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Investment Strategy February 2024: EXPECTING A SWAYING WAVE IN THE MONTH OF THE TET HOLIDAY

The VN Index has had a promising start to 2024, showing a 3% increase in January. This surge comes as investment flows have begun to concentrate in the banking sector, greatly bolstered by renewed interest from foreign investors and a robust 22% profit growth in Q4-2023.

The fourth quarter results from the banking sector have been the primary driving force behind a 29% growth in the earnings of listed companies on the HSX, in addition to the profit recovery seen in Basic Material and Consumer services industries. After reflecting the Q4-2023 earnings dynamics, the P/E valuation of the VN Index has adjusted to approximately 13.6x, which is approximately 10% lower than the peak of 15x seen in September 2023.

Another important data point regarding the characteristics of the stock market is the disclosed information on margin lending balances and investor deposits at brokerage firms. In general, we evaluate the scale of margin lending at the end of 2023 as relatively healthy when considering the margin lending to equity ratio and a slight growth rate compared to the previous quarter (excluding some exceptional cases namely TCBS, VPBS, MBS, VCI). Importantly, the trend of increasing investments in the stock market continues to be reinforced, with investor deposits at brokerage firms increasing by an additional VND 5 trillion compared to the previous quarter (+6% QoQ), amidst savings interest rates remaining at low levels, and investment confidence in other major investment channels not expected to recover soon.

The market is to enter a quiet period following the Q4-2023 earnings season, and with the Lunar New Year holiday effect, we don’t expect any significant market movements in February. However, the flow of information related to the AGM with new business plans for 2024 is likely to energize the market in the latter half of February. Conversely, the downside risk to the market appears limited, on (1) relatively cheap valuations of large-cap sectors, (2) the temporary halt of foreign net selling trends, and (3) investor deposits waiting to re-enter the market.

In February, we expect the trading range for the VN Index to be between 1,160 and 1,200.

Following the release of the Q4 2023 earnings, the trailing 12-month net income ofVN Index change + 7% compared to Q3 2023, which suggests a turnaround in corporate performance starting from the middle of the year. The anticipated benefits from easing monetary policies and ramping up public investment disbursements in 2023 are expected to become more evident in 2024. With the market's Price-to-Earnings (PE) ratio currently estimated at 13.6, below the year-end target of 14, the market is poised for reduced foreign investment pressure. This scenario presents a prime opportunity for investors to accumulate shares of leading companies poised for rapid recovery. For February, Investors can flexibly buy and sell stocks we favor for February, including VNM, QNS, and LHG