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Investment Strategy Report – February 2022: MONEY ROTATION TO FAVOR FUNDAMENTALLY STRONG STOCKS

“Divergence come across in Q4 2021 business results of listed companies, we expect money flows to be pickier with orientation on stocks having 2022F solid growth prospect.

After the earning seasons, market remained conservative when liquidity was below VND 30,000 Bn/trading session. From our view, investment cash flow will rotate and diverge between industries/stocks.

For VN30 group, the underperformance of banking stocks reflected its slower YoY growth in 2H2021 (c.12%) versus 1H 2021 with 55% YoY growth. In upcoming times, we expect the improvement of money flows in banking stocks as the state-owned banks’ performance to be supported by stories such as dividends and private placement to foreign investors in 1Q22, while the private banks are timed to have positive news and pose outstanding growth from 2Q-3Q/22. Also, we expect recovery of Steel stocks performance as HPG in upcoming times given its sharp decrease from the steel price correction in Q4 2021 while 2022 outlook is fairly positive from the recovery of domestic sales of construction materials. In the meantime, we recognize VN30 as a navigator to carry the market in order to avoid significant drop as it happened in January 2022.

Other companies operating in Retail, Logistics and Export are also expected to attract money flows backed by stores reopening, accelerated global consumer demand and normalization of global supply chains in 2022.

However, fear of inflation may cause the stock market to be volatile. 

Although we view inflation to likely remain under control (below 4%), we think it still poses a risk. In the near future, we are concerned about the risk of imported inflation as Vietnam is still dependent on the import (the proportion of imported materials cost over total raw materials cost of the whole economy is 37%, according to the Ministry of Planning and Investment). In which, gasoline costs (accounting of 3.52% production cost) resulting from the Brent oil price rally (c. over 90 USD/barrel – also the highest in the past 8 years, +80% versus beginning of 2021) would drive up input materials cost, causing elevated inflation. Therefore, the movement of oil price is a considerable factor for investors to observe in upcoming times.

VN Index to move in the 1,430 to 1,580 level.

We expect “Oil and Gas” stocks including BSR, PLX, GAS to partly support the VN Index. For banking stocks, private banks also have opportunities as we view the profit growth prospect to become clearer in 2H 2022 given businesses resuming operations under new normal conditions along with the Government's covid support packages. Other sectors including Steel, Retail, Logistics and Export are also noticeable. In general, we expect the VN-Index to fluctuate in the range of 1,430 - 1,580.”