Investment Strategy Report - NovemberÂÂÂÂÂ 2018: Short-term Rebound?
On October 30th the VN-Index closed at 889, trading at a current P/E of 15.7x. The market has rarely declined below a P/E 15.6x in the last two years. Therefore, it can be possible that the VN-Index is at a relatively strong support level. In fact, the day after, the VN-Index increased 26 points with flows into the market 25% higher than the average of the ten previous trading days.
In our last month’s strategy report, we mentioned that there would be a chance for disbursements in November. Our view seems to point to the right direction so far. The market will typically recover after experiencing a sharp fall, although it is difficult to predict the exact timing. It is important to keep in mind that it will not be a V-shape recovery. We also expect that the Index will rise in the final weeks of 2018 as it is the key time for investors to do portfolio rebalancing.
Excluding financials and banking sectors, revenue growth and NPAT growth of the market in Q3 was only 12% YoY and 9% YoY, respectively. A significant portion of earnings growth is from the financial sector, GAS and MSN. We worry that the growth of these big pillars might not be that great next year. Therefore, the stock market is expected to face a tougher time in 2019. However, emerging markets will continue to attract investors. Latin American emerging markets like Mexico and Brazil have done well this year, currently outperforming Asia emerging markets. We expect the opposite next year.
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