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Market Strategy June 2022 – Let’s sunshine

Strategy Note 27/05/2022    42


VN-INDEX experienced negative sentiment in May. Following the sell-off in April, the VN-INDEX continued to suffer from negative sentiment, dramatically fell to 1,218.81pts (-10.8% mtd, -18.7% ytd). Market sell-off momentum could be attributed from: (1) FED tightened monetary policy more aggressively to control inflation; (2) concerns about a slowdown in global economic growth due to high inflation, supply chain disruptions and tightening global financial conditions; (3) unfavorable movements of the global stock market.

Average trading value of three bourses decreased 33.2% mom (-33.8% yoy) to VND17,587bn (HOSE: VND15,167bn/trading day, -32.1% mom; HNX: VND1,669bn/trading day, -34.6% mom; UPCOM: VND750bn/trading day, -47.7% mom). Notably, ETF inflow by foreigners reached VND2,714bn, the highest level since August 2021, and foreign investors maintained net buying in May, worth VND1,260bn.

We see some positive catalysts to support the market in Jun, including: (1) improved COVID-19 situation in China will contribute to solving difficulties caused by supply chain disruptions; (2) stronger recovery pace of Vietnam economy in the next couple of quarters; (3) officially deploying an interest rate compensation package of VND40,000bn; and (4) strong business prospects of listed companies in the period of 2022-2023.

Very attractive market valuation relative to historical levels and regional peers. As at 23 May 2022, VN-Index was trading at 13.1x trailing 12-month P/E, which is 24.6% discount to the peak this year and 21.1% discount to the 5-year average P/E. We expect market earnings growth of 23% yoy and 19% yoy over FY22-23F which brings market valuation to 11.9x FY22F P/E and 10.1x FY23 P/E, much lower than 5-year historical average P/E of 16.5x. We think the stock market valuation is very attractive for long-term investors who seek for good corporate governance companies with strong earnings growths

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