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Market Strategy Mar 2022 – “In the Midst of Chaos, There Is Also Opportunity”

Strategy Note 01/03/2022    88

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  • The VN-INDEX dropped to the month-lowest level of 1,472.0 pts on Feb 14 responding to geopolitical tension in Ukraine. At as 28 Feb 2022, VN-INDEX closed at 1,490.pts, (+0.8% mtd). Liquidity weakened after Tet holiday with average trading volume of 3 main bourses of VND25,956bn/session (-22.4% mom;+61.7% yoy). We observe that market are relatively volatile following with Ukraine crisis, the taper tantrum and the mixed impact of energy and commodities prices hike.
  • Historical statistics show that war and geopolitical tensions mostly affect the stock market in the short term, within 2-3 weeks after the event takes place. Specifically, S&P 500 declines during such events average around 4-6%, and the market will soon recoup its losses and return to an uptrend within 2-3 months. Vietnam stock market, altogether with ASEAN stock markets seemed to have experienced limited impact during times of global conflict. Thus, we think any correction could provide good entry to accumulate stocks.
  • Foreign indirect investment (FII) may continue to be net withdrawn in 1H22 following FED rates hike but the impact on Vietnam stock market is minimal thanks to (1) the government is implementing flexible fiscal policy and monetary policy to support the economic recovery; (2) solid foreign direct investment and (3) strong domestic capital inflow into stock market.
  • We believe “there is also opportunity, in the midst of chaos”. First, Vietnam ramps up the re-openings of international flights and tourism; which will bode well for the recovery of aviation and retail sector. Second, as the Annual shareholder meeting season has kicked off with 2022 business guidance to be revealed. We expect HOSE – listed companies’ earnings to grow 23% yoy. Top strongest earnings growth include Industrial goods and services, Retail and Property development. And lastly; we see some sectors that ride on the commodities prices hike, including oil & gas; urea producers, galvanised steel exporters.
  • We are still confident about the market outlook in medium-term, underpinned by: (1) stronger recovery of Vietnam’s growth engines, including foreign-direct-investment (FDI) and service sector (tourism, transportation); (2) new financial stimulus package to be launched and (3) the valuation of Vietnam’s stock market looks attractive in a longer view. We expect the VN-INDEX to fluctuate in the range from 1,460-1,560 points in Mar 2022.

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