The stock market recorded a correction in July with the VN-Index falling 0.3% in July (as of July 26, 2024). While the HNX-Index and UPCOM-Index fell 0.4% and 2.5% respectively. The net inflow of capital stood outside observation with the average trading value falling 24.7% compared to the previous month to VND 19.9 trillion per session.
According to an expert from VNDIRECT Securities Company, the correction has helped the P/E ratio of the VN-Index trade at a reasonable level, with a discount of 7.1% compared to the 5-year average P/E. The expected EPS growth will improve further in the second half of 2024. This will support the market's valuation. VNDIRECT forecasts the forward P/E ratio of the VN-Index in 2024 to be around 13.2 times, with EPS growth of 18% for listed companies on HOSE. Furthermore, the FED's expected interest rate cut in the second half of 2024 will open up more space for Vietnam's monetary policy and reduce the pressure of interest rate hikes in the country in the latter months.
"The valuation of the VN-Index is quite reasonable compared to other emerging markets. The P/E ratio of the VN-Index is trading at a high of 1.1% compared to other emerging markets (MSCI EM), while the P/B ratio is trading at 1.7 times, the same as other emerging markets (MSCI EM). However, the ROE of the VN-Index has been higher than MSCI EM over the past 5 years" - VNDIRECT assessed.
An expert from KB Securities Company (KBSV) focused on the script for August, the VN-Index will continue to suffer from a downward momentum and may start to recover when the index falls back to the support area around 1,150 points (+-10). In the extreme scenario, the index continues to fall and breaks through this support area. The VN-Index will lose its medium-term uptrend and may establish a sideways trend on the monthly chart according to the triangle model from the 2022 peak, down to the strong support area around 1,080 points (+-15) before a potential recovery.
Regarding investment opportunities on the stock market, VNDIRECT is noticing a growing interest due to the short-term correction, making the valuation more attractive. The profit of businesses in the second quarter was better than expected, supporting the valuation. The downward pressure on the exchange rate has eased. The FED's expected interest rate cut will help the State Bank of Vietnam have more space for monetary policy to support economic growth. This is an opportunity for investors to increase their stock holdings when the VN-Index trades in the 1,180 (+/- 20 points) range.
Some investment opportunities for the August market, VNDIRECT points out, including real estate, industrial real estate, and consumer goods.
On the other hand, investors also need to note the risk of geopolitical tensions in the Middle East and the extreme impact of the global market on the domestic market's sentiment. Factors that may help the market grow stronger than expected include a sharp decline in inflation in August and an improvement in liquidity, helping interest rates to fall.
Meanwhile, KBSV is looking forward to businesses that have recovered their business results, foreign direct investment, domestic investment, and La Nina approaching. The market is entering a short-term correction phase, which will open up good opportunities for investors without a position, or for those who want to add more to their holdings.
