Monthly Market Outlook

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).

The VN Index gained 12.5 points in September (an increase of +1.27% MoM), thus extending its YTD gain to 11.65%. Market sentiment trended toward a moderate risk-off from the second week of September, sparked by the State bank of Vietnam (SBV) lowering its several policy rates by 25 bps for the first time since October 2017. While in the immediate term the rate cut provides a marginal level of support for the banking system, it serves as an early signal for a more flexible monetary policy ahead. A flurry of positive bank news gripped industry headlines, such as the VCB bancassurance deal, the MBB state divestment, a successful private placement for BID, and rising credit growth for HDB triggered rallies for tickers such as VCB, BID, TCB, VPB, and MBB- among others.

The VN Index has tapered off its annual gains for three months in a row at present, losing 9.94 points or -1.04% MoM. YTD, it had still increased 6.43%. Lacking earnings news, investors shifted their attention to global stock markets, of which had mixed signals in June. On one hand, the US-China trade war has still accelerated (only with positive development on the last day of June), and concerns on global economic slowdown lingered. On the other hand, the Fed seemed to be more dovish toward more accommodative monetary policy in the future, and market participants expect a rate cut in July 2019, which will support both the stock and bond markets. In H1 2019, VND lost merely -0.45% in value, with most of this slight depreciation occurring mostly in Q2. The lending interest rate also did not increase in H1 2019.

Given the absence of supporting news when the earnings season had ended, the VN Index continued to decline in May, losing 19.76 points or -2.02% MoM. The Index lost ground in May, as local investors followed the global stock markets. Increased volatility was due to further escalation in the US-China trade war, as the two global powers locked horns in a process to find a sense of diplomatic and market equilibrium (or at least détente). Although global investors came to the consensus conclusion that Vietnam is indeed poised to be one of the prime beneficiaries from US-China trade tensions, concerns of a possibility of a global recession combined with an inverted yield curve and global trade tensions sent the market on a tumble. Trading value was almost unchanged in May compared with that of April, maintaining a low level of $138 mn USD (vs. $232 mn USD on average in 2018). Based on SSI Research coverage, 2019 net profit growth of Vietnam listed companies is estimated to continue its upward growth spiral, at 15% YoY. As of May 31^st 2019, the Vietnam stock market was trading at metrics of 14.2x 2019 PER.

The VN Index got off to a good start in the first month of 2019, adding 2.03% (18.11 points) to close out the month at 910.65 points. Liquidity was a bit absent before the long Lunar New Year holiday (from 2 Feb to 10 Feb), with the average daily trading value during this time just at $106.5 mn USD (-30.5% MoM) across the 3 domestic stock exchanges. Foreign investors maintained a net buying position into the holiday of $67 mn USD (vs. $15 mn USD in December 2018). Top net-buying stocks included VNM, MWG, VCB, VRE, STB, MSN, and PVS. Based on SSI Research coverage, 2019 net profit growth of Vietnam listed companies is estimated to be at 13.3% YoY. As of 31 Jan 2019, the Vietnam stock market was trading at metrics of 13.5x 2019 PER.

The VN Index declined throughout the month of December, closing out the month at 892.54 points (-3.67% MoM). During 2018, the VN Index significantly fluctuated, and resulted in shedding -9.32% by year end. Liquidity improved compared to November, with an average daily trading value reaching $153.4mn USD (+12.3% MoM) on 3 domestic stock exchanges. Foreign investors maintained a net buying position, albeit at a lower level of $15 mn USD (vs. $60.4 mn USD in November). Foreign investors net sold amongst the 2 main boards ($21 mn USD), creating heavy selling pressure across some large caps including VCG, CTG, HPG, VJC, VIC, NVL, and VHC. However, foreign investors ended up as net buyers on the Upcom ($36mn USD), mainly thanks to a one-off transaction event in which a foreign investor purchased ~2.96 mn shares of VTP, with a total value of $15.83 mn USD on 20th Dec 2018. Based on SSI Research coverage, 2018 & 2019 net profit growth of Vietnam listed companies is estimated to be at 20.3% YoY and 18.3% YoY. On 28 Dec 2018, the Vietnam stock market is trading at metrics of 14.8x 2018 PER and 12.5x 2019 PER.