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Special Report: Preliminary 2H2022 outlook - BRACING FOR A HIGH VOLATILITY FUTURE

“The market may be more "sensitive" and volatile to negative information, especially as valuations have reached a much higher level than prior to the first outbreak of Covid (Mar 2020)…” Rong Viet yearly report 2022.

Despite being concerned about events that could negatively affect the market such as global inflation and geopolitical tensions, the actual impact was much stronger than our expectation. The VNIndex plummeted 20% YTD in 6M 2022.

In our base case, we believe that global inflation has peaked and that the VNIndex's 20% year-to-date decline fully reflects the impact of the most negative events. Looking to 2H2022, we believe that Vietnam’s economy in general, and the profits of listed companies in particular will maintain a good growth rate. An expansionary monetary policy could not be expected in the current context, but the cooling down of global inflation as well as the USD Index has offered the SBV more room to regulate the monetary market, not only can stabilize the operating interest rates and keep the volatility of the exchange rate within the target range but also can provide enough credit quota to the economy.

The VN Index is expected to stay in the range of 1225 – 1398. Concurrently, the average order-matching value on the HSX may increase by 20% compared to the average of Q2 to 17,000 - 19,000 VND/session in the rest 2022. However, given the current possibility of tightening monetary policy, we reckon the market's recovery will take place in a tug-of-war trend. Therefore, the disbursement strategy is also recommended to be cautious, not chasing buying in unexpected uptrends and always save buying power for market corrections. For the long-term and highly defensive investors, the stock : cash ratio can be maintained at 70:30.

The lists of positive industry groups that will have positive prospects in 2H 2022 are Industrial Parks, Aviation, IT, Banking, Pharmaceuticals, Tires, Fisheries, Food & Beverage with stocks like VCB, CTG, TCB, MBB, LHG, PHR, KBC, ACV, AST, FPT, CMG, DBD, DRC, ANV, HAX, VNM and QNS.

Not pessimistic, but not enthusiastic to the prospect of economic recovery, especially from late 2022 to early 2023. Amidst global inflation and geopolitical tensions, there are still many potential risks. The Chinese economy is struggling to grow due to the "Zero-Covid" policy; the world economic growth outlook is becoming less bright. Vietnam's economic growth prospects as well as monetary policy in the coming time will still be affected by the above events. These are likely to be major barriers to the market's ability to recover.

Last but not least, with the limitation of bank credit, the congestion of the corporate bond market could devastate the financial health of leveraged industries/enterprises. Bond default risk could completely happen and indirectly hit the stock market.”