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Investment Strategy April 2024: ON THE EDGE BETWEEN PIONEERING AND WAITING

The key messages from the meetings of major Central Banks around the world in March all hint at rate cuts occurring this year. However, questions about the timing of these cuts, which entity will move first, and at what speed are currently being meticulously weighed by investors. Under the base scenario, the Fed, ECB, and BoE are expected to make their first-rate cuts in June. Nonetheless, inflation data and economic growth expectations in the Eurozone suggest that the BoE and ECB might cut rates earlier. This, combined with the slow pace of interest rate increases and the continuation of Japan's central bank's government bond purchasing program, implies that foreign capital flows will continue to seek refuge in the US dollar and other US dollar-denominated assets at least until the Fed implements its first rate cut. This scenario makes the path to a new expansion cycle rougher due to unexpected FX rate movements. The VNDUSD could surge if the aforementioned misalignment occurs, potentially leading to a stronger net outflow of foreign capital over a certain period.

Furthermore, the stock market in April will be lively again with the first quarter 2024 earnings report season, alongside information on business strategies during the annual general meetings of listed companies. Regarding the profits of companies on the HSX for Q1 2024, we estimate a growth rate of approximately 7% YoY.

Regarding market liquidity, we anticipate that the surge in March will continue to be maintained in the coming period, primarily led by domestic investors as the real interest rate is nearing the 0% threshold, thanks to ongoing rate cuts with durations of 12 months or more since the beginning of the year.

With a current P/E ratio of 14.9, the valuation is relatively close to the target P/E for the VN Index that we outlined in our 2024 strategy report. Assuming the Q1 2024 business results align with our projections, the 12-month net income for the entire market could see a 2% QoQ increase, implying that the market's P/E ratio would adjust downward, and the market index could increase to return to the target P/E level, with a corresponding increase of 2% at the closing score on March 29, 2024.

However, the current exchange rate remains under significant pressure, nearly reaching the intervention threshold of the State Bank of Vietnam at 25,200 VND. We observe that market sentiment often fluctuates significantly during major currency shifts. Considering these push and pull factors, we expect the VN Index to fluctuate within a range of 1,220-1,320 during April.

Our April trading ideas are companies with positive YoY earnings growth in Q1 2024 including HAX, SCS, and QNS