Based on the profit growth prospect of 14%-18% compared to the same period and the trading P/E scenario in the range of 13.5 - 15 times, the reasonable point range of VN-Index is 1,236-1,420, after reflecting the growth of business results for the whole year of 2024.
Vn-Index can reach 1,420 points
The current E/P spread of the stock market over government bond yields is 4.53%, which is far above the average of the past 5 years and is in the low probability range.
Over the long term, and under normal conditions, this spread will fluctuate around the average to reflect the risk premium between asset classes.
Return spreads that exceed the range (1 standard deviation) typically come from the market overreacting to headwinds and reverting to the mean once the short-term headwinds pass.
In the baseline scenario, the State Bank can maintain the current operating interest rate level until the end of 2024 when there is still room for operating tools to intervene in the face of exchange rate pressure and the prospect of the FED cutting interest rates starting in September is almost certain.
In a more difficult scenario, if pressure on the exchange rate increases in late Q3 and early Q4 and system liquidity conditions become tight, the State Bank will raise the operating interest rate by another 25-50 basis points. In such scenarios, the market is expected to trade in the yield range of 6,67%-7,41%, corresponding to a P/E of 13.5x-15x.
Giving scenarios for the Vn-Index, according to VDSC, a yield difference of over 4.0% usually only occurs when there is an unexpected headwind and usually passes quickly, helping the market to rebalance and recover quickly.
Therefore, with EPS growth in the last 4 quarters (up to Q2/2024) of ~10% compared to the cumulative EPS of the 4 quarters up to Q4/2023, the reasonable P/E range in Q3/2024 of the index can be expected to be 14x - 15x (corresponding to the difference in earnings of 3.5% - 4.0%), corresponding to the equilibrium trading point of VN-Index of 1,237 - 1,325.
For the long term, based on the profit growth prospect of 14%-18% compared to the same period and the trading P/E scenario in the range of 13.5 - 15 times, the reasonable point range of VN-Index is 1,236-1,420, after reflecting the growth in business results for the whole year of 2024 compared to 2023.
Banking group leads the year end?
In terms of investment strategy, the stock market in the first sessions of August reacted negatively following the correction trend of global stock markets. The speed of the index adjustment was stronger than the macroeconomic picture in the first half of 2024.
Therefore, it is expected that with a quick and strong adjustment, mainly following the trend of global stocks instead of reflecting a less optimistic picture of corporate business operations, the market will soon regain balance.
However, investors need to prepare for headwinds such as whether the FED will be slow in implementing policies leading to recession?
In the last week of July, a series of US macro data, including unemployment rate, industrial and service PMI, were released worse than expected.
With this data, investors are starting to consider the scenario that the FED may be slow in implementing policy, if it only cuts interest rates twice (25bps each time, in 2024), leading to a faster economic recession.
The higher unemployment rate in July (4.3%) was largely due to a larger labor supply, largely due to increased immigration, rather than a reduction in labor demand. Initial jobless claims, an indicator of labor demand, remained at historically low levels, suggesting that labor demand remains strong.
Source: VnEconomy
