The investment strategy report for the last 6 months of 2022 by Petroleum Securities (PSI) shows that the coefficient of determination (R - Squared) between the VN-Index and the S&P 500 index of the US stock market from the beginning of 2022 to the end of June 15, 2022 has a relatively high value of 0.73. This shows that the movements of Vietnam's stock market have been strongly influenced by the world market since the beginning of the year.
Data from the Ho Chi Minh City Stock Exchange (HoSE) indicates that since the beginning of May, foreign investors have poured more than VND 1,302 billion into HoSE. This is the 2nd consecutive month that foreign investors have been net buyers in the market despite the sharp drop in the index.
The current P/E valuation of the Vietnamese market is at a low level compared to the region, at 13.1x, which is much lower than the 10-year average of 15x. Vietnam has the highest EPS growth in the region by the end of May, at 7%.
Comments on market trends in the last 6 months of the year, according to PSI, in the context of stagflation - a rare economic state with a combination of high inflation, high unemployment and low growth rates that threatens world’s leading economies including the US and EU, the adjustment pressure and risks in the financial market are increasing day by day.
However, as a manufacturing and processing country with the ability to self-produce most of the essential goods, Vietnam will be able to limit the import of inflation from the world.
Vietnam's stock market is likely to continue to experience an adjustment in accordance with the world market, but it will recover after that, and the basic scenario is that the VN-Index will continue to trade positively, ranging from 1,165 to 1,365 with P/E forward reaching from 11.4 to 13.3, respectively.
In a more optimistic scenario, Vn-Index will return to the peak of 1,400 - 1,550 points with an average liquidity of VND 21,000 - 25,000 billion per session. While in the most cautious scenario, the index is still in the range of 1,080 - 1,150 points with the liquidity of VND 12,000 - 17,000 billion per session.
PSI also expects that the growth momentum of businesses will continue to be maintained in the last 6 months of 2022 thanks to a solid macroeconomic foundation with the main growth driver coming from export, domestic consumption and fiscal policies to support the economy.
However, risks come from the world market, especially from the conflict between Russia and Ukraine, the blockade in China causing supply chain disruptions and the stagnation, which will cause the stock market to further decline.
Investment opportunities in the second half of 2022 will come from a group of businesses in defensive industries such as the energy and consumer goods sectors that are not much affected by inflation like oil and gas. The sharp increase in oil price is an opportunity for oil and gas stocks, especially oil and gas service, distribution, and processing stocks.
With a huge demand for electricity resulted from the reopening of the economy after the pandemic, electricity consumption will increase sharply. In 2022, favorable hydrological conditions will help many hydropower enterprises earn good profits.
As for the fertilizer industry, the demand for food storage and high fertilizer prices in the context of the conflict between Russia and Ukraine continue to be the short-term growth momentums for fertilizer chemical businesses.
Compiled by VietnamCredit