At the trading session on July 28, marking the 21st anniversary of the first session, the stock market witnessed a cautious atmosphere, with low liquidity.

The total trading value in the morning session of all three bourses was just VND8 trillion. The liquidity decreased in the context of the VN Index fall of 11-12 percent, from 1,420 points to 1,270.

It is estimated that only VND15-17 trillion worth of securities are being traded each session instead of VND25-30 trillion as seen in the golden days in June and early July.

However, Le Anh Tuan from Dragon Capital said though the liquidity has decreased sharply from the peak, the market has made great progress. He said at an online workshop on the prospects of the stock market in H2 2021 held by Dau Tu newspaper that liquidity still accounts for 80 percent of the capitalization value of the entire market and this is a reasonable level. The VND30 trillion level is insubstantial and won’t exist for a long time.

In fact, the correction is anticipated by many securities companies. Prior to that, the P/E soared by 19 times and the fourth pandemic wave led to lower predicted growth rates of businesses.

Tuan cited two reasons behind the decrease in the market – valuation and cash flow. Foreign investors’ net withdrawal is strong. The margin lending increased dramatically at companies.

In terms of valuation, in 2021, with the profit growth rate of 35-40 percent, the P/E is 14-15x. In 2022, the figures are 22-25 percent and 11.5-12x. If compared with the market average P/E of 15-16x, the figures are still attractive.

According to Le Quang Minh from Mirae Asset, when the VN Index falls to the 1,200 point area, this will be the time for investors to buy.

Minh believes that if the pandemic is controlled by mid-August, the business results of listed enterprises won’t be affected.

Mirae Asset has revised the predicted profit growth rates of enterprises in H2 to reflect this, forecasting that the EPS growth rate this year would rise to 33.8 percent from 28 percent. If the EPS increases by 30 percent, P/E would decrease and will be the time to buy.

Mirae Asset believes that economic performance will still be good, saying that the world considers Vietnam’s economy as a bright spot in Southeast Asia, especially in its openness, just after Hong Kong (China). The economic picture is good, thus helping Vietnam maintain growth momentum in the long term. For investors, long-term prospects are an important factor for consideration.

Fields of interest

Nguyen Thi Phuong Lam from Rong Viet Securities commented that the ‘buy and make profit’ time, when every purchase would bring profit, is over. Investors need to become more selective in the time to come.

According to Lam, at the end of June 2021, the P/E was 19.2x, or 19 percent higher than the 3-year average P/E (16.2x), but it was still lower than 2018, when the P/E was 22.2x.

In the long term, cash flow is high thanks to people’s high investment demand. The number of new accounts keeps increasing with more than 100,000 accounts a month. After the latest correction campaign, many shares have become attractive, which is an opportunity for investors to buy.

Some securities companies focus on enterprises which have not been affected badly by Covid-19 and can exist well in the context of social distancing.

There are six groups of business fields recommended to securities investors, including IT, material, banking, securities, logistics and industrial zone real estate.

The IT sector has great potential because the demand for digital transformation is high, not only among enterprises, but individuals as well. The demand for both hardware and software is high.

The enterprises which provide materials may bear price shocks in the short term, but they will reach new peaks when everything returns to normal. Scarcity may occur because of the disruption of the supply chain. In this case, supply wil fall short to satisfy sharply increased demand and enterprises will benefit from this.

As for the banking sector, the peak time is over, but it is still better than other business fields because it has not been hit hard by the pandemic. Commercial banks had good business results in Q2.

Meanwhile, the increase in number of clients will give more opportunities to securities companies.

Logistics firms can benefit from the typical characteristics of Vietnam’s economy and charge increases.

Industrial zone developers with large land banks will have great advantages as more and more foreign and domestic investors will come to Vietnam. The enterprises which provide associated services, such as housing, transportation and cold storage, will also have great opportunities for development.

Dang Thanh Tam, president of Kinh Bac Corporation, said the pandemic developments may cause big upheavals to businesses but he can see positive signs. 

Luong Bang

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