SPEED UP TO FINISH THE PIVOTAL YEAR
We expect the market to bounce back positively in November, supported by impressive Q3 results that will bring valuations back to attractive levels. NPAT for HSX-listed companies rose 29% YoY, while trailing twelve-month EPS rose +9% QoQ and +16% YoY. Reflecting these results, VN Index's P/E ratio has adjusted from 14.7 to 13.4, its lowest pricing this year. Historical trading data over the past 7 years also shows that the market typically posts higher gains in the month following the earnings season.Furthermore, we expect this positive trend to continue over the medium term, with listed companies' NPAT growth forecast to reach 22% y/y in Q4 2024, marking the fourth consecutive quarter of double-digit growth. Large caps in core sectors such as Banking, Real estate and F&B are expected to lead this growth. Our coverage list, which represents around 65% of total market earnings, also shows a similar growth estimate of +23% YoY for Q4 2024.
In the short term, exchange rates are under pressure due to interest rate differentials, which affect the SBV monetary policy management. However, we believe that regardless of the outcome of the US presidential election, a weak USD outlook will return, helping to stabilize the exchange rate band and the SBV's monetary policy. This outlook is based on two main factors: (1) the Federal Reserve cut interest rates by 50 bps in September 2024, signaling the start of interest rate normalisation, with a further cut of 150 bps expected over the next 15 months as inflation consistently eases; (2) concerns over the fiscal deficit policies of both US candidates could put pressure on the USD.
Based on the 9M 2024 earnings results, the fair valuation range for the VN Index, corresponding to a P/E of 14.x - 15.x, is between 1,299 and 1,392. However, with short-term headwinds impacting investor confidence, the VN Index may test lower valuations before returning to fair levels. Accordingly, VN Index may fluctuate in the range of 1,237 - 1,345 points over the next three months (before Q4 earnings announcements).
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