In the report titled “Investment Compass December 2024 – Restructuring investment portfolio towards 2025”, VNDirect Securities Joint Stock Company (VNDirect) said that the
stock market valuation is at an attractive level.
In the report titled “Investment Compass December 2024 – Restructuring investment portfolio towards 2025”, VNDirect Securities Joint Stock Company (VNDirect) said that the stock market valuation is at an attractive level.
The transaction has not yet reflected all positive factors.
According to VNDirect, the VN-Index ‘s trailing P/E or price/earnings per share for the last four quarters is currently discounted by more than 10.3% compared to the five-year average.
VNDirect believes that the market has not yet properly assessed the prospect of fourth-quarter profit growth of over 20% as forecast by the company. The market has also largely reflected the risks of President-elect Donald Trump’s proposed policies, which pushed the USD Index (DXY) to 107.
VNDirect believes that the US Federal Reserve (Fed) will continue to cut interest rates at its upcoming December meeting. This could cool down the DXY index, thereby reducing pressure on the VND exchange rate and creating conditions for the State Bank to focus more on supporting system liquidity and credit growth. These factors could push the market’s P/E level higher by the end of this year.
VNDirect believes that the VN-Index will fluctuate around 1,250 – 1,270 points by the end of 2024, based on an estimated market earnings per share (EPS) growth of 18% and a target P/E of 13x.
The target P/E is lower than the P/E at the end of 2023 of 13.4 times. Although economic growth and the profit picture of listed companies have improved significantly, it can be seen that market valuations have not fully reflected these positive factors, mainly due to the impact of issues: The huge net selling level of foreign investors since the beginning of the year, increasing exchange rate pressure and higher liquidity stress in the last months of this year compared to the same period in 2023.
Given the current valuations and macroeconomic backdrop, this is a good time for long-term investors to actively allocate capital and accumulate stocks to build a portfolio for 2025. However, as the market has yet to establish a clear uptrend, excessive leverage may be counterproductive and increase risk. Investors are advised to adopt a cautious capital allocation strategy.
VN-Index is currently trading in a consolidation range of 1,200 – 1,300 points, with trading liquidity gradually decreasing after a period of strong net selling from foreign investors.
The US CPI showed signs of rebounding in October, leading to more cautious comments from Chairman Powell on the Fed’s interest rate cut plan. However, we believe that the Fed’s cautious moves may start from 2025 after Trump officially takes office as President, and the Fed is still likely to cut interest rates as planned in December this year.
DXY is currently one of the most closely watched indicators in the market, as exchange rate pressures can directly impact the monetary policy of the State Bank of Vietnam.
VNDirect expects exchange rate pressure to be controlled in December thanks to the improvement in USD supply from the high trade surplus and export enterprises often selling foreign currency to banks at the end of the year to meet domestic shopping needs and pay salaries and bonuses; positive growth in realized FDI capital; December is the peak time for remittances flowing into Vietnam.
VNDirect believes that the VN-Index will fluctuate around 1,250 – 1,270 points by the end of this year, based on the assumption of 18% net profit growth and a target P/E of 13 times. This target P/E is lower than the P/E of 13.4 times at the end of 2023.
Although economic growth and the profitability picture of listed companies have improved, these positives have not been fully reflected in market valuations, due to the following issues: Record net selling from foreign investors, exchange rate pressure and greater liquidity stress in the last months of this year compared to the same period in 2023. With the current valuation and macroeconomic context, VNDirect experts believe that this is the right time for long-term investors to proactively allocate capital and accumulate stocks to build a portfolio for 2025.
However, as the market has yet to establish a solid uptrend, excessive use of financial leverage may be counterproductive and increase risk. Investors are advised to adopt a cautious capital allocation strategy.
Mr. Dinh Quang Hinh, Head of Macro and Market Strategy Department of VNDIRECT Securities Joint Stock Company, said that the Vietnamese stock market continued to record a week of increasing points with the VN-Index closing the week at 1,270 points. The market’s recovery momentum was extended this week thanks to some supporting domestic macro information.
Specifically, positive assessments from market rating organization FTSE Russell during this working trip to Vietnam have reinforced market expectations about the possibility of upgrading Vietnam’s stock market to FTSE’s secondary emerging stock market next year.
This information has triggered speculative cash flow back into the market, boosting the price increase of stocks expected to benefit from market upgrades such as securities and some large-cap stocks.
In the last two sessions of the week, the market’s growth was also fueled by the return visit to Vietnam of Nvidia CEO Jensen Huang to realize previous commitments to open a research and development center and promote investment in Vietnam.
In addition, the General Statistics Office also announced that the macro data for November were generally quite positive, showing a continued trend of broad-based recovery in the Vietnamese economy after Typhoon Yagi, spanning from industry, services to public investment, as well as showing that concerns about inflation have been “left behind” when the CPI in November increased by only 0.13% compared to the previous month and 2.77% compared to the same period.
Market liquidity is also a bright spot as it witnessed the return of trading sessions of over VND20,000 billion. With positive signs of cash flow, the VN-Index may continue to move upward and head towards the strong resistance zone of 1,280-1,300 points.
The market will soon witness increased profit-taking activities when the VN-Index hits the above resistance zone, so investors should limit chasing high prices, patiently wait for upcoming fluctuations to restructure their investment portfolios, and shift their portfolios to stocks with positive growth prospects in the last quarter of the year such as banks, exports (seafood, textiles) and stocks that benefit from the market upgrade story, Mr. Hinh recommended.
Experts from Saigon – Hanoi Securities Joint Stock Company (SHS) said that the market this week has performed as the company expected. VN-Index is recovering well based on the market’s internal quality improving after a long accumulation period, on the relatively attractive capitalization of the market compared to the size of the economy, with GDP growth planned to increase by 6.5-7% in 2025.
Many codes and groups of codes are at relatively attractive prices, opening up many good opportunities. SHS expects the market to overcome the accumulation trend that has lasted since the beginning of the year.
According to Vietnam Construction Securities Joint Stock Company (CSI), VN-Index has increased for the third consecutive week with a high matching volume compared to the previous two weeks. Moreover, last week saw a momentum explosion, surpassing the long-term moving average MA200 (reflecting the market’s long-term view on a stock, so this view has great reliability), thereby confirming the previous bottom of 1,200 points of VN-Index, showing that the optimistic trend has returned.
In fact, the Vietnamese stock market has performed positively in the context of a strong increase in the world stock market.
S&P 500 and Nasdaq Composite continue to hit new highs
The S&P 500 and Nasdaq Composite indexes set new record highs at the close of trading on December 6, thanks to positive business outlooks of some companies and better-than-expected US employment data in November 2024, raising expectations that the US Federal Reserve (Fed) will cut interest rates this month.
At the end of the trading session on December 6, the Dow Jones Industrial Average fell 0.28% to 44,642.52 points. Meanwhile, the S&P 500 Index rose 0.25% to 6,090.27 points and the Nasdaq Composite Technology Index increased 0.81% to 19,859.77 points. On December 6, the S&P 500 Index witnessed its 57th record closing high in 2024, while the Nasdaq Composite reached its 36th record closing high this year.
Wall Street’s record rally kicked off earlier this week, fueled largely by a surge in technology stocks.
Donald Trump’s re-election as US President last month, and his Republican Party’s control of both houses of Congress, provided a major boost to the stock market in November 2024.
Strategists say Mr Trump’s plans to cut taxes and ease regulations could support markets, but tariffs are a negative factor.
In the Beige Book, the Fed assessed that US economic activity has grown slightly in most regions since early October 2024. Investors believe that the Fed will cut interest rates for the third time in a row at its meeting on December 17-18.