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Investment Strategy Report - August 2021: PICKING SAFE HAVEN IN A TIME OF UNCERTAINTY

The net purchase action of foreign investors is expected to continue from its momentum in July when the market valuation and expected 2022F EPS growth are still attractive.   

In July 2021, foreign investors returned as net buyer for the first time as net buyer since Jan 2020 with total net trading value of VND 3,602 Bn (or USD 155 Mn.  In which, Fubon ETF was the main player when recorded net add valued of VND 3,953 Bn (or USD 171 Mn). Per Fubon representatives, they appreciate on Vietnam ability to control Covid-19 and effort of Vietnam in develop stock market (use new trading system to solve the order congestion problem). 

From our view, the foreign investors action is understandable given the potential turnaround of Vietnam market after containing Covid-19 with PE forward 2022F of 12.96 and EPS 2022F growth of 16.16% versus peers per Bloomberg estimation. Therefore, we expect on more positive action of foreign investors in upcoming times.

Better market sentiment thanks to the accelerated vaccination in HCMC.

Per our Macro part estimation, we believe that HCMC authorities can achieve its target to have at least one shot to 70% of 9m citizens in Aug 2021. Therefore, we expect market to react positively given expectation on economic recovery in 2022 thanks to the accelerated vaccination progress in HCMC.

Currently, the tightened lockdown has saw preliminary effectiveness after three months when the number of Covid-19 cases was lower since the all-time-high on July 27th with 10,774 cases. Therefore, we expect the government would likely to control the Covid-19 in Q4 2021 on our base case assumption.

Regarding to the market outlook, market would be more optimistic if the daily cases peak as we considerate the movement of some markets including Taiwan, India, and Canada. Specifically, we saw the uptrend movement of some regional stock markets with 5% to 8 % gain YTD when the number of daily cases peaked.

…However, on the worst case, we still concern on the further complicated situation of Covid-19.

The turnaround expectation would be challenging when the current lockdown is prolonged, and the economy activities would not resume as expected on Q4 2021. Consequently, it would impact the market sentiment negatively.

For this month, based on our Coverage list on VN30 stocks (76% market cap of the whole market as of July 30st 2021), we expect consumer stocks including MSN, MWG to support the VN Index given the strong Q3 business performance outlook from the high demand of grocery items. FPT is also having chance given its resilient performance and further growth outlook based on the accelerated pace of digital adoption in Covid-19 situation. For real estate stocks, the story of private placement of mid-cap stocks (DIG, NLG), selling treasury stocks (VHM) may lead the market at end of Q3 and Q4 2021. For banking stocks, we think the strong stock rally like 6M 2021 would be tough given high base in same period last year and expected slower growth in Q3 2021. We stay neutral on Oil and Gas stocks as the oil price rally in 1H 2021 is expected to slow down in 2H 2021. In overall, we expect the VN-Index to move in from the range of 1,260 – 1,370.