Investors advised to buy steel, retail, aviation, banking stocks ahead of Q2 earnings season

Investors should be keeping an eye on steel, retail, aviation, and banking stocks ahead of the Q2 earnings season, broker Viet Dragon Securities (VDSC) has recommended.

The Vietnamese stock market made a significant recovery in May. According to the Ho Chi Minh Stock Exchange (HoSE), its benchmark VN-Index closed last month at 1,261.72 points, an increase of 4.32% compared to the end of April.

Most stock groups recorded month-on-month growth, notably energy, up 13.17%; construction materials, up 10.85%; and consumer goods and utility services, both up 10.36%.

Trading volume and value on the HoSE were equivalent to the previous month, with an average of 826 million shares and VND21.6 trillion ($850 million) per session, respectively.

According to VDSC, the higher-than-expected Q1 business results had provided the foundation for the market's recovery. In addition, cooling U.S. inflation has strengthened global and domestic confidence in an interest rate cut by the Federal Reserve (Fed).

In June, while investors wait for Q2 business results to be announced, domestic and foreign macro factors will still be the main catalysts for the stock market, it noted.

Vietnam's recent macro data shows positive developments in production and consumption, reinforcing the positive outlook for GDP growth in the second quarter. Regarding the currency market, with the State Bank of Vietnam’s drastic actions to ease exchange rate pressure, the VDSC expected that policy and real interest rates will not fluctuate significantly.

In addition, the government has asked the National Assembly Standing Committee to make the amended Housing Law, the amended Land Law, the amended Law on Real Estate Business, and the amended Law on Credit Institutions take effect earlier than originally planned.

If approved in June, major bottlenecks in the real estate sector will soon be removed, while credit capital flows will be unleashed, facilitating the implementation of projects, the brokerage added.

Internationally, the market focus will be on what major central banks decide to do about interest rates. The VDSC said that the European Central Bank and the Bank of England are likely to make their first interest rate cuts in two years, while the Fed will keep interest rates unchanged with a more dovish message based on recent growth, inflation, and employment data.

These developments will help real estate stocks (accounting for 14% of the HoSE's capitalization) move more positively, thereby having a positive impact on the market, said the broker.

The VDSC predicted that the VN-Index will hover around 1,250-1,320 in June. In the base scenario, positive macro developments could help the index maintain its momentum to surpass the new short-term old peak.

On the contrary, stronger exchange rate pressure may make it difficult for the State Bank of Vietnam to maintain its current interest rate orientation, indirectly negatively impacting investors' expectations as well as market scores.

The positive Q2 economic growth prospects are likely to overwhelm the unfavorable context of the currency market, so the broker believed that investors should buy shares in businesses whose profits may recover gradually quarterly, or grow year-on-year, during market corrections in June.

“Accumulating these stocks and holding them patiently can achieve better profits than short-term trading,” it advised.

Among the stock groups, steel has been highlighted by the VDSC, given probable high consumption in the remaining quarters of 2024. The industry's Q2 profit margin may not have improved compared to the first quarter, but it will gradually improve in the second half of the year when selling prices recover.

In addition, investors can also put money into stocks in the consumer goods, retail, aviation, and banking industries during market corrections, the VDSC recommended.