Investment Strategy Report - JuneÂÂÂÂÂÂ 2018: Rebound in June?
When margin calls were triggered May 29 and the market was down by over 3%, we estimated that margin lending had been brought down to around VND 38 trillion. The figure is relatively lower than that in Q1. We think this is a safer level, and it should help prevent the market from another shocking decline in the short term. However, keep in mind that total margin lending has been on the rise since 2014.
Valuations appear more reasonable. The correction has brought the P/E of the Vietnam market to 18.5x, which translates to an earning yield of 5.4%, quite in line with other markets in the region. Meanwhile, earnings growth is still there. All companies have announced their business results. Corporates listed on the HSX managed to grow their NPAT by 21% in Q1. However, banking stocks account for a big part of that growth. In fact, seven banks are among the 10 contributors for the earnings growth of the VN-Index year-to-date. It remains to be seen if this growth is sustainable.
We see the downside move in the market during the last two months as a ‘time correction’. The market usually needs some time to recover after that kind of event, so there is no need for investors to rush in to buy massively. However, considering the fact that corporate earnings are still growing while the market is where it was at the beginning of the year, it seems that it is time to start looking for opportunities and gradually accumulate stocks.
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