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Investment Strategy March 2024: HAND ON THE GEAR TO PREPARE FOR A NEW SHIFT

The VN Index has had a promising start to 2024, showing a 3% increase in January. At present, the market has almost fully reflected the Q4 2023 earnings results. Meanwhile, significant attention towards the first quarter's business earnings may start from the end of the month. Thus, we do not believe that expectation on Q1 business results is a strong enough factor to impact the market's trading sentiment. On the macroeconomic front, the most recent data indicates a recovery trend in production and investment in the first two months of the year. Hence, this could be a foundational factor and may support the growth expectations for the business results of listed companies.

In March, critical events and factors that might impact market sentiment include:

• Message on monetary policy guidances during the March meetings of major central banks will be the major focus. Our base scenario is that central banks, including those in the US and the Western countries, will only reverse their monetary policies from the second half of 2024, while the Bank of Japan might end its ultra-loosing monetary policy earlier.
• In the short term, the VNIndex's P/E ratio surpassing 14 times may exert some pressure on the market as foreign investors often tend to net sell at valuation levels above this threshold. However, we expect the net trading position of foreign investors to turn positive again as capital from USD-denominated assets begins to reallocate following the reversal of monetary policies in Western countries as well as the prospects for Vietnam's market upgrade become foreseeable after bottlenecks are resolved.
• The successful upgrading from market reclassification by the FTSE is likely to be postponed to September instead of the upcoming review in March due to unmet criteria related to "Settlement and Clearing." However, positive results from the trial testing of the KRX system (a technical bottleneck for implementing the settlement and clearing mechanism) will bolster market confidence in a scenario for official operation in May.

The VN Index has experienced four consecutive months of gains, accumulating a return of 21.7% since the start of the increase, ranking as the seventh highest among the nine strong upward trends since 2009. The market cannot avoid the possibility of profit-taking by a part of market participants, but positive macroeconomic data continues to support earnings expectations for the market. With push and pull factors currently well-balanced, we expect the VN Index to fluctuate within a narrow range of 1,210-1,290 during March.

In that case, we recommend investors to realize profits as the stocks achieve reasonable yields for short- to medium-term investment horizons position. Portfolio position should avoid excessive leveraging to circumvent unexpected downturns. With anticipating a steady rotaion between sectors rather than a withdrawal from the market, our March investment thesis centers on stocks and sectors with promising prospects for 2024. However, the recent increases have been disproportionate. They are  REE and MSN