Barry Weisblatt David said many sectors will provide good investment opportunities for the rest of 2024.
After a shocking drop, the Vietnamese stock market “recovered” quite positively in the session of August 6. The increase was extended in the afternoon session, surprising investors when stocks that had just been dyed “red” now raced to “green and purple”.
Mr. Barry Weisblatt David - Director of Analysis Department, VNDIRECT Securities Joint Stock Company commented on this surprising development of the market as well as found out the outstanding industry groups in the second half of 2024.
Will the VN-Index still be affected by the BOJ's decision?
Mr. Barry Weisblatt David: No, I don't think so.
VN-Index fell ~4% in the session of August 5. At the same time, the Nikkei index fell sharply by 12.4% – this is the largest percentage drop since Black Monday in October 1987. Both of these were caused by news from the US. The BOJ's decision to raise interest rates, in my opinion, probably only have a small impact on Vietnam.
The Yen weakened to a 38-year low of 161.99 against the US Dollar, forcing the BOJ to raise its base rate to around 0.25% to support the Yen.
A stronger Yen puts pressure on Japanese stocks because the Japanese stock market is dominated by export-oriented businesses – unlike the Vietnamese market which is dominated by domestic sectors such as banking, real estate and consumer companies.
However, Japan's interest rate hike has little impact on Vietnam.. Japan is only Vietnam’s sixth-largest export market. And most of Japan’s investment in Vietnam is in the form of development assistance (between governments) or long-term FDI, such as SMBC’s $1.5 billion investment in VP Bank.
These flows are not inherently sensitive to moderate currency movements in the same way that ETF flows would be.
So yesterday's news is unlikely to cause much change in Japanese investment flows into Vietnam. And I don't think global investors will leave Vietnam for Japan just to get an extra 25 basis points of Yen interest rate.
Prediction for VN-Index for the remaining period of 2024?
Mr. Barry Weisblatt David: Investors need to have good risk management measures, especially in highly volatile market sessions like yesterday. No investor wants to sell in a panic or be forced to sell by a “margin call”.
I assess that yesterday's trading session created a good buying opportunity with the forecast of improved market outlook by the end of 2024.
In the base scenario, The Fed will cut interest rates once this year, which will cause the Dollar Index – DXY to decline below 102. Exports will increase by 10-12% this year.
Credit will grow by 14% and accordingly, listed companies' profits will increase by 18%. VN-Index will close at 1,350 with a trailing P/E of 14.2x.
The profits of listed companies in the first half of the year are currently in line with the baseline scenario. Profit growth in the second quarter of 2024 accelerated compared to the previous quarter and reached 15% over the same period. Therefore, I believe that the market profit growth is on track to reach the forecast figure.
On the P/E side, yesterday’s news from the US put upward pressure on our forecasts. Following yesterday’s news of weak US non-farm payrolls growth, the consensus is that the Fed will definitely cut rates at least once and possibly even cut by 50 basis points this year.
This information caused the US Dollar index DXY to fall 0.75% yesterday to 102.5. (VND increased 0.42% to 25,100).
The Fed’s two rate cuts could push the DXY index below 100. This would give the SBV more flexibility to inject liquidity into the market and make it easier to achieve the 14% credit growth. In fact, we have already seen the SBV cut the OMO rate from 4.5% to 4.25%.
Although the US slowdown may put some pressure on export forecasts (as the US is Vietnam’s largest export market), manufacturing activity remained strong in July. The PMI index reached 54.7 points thanks to a strong increase in new orders.
In summary, we believe that in the positive scenario, VN-Index closing in 2024 above 1,400 points, corresponding to a P/E ratio of 14.8x, is currently feasible.
Which industries have investment potential in the second half of the year and beyond, and why?
Mr. Barry Weisblatt David: Many sectors will bring good investment opportunities for the rest of 2024, including Banking and Steel are two sectors that investors should pay attention to.
For banks, although it must be admitted that asset quality has deteriorated recently, I believe that asset quality will recover in the coming months as the Vietnamese economy improves.
Furthermore, the new real estate law will make it easier for banks to recognize value from mortgaged assets.
More importantly, I expect strong credit growth, exceeding the SBV's target of 15%, to boost earnings.
And a weaker US dollar will reduce the pressure on the central bank to tighten policy to support the exchange rate, thereby reducing the risk of higher interest rates, which could affect credit growth.
Furthermore, Banks are currently trading at an attractive P/B of 1.7x, slightly below their five-year average.
For the steel industry, it can be seen that this industrial manufacturing sector has a strong profit growth of 437.3% over the same period in the second quarter of 2024. HPG grew by 129%, HSG increased by 18 times and NKG increased by 75%, although mainly from financial profits.
Exports of steel coils and galvanized steel increased sharply in the first 6 months of the year and I believe that the recovery of Vietnam's real estate market (after the new Land Law was implemented) will also help boost domestic consumption.
Source: CafeF
