Aviation, banking, food stocks recommended in countdown to Lunar New Year

Investors should buy stocks benefiting from China’s reopening including those in the aviation, seafood, banking and food sectors in the run-up to the Lunar New Year (Tet) holiday, said an expert.

Nguyen The Minh, analysis director at Yuanta Vietnam Securities, advised investors to keep the ratio of stocks in their investment portfolio at no more than 50% and not to use high margins.

Closing the Tuesday session, the VN-Index, which represents the Ho Chi Minh Stock Exchange (HoSE), went down 0.86 points, or 0.08%, to 1,053.35. The major bourse saw 210 gainers and 174 losers, with more than 546 million shares changing hands for over VND9.7 trillion ($413.65 million).

According to Minh, the HoSE's liquidity has shown signs of decline since the previous trading week from January 2-6.

"Low liquidity signals that large cash flow is staying out as there are only nine more sessions to Tet, and many investors choose to sell stocks and enjoy the holiday. Moreover, there is not a lot of good information supporting the market," he said.

However, good opportunities have begun to appear, despite a divergence among stock groups. The cash flow mainly runs into banking, oil and gas stocks, and a few large-cap codes.

As the VN-Index's score still improved, expanding over 4.6% since the beginning of the year, Minh said that in a short-term scenario, the benchmark would range from 1,042-1,067 points.

What is the coming impetus?

"The biggest driving force affecting Vietnam's stock market in the coming time is still the story from the U.S. Federal Reserve. In the context of the tight monetary and fiscal policies, I think to promote both the economy and the stock market, there must be a harmony between the two policies," he said.

It is likely that the Fed will not sharply raise interest rates in the year-beginning period, as the current level stands at 4.25%, not very far from the target of 5.1%. As a result, the USD/VND exchange rate will decrease, thus easing pressure on importers and exporters with dollar loans.

Domestically, the biggest variable is interest rates. Tight monetary and fiscal policies in recent times have created no motivation to reduce inflation pressure. Therefore, monetary policy easing like a possible increase in money supply at the beginning of the year will relieve pressure on the economy. Meanwhile, some fiscal policy solutions like reducing taxes and fees are expected to have a positive impact on the stock market.

Many reports showed a high correlation between M2 supply growth and the VN-Index. M2 includes cash, checking deposits, and other types of deposits that are readily convertible to cash like certificates of deposit.

In fact, M2 supply increased at a record low in 2022, making market liquidity, banking system and the whole economy tense, thus pushing interest rates to high levels. This was one of the main reasons for the negative development of the VN-Index.

Another factor that can positively affect the stock market is public investment. Large capital for infrastructure development is hoped to promote related industries.

Not to mention, there are also factors from listed firms’ Q4/2022 financial statements, Minh said, forecasting that the business results of the listed companies would be better.