Overall, the VN-Index is being affected by objective factors and the changing external environment.
The panoramic view
The season of Q3 business result reports has ended. A recent report by the financial data company FiinPro gives some noticeable sketches. According to statistics from the FiinPro Platform, by November 1, 2019, 832 enterprises on three stock exchanges which make up 95% of the market capitalization had published their Q3 financial reports. Of those enterprises, 85%, or 706 enterprises, reported profits; and 15.1%, or 126 enterprises, achieved the profit target for 2019.
In absolute figures, the financial reports of 832 enterprises recorded total gross profit of VND73.6 trillion, rising 22.8% year-on-year. Enterprises in the banking sector earned VND22.8 trillion, accounting for 31% of the total profit. Exclusive of banking enterprises, the overall market growth is 14.9% versus Q3 2018.
The average return on equity (ROE) and return on assets (ROA) of enterprises in Q3 are 14% and 2.7%, respectively, down against the ROE of 14.9% and the ROA of 4.26% in Q3 last year.
In terms of industry, the telecoms, insurance and banking sectors scored the highest gross profit growth against Q3 last year, at 355.4%, 49.3% and 45%, respectively. Meanwhile, the communications, chemical and oil and gas sectors suffered the most drastic profit fall in Q3, at 97.3%, 35% and 28.5%, respectively.
More precisely, the banking sector remained the market leader. The sector earned VND22.8 trillion in Q3, up 45% from Q3 last year, with the significant contribution from Vietcombank’s (VCB) strong growth. In Q3, Vietcombank raked in more than VND5 trillion, up 72% from the same period last year. Techcombank (TCB) and VietinBank (CTG) followed with VND2.6 trillion and VND2.5 trillion, respectively. Their good performances have lifted the banking sector’s profit growth from the lowest level of 11.8% in Q4 2018 to nearly 45% in Q3 this year.
The real estate sector grossed VND11 trillion in profit in Q3, up 19.7% from over VND9 trillion in Q3 2018 and accounting for 15% of the total profit. Vinhomes (VHM) generated a profit of VND5.5 trillion, accounting for nearly half of the real estate sector’s profit. Then came Vincom Retail (VRE) and Vingroup (VIC) with VND717 billion and VND498 billion, respectively. Exclusive of VHM, the real estate sector’s year-on-year profit growth was only 3%.
The telecoms sector posted a 3.5 fold year-on-year profit growth, contributed mainly by FPT Telecom (FOX) with VND340 billion, accounting for 81.3% of the sector’s gross profit. Viettel (VGI) gained nearly VND59 billion after suffering a net loss in Q3 2018. However, the telecoms sector made up only 0.6% of the total profit in the market.
Insurance is the second in profit growth after the telecoms sector, at 49.3%, contributing over 1%, or VND774 billion, to the total profit in the market. The major contributors to the strong profit growth are Bao Viet Insurance (BVH) with VND360 billion, up 3.6 fold year-on-year; and PetroVietnam Insurance (PVI) with VND156.1 billion, down 28.7% year-on-year.
Meanwhile, the communications sector suffered the most drastic profit fall, from over VND300 billion in Q3 2018 to only VND8 billion in Q3 this year, down 97.3% year-on-year. The reason for the fall is the net loss of VND120 billion of Yeah 1 Group (YEG), the second consecutive quarterly loss after the Yeah1! incident which forced Youtube to announce an end to the content hosting agreement with YEG in end-March this year.
The chemical sector recorded a profit of VND1.7 trillion, contributed mainly by Vietnam Rubber Group (VRG) with VND980.4 billion and Phuoc Hoa Rubber (PHR) with VND444.8 billion. Exclusive of VRG, the sector posted negative growth of -35% against Q3 last year.
Since early November, the VN-Index has experienced strong swings with widely fluctuating trading sessions. After a sudden breakout far higher than the 1,000-point level in the Nov. 1 and Nov. 4 sessions, the VN-Index suffered a drastic fall, plunging to near 970 points, especially during the sessions from Nov. 18 to 21.
In the first half of November, the VN-Index was partly supported by quite positive Q3 business results of enterprises, especially banks. Investors had fresh expectation from changes in the macro picture of the world. The first is the signal for a “pause” in interest rate cut after the U.S. Federal Reserve (Fed) October meeting, which showed that the U.S. economic prospect is not so gloomy and the possibility of a deep recession in the future is low. The second is the de-escalation in the Sino-U.S. trade war when the two countries are gearing towards the “first phase agreement” over the short term, with the possibility of the U.S. withdrawal of some tariffs on Chinese goods under consideration.
These two fundamental changes in the international macro picture have significantly altered the sentiment of investors worldwide, at least over the short term. Risk aversion is reduced, and funds tend to move from safe assets like U.S. government bonds, gold and U.S. dollars to riskier assets, such as U.S. stocks and assets in emerging and frontier markets. The yield of U.S. government bonds over the past three weeks has increased by 20 basis points, meaning a fall in the bond prices, while the Dow Jones and S&P 500 indexes have continuously made new record highs.
Nevertheless, the international environment has experienced some changes recently, especially regarding the Sino-U.S. trade war. The approval of the Hong Kong Bill by both the U.S. Senate and House of Representatives has dimmed the prospect of trade talks between the U.S. and China. This is one of the reasons for the return of the bear sentiment of local investors, pushing down the VN-Index. Overall, the index is being affected by objective factors and the changing external environment, which put it in an unpredictable trajectory and negative trend again. SGT