FREE

Investment Strategy Report - September 2021: PREPARING FOR POST-LOCKDOWN PERIOD

Optimistic news flow on vaccination progress and less stringent lockdown directives would likely knock on the market’s mood.

Previously, strict lockdown under Directive 16+ given the continued problem in controlling the Covid-19 fourth wave, especially in HCMC, led to a volatile movement of the VN Index. In the first three weeks of August, market sentiment was optimistic until the government declared a strict stay-at-home on 20th August for HCMC. The market reacted negatively and went down 6% in the next two days.

Up to now, HCMC has been allocated 9,2 mn doses of Covid-19 vaccines, ensuring 100% vaccination coverage for ones having one dose in the upcoming weeks. For other “red” regions, Binh Duong province and Long An province have been allocated 2,369,650 doses and 1,799,090 doses, respectively (ensuring 100% of the population in each region to have at least one dose). Therefore, we expect that a continued ramp-up in vaccination could help the city to gradually reopen in 4Q21. From there, the relaxation of the current Directive would be more feasible and impact positively the VN Index.

However, continuous stringent lockdown without relaxation is our main concerns, causing the weak money flows on foreign investors. 

No relaxation on current strict stay-at-home in September may drag down money flows from foreign investors. In July, foreign investors were quite confident with Vietnam’s ability to control the situation, but further lockdown extension with no relaxation in September may raise their conservativeness and lead to selling action for profit-taking backed by “buy on dip” in July.

Banking stocks movement will determine the market trend.

For this month, we have insignificant changes to our view from last month as Q3 business performance is surely impacted given the current prolonged lockdown. We have a prudent view on mid-cap stocks given the strong rally in August and limited upside based on our coverage list.

For banking stocks, the stock price has corrected 20% - 30% from the peak so the bull case would be possible given (if any) the money flows from mid-to long-term investors. Currently, we are still positive on prospects of CTG, TCB, ACB, MBB in 2022. The upcoming credit room revision which the result may come out at the end of September would be supporting factor. Specifically, credit growth may increase more positively in September as banks with large credit headroom will attempt to fill up the current credit quota with short term loans to ask for higher credit growth limit. However, the downside from higher-than-expected NPL (bad debt) is also there if the current strict lockdown is not lifted and affect stronger-than-expected results for the upcoming quarters. Therefore, we view the banking stocks as high volatile stocks and directly impact on VN Index in September. Overall, we expect the VN-Index to move in a range from 1,250 – 1,380.