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Investment Strategy Report 2023: TOUGH TIMES NEVER LAST

“Growth engines will run at a slower rate, holes in the economy will be patched, weaknesses in the system will take time to improve”

• The economy in general and the stock market in particular are still expected to face headwinds, at least in H1 2023: the Fed's interest rate hike roadmap, the global economy's recession, and the resistance capability of the economy when a large amount of corporate bond maturity come due in Q2 2023. After high growth in 2022 from the 2021 low base, we expect 2023 GDP growth at 5.6% in the base case scenario, lower than the Government's target.
• We suppose that the stock market has mostly reflected the most negative events in 2022: China’s lockdown, the escalation of Russia-Ukraine tensions, the scale of Fed's interest rate hike, banking liquidity crisis due to domestic events. However, the difficulties in 2023 are also challenges that need to be carefully observed. More importantly, because of the synergistic impact of events taking place in 2022, we estimate that 2023 earning of companies under our coverage to decelerate compared to the growth rate of 2022.
• In our base case scenario, we expect that difficulties will be gradually relived after China fully reopens its economy, the Fed's interest rate hike route comes to an end, which will give the SBV more room to operate its monetary policies. Although there are many bottlenecks that need to be removed so that public disbursement meets the guidelines, the higher ratio of disbursement will have a spillover effect to various economic sectors.
• We also expect that fiscal policy will continue to support monetary policy, in case (1) the 2% interest rate support package (roughly VND 40 Tn or USD 1.7 Bn), will be actively disbursed in 2023, (2) keeping the policy of reducing the environmental protection tax for petroleum products, and (3) keeping the policy of reducing the VAT from 10 % to 8% in 2023 amid difficult economic conditions.
• VNIndex is forecasted to fluctuate between 930 -1270 points. The average order-matching value can be maintained at VND 13 -16 trillion/session on average.
• We also see that (1) the market’s PER valuation only decreased to 9.x – 11.x during a macro challenging period and (2) buying and holding at the market PER of 9.x – 11.x will offer high investment performance which will outperform bank deposit rates. Therefore, besides allocating your saving to deposit accounts, long-term investors could consider to accumulate strong fundamental stocks which are major beneficiaries in the long-term positive trend of Vietnam's macro.
• Market risks: Highlights are (1) the global economy’s potential recession, (2) the escalation of geopolitical tensions, (3) the lack of uniformity and transparency of macro policies. Those problems have been none for a while. Nonetheless, in case these factors turn out to be worse than expectations, the stock market's downward trend could go further. By contrast, an unexpected easing in monetary policies of central banks to support the economy will boost the stock market, especially in 2H2023.