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Market Strategy Aug 2021 – Will the market bottom out in Aug ?

Strategy Note 30/07/2021    153

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  • Market experienced a sharp correction of 13.7% from the peak in Jul following concerns over (1) the infection surge which could be considered as the worst outbreak so far and (2) longer-than-expected nationwide lockdown protocols will hurt the macro prospect and businesses outlook. Market liquidity also diminished 12.8% in Jul versus previous month.
  • 2Q21 earnings season has kicked off. As at 29 Jul 2021, 595 listed companies, representing 34% of the total listed stocks and 52% of market capitalisation, have released 2Q21 results. Based on our estimates, 2Q21 aggregate earnings of listed companies on three bourses (HOSE, HNX, UPCOM) rose 90.3% yoy from the low base 2Q20 (-12.5% yoy). So far, FY21F market earnings is still on track to our expectation of 30% yoy growth.
  • We see some positive catalysts for market in Aug, including: (1) though liquidity dropped in Jul but so far, we haven’t seen capital flight yet. Stand-by cash of investors in Vietnam brokerage firms as at end 2Q21 even increased 32.3% vs. end-1Q21; (1) some 2Q21 earnings release surprises might enhance investors’ confidence and (3) the valuation of Vietnam’s stock market looks quite attractive now, in our view.
  • As of Jul 29, 2021, the VN-INDEX is currently traded at 15.8x P/E forward, which is 17.7% discount from its peak in Jul and even below the 5-year average P/E of 16.5x.
  • However, as cases continue to climb sharply and nationwide social distancing might extend for a couple more weeks, stock market is unlikely to firm an uptrend in the upcoming month, in our view. We expect the VN-Index to fluctuate within the 1,250-1,350pts range in Aug.

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