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Investment Strategy Report - November­­­­­­ 2017: Buying Stock at the Right Time

In October, some large-cap stocks, especially ROS, continued to dominate the VNIndex. In particular, ROS has increased about 87% MoM, contributing approximately 40 points to the increase of the index. Excluding the impact of ROS, the VNIndex at the end of October would have closed at 797 points (+2% MoM).

In addition to ROS, 5 out of 10 other stocks (largest cap stocks in HSX) also increased aggressively in October, including SAB, VIC, VCB, BID, and MSN. However, each stock had their own stories, such as positive profit growth (VCB), divestment by the government (SAB, VNM), listing of subsidiaries (VIC), expectation on issuing shares to strategic partners (BID), buying back shares (MSN). Thanks to the efforts to maintain the index at high level attributable to the performance of large-cap stocks, VNIndex’s PE at the end of October was around 16.5 times.

Financial results in Q3 2017 have affected stock prices insignificantly. In our view, although profit growth was better than the same period in 2016, the results have not exceeded our expectations, or even lower than estimations of investors. Regarding the portfolio of 60 stocks, which RongViet Research is watching, 47% of the portfolio have financial results considered to be reasonable while 30% have financial results lower than expectations of analysts. While stock prices have risen sharply since the beginning of the year, the unsurprising Q3 2017 financial results may be the reason for the unfavorable movements of these stocks.

As we discussed in October Strategy Report, the VNIndex had a low possibility to increase. After a strong rally took place over a month, the catalysts for some of the “pillars” for VNIndex could weaken in November. However, there are no clear reasons for the increase in price of some stocks. Hence, the irrational movements may continue to distort the index in November. Except for positive news on macro, there is no support news related to the operation of the business during this period. Therefore, regardless of the increase or decrease of VNIndex, there will not be many bright colors for the market in November.

Ignoring the increase of the index, some strong corrections in late October have pushed the valuation of many stocks with good fundamentals down to an attractive level. In addition, according to the statistics of market research department of RongViet Research, the fourth quarter should be an adjustment period; most of the profits from securities investment at Vietnam Market are generated in the first 5 months of the year. This is quite reasonable when the fourth quarter, especially November, is a period when the market does not have much information. Meanwhile, the first quarter with the “January effect” and annual financial results, as well as shareholder meetings, are considered to be supporting factors for the market. Thus, accumulating stocks in the fourth quarter, especially in November, leads to great possibility for investors to have high profit at the beginning of the next year.