Vietnam’s benchmark VN-Index is expected to fluctuate in the range of 1,100-1,180 points this month, corresponding to a price-to-earnings (P/E) ratio of 13.2-14.2x and an implied return of 7-7.6%, according to Viet Dragon Securities (VDSC).
With this expected return, the stock market channel is more attractive than bank savings, with the current interest rates for 12-month deposits at below 6%, the broker says in a recent report.
VDSC believes that stock market developments in October will revolve around stories related to listed companies’ estimated business results in Q3/2023.
“The market is unlikely to have a season of optimistic business results on a large scale,” it says, adding that the level of recovery will depend on each industry and business strategy of each enterprise.
Therefore, investors need to select individual stocks, instead of hoping for a general recovery of the entire industry, it advises.
VDSC forecasts that Q3 profits of most industry groups will be better than Q2, a trend that somewhat matches the recovery of economic and trade activities as reflected in data released by the General Statistics Office.
In terms of year-on-year growth, the oil and gas, pharmaceutical and technology groups are likely to record double-digit net profit after tax (NPAT) growth in Q3.
Meanwhile, the seafood, real estate, fertilizer, retail and electricity industries will see a profit decline compared to Q3/2022.
"Overall, although the year-on-year growth rate will be higher than the previous quarter, the improvement will still be limited. Therefore, the driving force for improvements in valuation and score for the market is not big in this quarterly earnings reporting season," the VDSC report says.
According to the broker, the outlook for after-tax profit growth is likely to be more positive in Q4/2023 due to low profit bases in such industries as banking, steel, consumer goods, real estate and securities.
For the banking sector, the overall profit picture will be more stable and positive than other groups. In the current context, banks with capital advantages, customers less vulnerable to economic recession and high reserve buffers will be the ones most likely to see profit growth at the earliest.
Closing Friday, the VN-Index, which represents the Ho Chi Minh Stock Exchange (HoSE), rose 14.65 points, or 1.32%, to 1,128.54, with nearly 622 million shares changing hands for VND12.8 trillion ($525 million).