Which scenario for the stock market at the end of 2020?

06-Aug-2020 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

According to VNDIRECT, the total net profit of businesses listed on the three stock exchanges (HCM City Stock Exchange (HoSE), Hanoi Stock Exchange (HNX), and Unlisted Public Company Market (UPCoM) in the second quarter (Q2) of 2020 fell by 14.4 percent compared to the same period of last year. This number is much more positive than the 27.7 percent decline in net profit compared to the same period in Q1.

Sectors affected by the epidemic

Vietnam implemented 21 days of nationwide social distancing in April, and that almost completely disrupted service and transport activities. Transportation and tourism sectors suffered heavy losses, causing the Q2 profit of businesses in these two sectors to fall by respectively 73.3 percent and 493.8 percent compared to the same period of last year.

Retail sector recorded 40.5 percent profit decrease in Q2 in the context of the weak domestic demand. The profit of oil and gas sector dropped by up to 78.5 percent compared to the same period of last year due to the low Brent oil price (down by 51 percent over the same period of last year).

In addition, real estate also experienced profit reduction of 29.3 percent compared to the same period of last year due to the difficulties in recording apartment transfers and sales revenue.

In addition, banks with large drop in profits are convenient services (a decrease of 21.7 percent over the same period of last year), mining (a decrease of 123.9 percent over the same period of last year).

The main pillars of the market

The Q2 profit of the banking industry grew by 21.9 percent over the same period of last year, much higher than the growth of 3.4 percent in Q1. The positive growth came from the profit of Commercial Joint Stock Bank for Industry and Trade of Vietnam (CTG, 102 percent over the same period of 2019), HCM City Development Commercial Joint Stock Bank (HDB, 54 percent over the same period of 2019), Vietnam Prosperity Commercial Joint Stock Bank (VPB, 44 percent over the same period of 2019).

In the first six months of 2020, the profit of the banking industry increased by 12.6 percent over the same period of last year, contributing 3.8 percentage point to the profit growth of the entire market.

In addition, the profit in Q2 of the electricity generation industry increased by 27.3 percent over the same period of 2019, mainly thanks to the 13-time increase in net profit of Power Generation Joint Stock Corporation (PGV).

Meanwhile, the chemical industry recorded a 16.1 percent profit increase compared to the same period of last year thanks to the increase in profit margin amid low oil prices (compared to the decline of 34 percent in Q1 2020). In addition, the market was supported by paper and forestry industry (up by 341.1 percent over the same period of last year), metals (up by 17.1 percent over the same period of last year), and insurance (up by 61.5 percent over the same period of last year), etc.

The VN Index ended July at 798 points, up by 23 percent from the bottom of 650 points in March, equivalent to a market Price-to-Earnings Ratio (P/E) of 12.3 times. In the second half of 2020, VNDIRECT saw uncertainties increasing with the new Covid-19 outbreak and US-China tensions.

However, according to VNDIRECT, there are still factors that can support the market such as the promotion of public investment to rebuild the economy in 2020, and the return of foreign cash flows and the further easing of monetary policy which could lead capital to flow back into the stock market.

In the base scenario, VNDIRECT forecasts that the profit of businesses in the VNINDEX basket will decline by five to six percent compared to the same period (compared to the increase of 7.1 percent in 2019). Along with the target P/E of 14 15 times for the market in 2020, VNDIRECT expects the VN Index to end year 2020 at 840 920 points.

 


Category: Stocks, Vietnam

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