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Investment Strategy July 2021: CAPTURING POSITIVE ROTATION OF MONEY FLOW

The continuous money flows from individual investors are main driving forces and still have a lot of headroom 

Currently, the whole market has about 3.2 million individual securities accounts of domestic investors  (c. ~3.4% of total population). This rate is much lower than neighboring markets such as Thailand (25-30% of total population), Singapore (32%), Malaysia (18%). Moreover, the total net money flows from retail investors in last one years during pandemic time was VND 43,397 Bn (or USD 1.9 Bn), which was still low (occupy less than 1% of total deposited money as of April 2021). Consequently, there is still a lot of headroom for the growth of new investors in upcoming times. In the context that interest rates cannot rise immediately given the hit of Covid-19 fourth wave , we expect the cash flow from F0 investors would stay in the market when this investment channel generates fairly good return (VN-Index increases 28% YTD) in 2021 so far.

Market sentiment might be boosted in short-term thanks to new trading system of FPT (go live from July 5th).

Accordingly, FPT will put the new trading system into operation on HOSE. The new trading system is expected to handle up to 5 million orders per day so it would likely boost investors confidence than before (the capacity is five time larger than the current system).

The severe impact of Covid-19 fourth wave raises our concern

As of Jun 30th, 2021, VN Index is currently traded at trailing P/E of 19.2x which is 19% higher to average 3-year trailing P/E of 16.2x but still lower than 2018 period with PE of 22.2x (Figure 8). Therefore, the current market situation is not considered as cheap any more. Moreover, the seriousness of Covid-19 fourth wave as mentioned in our last month Strategy report was confirmed. Therefore, we maintain our view for the EPS growth range from 10% to 20% in 2021. For PE re-rating, we increase the target PE to 17 (better expectation on the market by solving trading congestion issue) and suggest a range for the VN Index from 1,370 to 1,470.

For this month, based on our Coverage list on VN30 stocks (70% market cap of the whole market as of June 31st 2021), we expect banking stock (TCB) and few large cap stocks including GAS (benefit from oil price rally), MSN, VHM to support the VN Index. The mid cap stocks on Securities brokerage, Consumer, Utility services will also contribute (at smaller impact) to overall market backed by solid Q2 2021 business performance outlook. We stay cautious with stocks in Travel and Leisure, Retail stocks group given the intense impact of Covid-19. In overall, the weight of sectors having positive outcomes in Q2 2021 on HOSE is larger than the negative ones so we are fairly positive on market in July but in cautious manner.

Historically, the market reacted positively in July (corporate earnings season) but the Covid-19 broke that gaining streaks in 2020, supporting to our cautious view this time.