply contrasted behavior, and continued massive selling in April to the amount of $284 mn USD, focusing on VIC, VNM, VCB, VRE and VPB. YTD, they unloaded $722 mn USD from the Vietnam stock market. ETF net outflows were $17 mn USD in March. 

March was quite simply a horrific month for global equity markets, as the coronavirus pandemic ravaged global economies and sent various markets abroad into recession territory. Far from being insulated from such news of infectious outbreaks,the VN Index buckled from the weight of global pressure, sinking by -24.9% in March and closing the month at 662.53 points - the lowest level since December 2016. YTD, the VN Index returned -31.1%, with VN30 stocks leading the collapse. The fear of the virus is real, and it is indeed contagious. While people quickly stocked up staple goods in panic mode at supermarkets in various countries around the world, investors at the same time aggressively sold off global stocks, trying to flee to cash positions as much as possible. Foreign investors registered a massive sell off of -$380 mn USD in March, recording the biggest withdrawal month since Jan 2017. They net sold MSN, HPG, VIC, VHM, and VRE during the month. YTD, foreign outflow totaled -$438 mn USD, in which $43mn USD was sold off via ETFs. Daily liquidity via order-matching at 3 bourses totaled $168 mn, up 8% MoM in March. 

The VN Index closed the month at 882.19 points losing 54.4 points or -5.8%. YTD, it decreased by -8.2%. As such, the VN Index lost some ground in the first 2 months of the year, contrary to the pattern established over the last 10 years in which the VN Index had always increased in the first 2 months of the year. The Covid-19 epidemic, hands down, has been the main source of the decline. 

Before the Lunar New Year holiday (23^rd to 29^th January), the VN Index had a pretty good start to 2020 with a 3% increase by 23^rd Jan. However, the coronavirus outbreak during the holiday spooked markets amid fears of a hit to the global economy.When the Vietnam stock market resumed on 30^th January, a wave of stock sell-offs characterized market sentiment, causing the VN Index to drop by -2.54% YTD closing the month at 936.62 points.  Except for healthcare stocks, most other sectors such as aviation, oil&gas, agriculture, retail, logistics, and consumer staples strongly carried risk-off sentiment as coronavirus outbreak worries cast a pall upon the market. As both the magnitude and duration of the outbreak are unknown, downside risks still persist over the short-term. 

The VN Index closed the last month of 2019 at 960.99 points, losing -1% MoM on ho-hum sentiment of retail investors, while foreign investors continued to net sell in December. Despite Phase One negotiations between the US and China regarding the much anticipated trade deal tentatively reached that sent other stock indices like the Dow Jones, S&P 500, Shanghai Composite, Hang Sheng, and Nikkei to higher edges, the VN Index was isolated from global news. Unlike some might expect, window dressing activities were not observed on the last trading day of the year. 

The VN Index closed the first week of the month at 1024.91 points on 6th Nov, marking a short-term peak and the highest since July 2018. The upsurge was fueled by strong Q3 corporate earnings, VHM & VRE share buyback announcements, as well as the completion of the VCB bancassurance contract & BID recapitalization. The market tested these highs before pulling back remarkably, closing out the month at 970.75, -2.81% MoM. One could point to arbitrage activities on the VN 30 Future during 21st Nov being amongst one of the key causes for the market pullback. On the day the VN30 Future expired, the VN Index dipped -1.3% once again below 1,000. In the meantime, retail investor sentiment (who account for 85-90% of market trading value in Vietnam) was lackluster, as they do not expect significant new catalysts for the market in the near term. Therefore, some actively withdrew from the market, opting instead to bide their time for attractive bargains in the future. We have observed the same pattern among retail investors, of which their behavior was similar when the VN Index decreased in November-early December in previous years (2015-2019).

Movement in the VN Index crabbed sideways in October, keeping up with inflation and breaching the 1000 point level, gaining 2.26 points in October (+0.23% MoM). YTD, the VN Index has returned 11.91%. The third-quarter earnings season has since unfolded, and winners and losers alike have emerged. Sectors that have exhibited comparatively superior earnings growth include banking, real estate (VIC, VHM, VRE, KDH, DXG, HDG, BCM, VGC), utilities (POW, REE, NT2, PPC), and consumer discretionary (MWG, PNJ, DRC), IT (FPT). Meanwhile, some sectors shrank in terms of earnings like construction (CTD, HBC, DPG, FCN), materials (HPG, DPM, DCM), oil & gas (GAS, PVD, PVS, BSR), and securities. Others did not shape up to expectations, like consumer staples (VNM, MSN, VHC, VEA), textile & garment (MSH, TCM, VGG), and pharma (DHG, TRA, DBD).