Rong Viet Securities (VDSC) forecasts that the market will continue to go up in November thanks to the reactivation of economic activities and the expectation of the Government's support package. Besides banking and logistics, VDSC also sees the prospect of public investment stocks in the long-term growth story. / Source: VnEconomy
In the recent strategic report, Rong Viet Securities (VDSC - Code: VDS) forecast that the market will continue to go up thanks to more clearly reactivated economic activities in the fourth quarter and the stimulus support package. Economic interest will be the main driving force supporting the market. Accordingly, VN-Index may fluctuate in the range of 1,400 - 1,500 points in November.
Source: VDSC
However, volatility may occur in the short term from corrections in industries with unattractive valuations after stock prices have risen sharply thanks to abundant capital inflows into the market.
A clearer restart of economic activity and support packages should boost market sentiment
The market continued to recover in October despite a slowdown in third-quarter business results compared to the previous quarter. The impetus for the recovery comes from accelerating vaccination progress and restarting economic activities in key economic centers.
In the coming period, support from the Government is one of the key factors to activate the economy and stock market. With the new support package, GDP growth forecast for the period 2021 - 2025 can reach 6.5% - 7%, an increase of about 0.4% compared to before. Market sentiment will become quite positive on the news of these stimulus packages.
Looking at the markets in the region, in the 10 days following the approval of the $4.5 billion support package, the SET (Thailand) index gained 1%. In the case of Indonesia, the market performed even better as it increased by 5% after news of the support package.
Therefore, VDSC expects Vietnam's economic stimulus package to boost market sentiment in the short term. The long-term factors leading the market will depend on the actual recovery of businesses.
Short-term fluctuations are possible, which industry group should investors choose?
The fact that the market has broken out rapidly since the end of October, valuations in many sectors have become less attractive, which means that investors need to choose stocks carefully to minimize the risk of short-term market fluctuations.
VDSC found that the valuations of industries such as agriculture, distribution & auto parts manufacturing did not change much despite the sharp decline in business results.
Similarly, the valuation of the banking and logistics industries fluctuated within a narrow range, although net profit growth in the third quarter was relatively positive. These are also two industries that VDSC highly appreciates for the possibility of being revalued when taking into account the forecast of profit growth in the fourth quarter as well as for 2022.
Despite concerns about the asset quality of the banking group, securities companies believe that banks' strong provisioning in the third quarter also supports growth prospects in the following quarters. The return of businesses to operate under new normal conditions together with the Government's support packages will also be a supporting factor in the coming time.
For shares of Vingroup, VHM of Vinhomes Joint Stock Company has an opportunity at this time on the basis of the positive results of wholesale transactions and the stable business results of the business in the third quarter, along with the outlook next year.
Among the objects of the stimulus package, infrastructure investment is one of the important pillars. Therefore, VDSC expects companies operating in the fields of construction, materials, and real estate will likely benefit greatly from the disbursement of the support package in the next two years.
In addition, VDSC also sees a positive long-term prospect of stocks related to public investment activities, which have been considered the lifeline of economic growth since the outbreak of the pandemic. The industries that directly benefit can be mentioned are the group of materials and infrastructure construction, civil real estate and industrial real estate with land bank near the developed infrastructure.
However, most of the above stocks have had strong price increases since the beginning of the year. Therefore, investors can disburse when the stock's valuation adjusts to near the past average to have a safe position in the long-term potential growth story.
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