05112018_BSC_Vietnam Sector Outlook_EN_4Q2018

Investment Strategy for Q4/2018
 

After a period of fluctuations with the Asian stock markets in the first two quarters of this year, Vietnam stock market began to show signs of differentiation in the third quarter of 2018. The foundation of these differences is that the macro conditions in Vietnam are in a more favorable state than in neighboring countries. In the fourth quarter of 2018, the expectation of fundamentals of business generally improved with business results growing quite fast compared to 2017. If there is no extreme fluctuation in macro conditions and factors from the national market, the opportunities on the stock market will continue. We appreciate the following investment themes:

Firstly, the adjustment from the new equitization and listing. From 2016 to 2018, the market has been continuously receiving large IPOs, private placement and listing, prices have been rising from last year and gradually revised to a more reasonable level in Q3 2018. From the fourth quarter of 2018, these stocks will be further divided into fundamentally improved levels, as well as important information on capital withdrawal and transfer.

Secondly, the opportunity from State Capital Divestment from leading firms. Similarly, the stock market is divided, causing the price of companies to return to a more reasonable level. The list is similar to Q3/2018, some companies should be noted such as PVI (insurance), CSM, DRC, CSV (chemical), VGC (building materials), firms of SCIC , and the ability to withdraw capital from commercial banks is also worth noting.

Thirdly, the bank recovered thanks to business performances. The majority of banks are also listed on the stock exchange and account for a large proportion. After a period of hot growth in share prices, the sharp fall of the second quarter of 2018 has helped many banks to be valuated-attractive for long-term investors. However, the Bank's valuation expectation should not be as high as Q1/2018.

Fourthly, real estate continues to grow. The period from 2018 to 2019 will be the time to continue to record strong growth in business results. However, developers shift to the average segment more than in previous years and delays in deployment due to licensing procedures. The expectation of mid-term sales and profits is not as optimistic as before, which has an impact on stock outlook. Real estate is an upstream sector so it will also affect downstream sectors such as construction and materials.

Fifthly, external instability and defensive sectors. Although Vietnam is in Asian stock market which is recovering after many turmoils, triggered by trade war and tightened monetary policy in big countries, uncertainty in the coming time is unavoidable. At this stage, we still believe that investors can pay attention to the high defensive sector, preferring domestic market such as Electricity (POW, NT2), Retail (MWG, PNJ), Food (VNM) ... the sectors that are still benefiting and maintaining steady growth according to the domestic demand of the economy.

Sixthly, sectors benefited from the new trend (complementary to previous reports) The rapidly changing economic outlook, coupled with a global geopolitical environment, is accompanied by rapid growth of technology. This leads to a shift in both production and consumption. One of them is the China + 1 trend that has been going on for years, now with the impact of the trade war, is even stronger. Some sectors of the Vietnamese economy can benefit: export sectors (textile and garment, seafood ...), export services (logistic, seaports, aviation, industrial zones ...)