'Outside' cash flow to return to Vietnam stock market after Tet: broker

Cash flow that has been "on the sidelines" in recent months will return to the Vietnamese stock market after the Lunar New Year holiday (Tet) in anticipation of the 2024 annual general meeting (AGM) season, according to Rong Viet Securities (VDSC).

According to the Ho Chi Minh City Stock Exchange (HoSE), the stock market performed positively in the first month of the year with the VN-Index closing on January 31 up more than 3% to 1,164.3 points compared to the end of 2023.

Market liquidity also improved with the average trading value reaching VND16,531 billion ($676.8 million) per day, up 3.6% compared to December. Foreign investors turned net buyers on the HoSE with VND1,304 billion ($53.39 million).

The driving force came from the financial group (banking and securities), consumer goods and utility services. In addition, the National Assembly’s official passage of the amended Land Law and the amended Law on Credit Institutions during its extraordinary session on January 18 was a notable highlight.

It is estimated that bottlenecks and loopholes in the operation mechanism will be fixed with clear new regulations, creating a premise for the sustainable development of the real estate sector, the banking system and the economy as a whole.

VDSC did not expect the market to have strong fluctuations in February due to the period of information gap after the Q4/2023 financial statement release and the effect of the Lunar New Year holiday. The VN-Index is forecast to hover at around 1,160-1,200 points in February.

However, the flow of information about the AGM season and new business plans for 2024 will likely help the market become more vibrant in the second half of February.

On the contrary, there is a small risk of a deep decline thanks to the relatively cheap valuation of large-cap sectors, the net selling trend of foreign investors temporarily ending, and a huge amount of investor deposits waiting to join the market.

At the same time, the trend of increasing investment in the securities channel continued to be reinforced with the amount of investors' deposits at securities companies increasing by 6% compared to the previous quarter and 30% from the beginning of the year to VND82,000 billion ($3.36 billion), much higher than the deposit growth of the banking system (13.2%).

In contrast, the Q4/2023 trading value on the three exchanges, namely the HoSE, the Hanoi Stock Exchange and the Unlisted Public Companies Market, decreased by 25% compared to the previous quarter. This meant that despite caution in the late 2023 period, most continued to choose to "stay in the market", especially when deposit interest rates plunged to the bottom and confidence in other major investment channels showed no signs of a speedy recovery.

VDSC believes that cash flow that chose to temporarily "stand aside" recently will return after the Lunar New Year holiday in anticipation of the 2024 AGM season. Meanwhile, a sudden sharp decline with more attractive investment opportunities in the market may also reactivate this source of money.

Listed companies announced their business results in Q4/2023 with profit growth of 7% compared to Q3. This sign shows that business activities have begun to recover from mid-2023.

The effectiveness from loosening monetary policy and increasing public investment disbursement in 2023 will become more visible in 2024. With the entire market’s P/E (price to earnings) ratio estimated at 13.6, lower than the level of nearly 14 at the end of 2023, the market is expected to face less pressure from foreign investors, opening up opportunities for investors to accumulate stocks in leading firms with high recovery potential.

In addition, for Q1/2024, the cooling prices of some agricultural products is a topic of concern. VDSC expects that the continued downward trend in powdered milk and soybean prices can help the profit margins of food and beverage businesses improve significantly compared to the same period in 2023.