Market Strategy September 2022 – Improving fundamentals

Since the bottom in mid-July, VN-INDEX has extended its uptrend in August and closed at 1,282.6 points (+6.3 % mtd, -14.4% ytd). We believe VN-INDEX’s strong performance is driven by the following catalysts: (1) inflation tended to cool down in both the US and Vietnam, (2) market sentiment improved with the expectation that the FED will slow down the rate hike in 4Q22, (3) growth momentum is enhanced by the participation of speculative cash flows.

Average trading value of three bourses surged 35.7% mom (-36.1% yoy) to VND18,560bn (HOSE: VND15,795bn/trading day, +35.6% mom; HNX: VND1,826bn/trading day, +41.9% mom; UPCOM: VND939bn/trading day, +26.5% mom). Notably, foreign investors change their position from net seller to net buyers with inflow of VND1,661bn in August

Market fundamentals are improving. We see that external situation continue to improve with inflation in the US cooling down and market expectations on Fed rate hikes having passed its peak. Domestically, Vietnam’s could witness very strong GDP growth in 3Q22F. In addition, the State Bank of Vietnam (SBV) is getting closer and closer to the time of raising the cap of credit growth for commercial banks. Moreover, the Vietnam Stock Exchange will official launch T+2 trading on August 29, 2022. These external and internal factors support Vietnam’s stock market outlook in September 2022.

Any market correction might be an opportunity to accumulate. We concern that the Vietnam’s stock market may undergo a shortterm correction in Sep when the VN-INDEX approaches the resistance level of 1,300-1,330 points. However, seeing that market fundamentals are improving, we believe the correction provides an opportunity for investors to build their portfolios for 4Q22 and beyond into 2023. We expect 1,240-1,260 points to be strong support for VN-INDEX in September.

We have strong interest in Travel & Leisure, Industrial, Automobiles, Retail, Food & Beverage and Banking sectors: In 3Q21, business results of some sectors such as Travel & Leisure, Industrial, Automobiles, Retail and Food & Beverage plummeted due to social distancing caused by the fourth wave of COVID-19 pandemic. We expect these sectors to perform very strongly in 3Q22 as the economy has entered “a new normal” once the pandemic is under control. In addition, we expect the SBV to raise the credit growth ceiling for some commercial banks from the end of 3Q22 and this will strongly support the stock market as well as banking stocks.
Our high-conviction stocks for August include: BCG, DXG, KBC, MBB, PNJ, SZC and VTP.

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