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Investment Strategy Report – June 2020: SAVING PURCHASING POWER FOR BETTER OPPORTUNITIESY

The stock market in May has increased stronger than our expectations, thanks to the strong participation of domestic investors as well as the lower selling pressure of foreign investors. The proportion of trading value of local retail investors and foreign institutional investors reached 77% and 15% in May, respectively, compared to the average of 72% and 17%. The active participation of domestic investors, besides the positive progress of disease control, we believe that there is a great support from the further relaxation of monetary policy by SBV during low demand for capital  because of stagnant production due to the fact that the major trading partners of Vietnam were still closed.

The demand from foreign investors will mainly come from new ETFs as these partly solve the current problem of foreign ownership limit. Particularly, FUEVFVND showed its attraction after listing when its assets  increased seven times now compared to pre-IPO to VND 725 billion. Currently, total assets of FUEVFVND are only equal to 12% of the total assets of E1VFVN30. In addition, FUESSVFL began to attract investors after two months of listing when its total assets doubled in May to VND 451 billion. Obviously, having listed in the context of a strong market decline has prevented FUESSVFL from attracting as many investors as expected. For other foreign investors, we expect them to continue to trade lightly as in May instead of strong net selling like in previous months.

After outperforming regional and global stock markets, the VNIndex nearly caught up with global markets in May. Most of the key stocks rebounded better than the rest of the market. Therefore, we believe that the contribution of large caps to the index in June will decrease significantly compared to the previous two months. Meanwhile, domestic individual investors have started to buy selectively. Our data also shows that the number of new accounts opened in May has begun to slow down.

Fundamentally, the market is more expensive compared to the beginning of the year while VNIndex only decreased by 8.5% YTD. Estimated earnings per share in 2020 was adjusted to -4% now from +12% at the beginning of the year.

In addition, while the market has recovered 30% since the bottom in March and valuations are no longer that attractive, there are still many risks that investors need to pay attention to. We realize that these risks are mainly externalities, which do not / have no direct impact on Vietnam's economic activities, but may affect market sentiment.

In summary, we believe that factors that have driven the market in the past month or so will remain in June but we see a limited room for market to grow. We forecast a range  for the VNIndex of 830 - 905.