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Investment Strategy Report – November 2021: MOVE UP BUT BEWARE OF VOLATILITY

“The clear reactivation of economic activities in Q4 2021 and supporting packages will be likely to boost market sentiment.

Looking forward, we foresee the reactivation of economic activities in fourth quarter based on the aforementioned rationale. The support from Government is pivotal to kick off the economy and stock market as well. The Ministry of Planning and Investment has just submitted to the Government a program for economic recovery and development after the Covid-19 epidemic with a scale of about VND 800,000 billion (nearly USD 35 billion), 3.5 times higher than the Government's support package in 2021. From our view, this package would strongly stimulate and accelerate the recovery speed of Vietnam macro. The expected GDP growth in 2021-2025 period is forecasted to be higher from this support package by reaching 6.5% - 7.0% compared to 6.4% – 6.8% as previously estimated. Therefore, we believe market sentiment would be fairly positive after these incentives. Regarding to the target of the package, infrastructure investment is one of key pillars, so we expect companies working in construction/materials/real estate will likely benefit from the incentives in the next two years.

Looking on other market as Indonesia and Thailand, results in short-term is predictable. In ten days after the news over ratification of support package valued at USD 4.5 Bn, SET index (Thailand) went up 1%. For Indonesia case, market even performed better by increasing 5% after the support package news.

… However, short-term volatility would be possible 

The market's rapid breakout since late October has driven valuation in many sectors to less attractive level when accounting for decelerated Q3-2021 earnings growth. In fact, the rerating in many industries has happened very quickly in a short period of time. While a few industries were catalyzed by the surge in business profits, most of the rest benefited from the abundance of capital flows in the market. As a result, we believe investors will now need to pick stocks more conservatively combined with a longer investment horizon to minimize the market volatility risk in the short-term.

Based on our Coverage List, we predict the 2021 EPS growth to reach 46% YoY and use an average three-year PE of 16.3x to come up with the 1,500 points level. For the banking group, we still believe some banks will have resilient business results, such as TCB, and better than expected as (CTG) and will partly support the market. For Vin stocks, VHM is having chance at this time as we are quite comfortable with their bulk sale and solid performance in Q3, along with the 2022 outlook. In short, we predict VN Index to move on 1400 – 1500 range.”