The third week of the second half of 2018 has shown a remarkable shift from the last fourteen weeks prior. Excluding today, the market had ended positive for the last six trading sessions. With Wednesday the 18th having a +2.29% gain, contrasted to 13 weeks of at least one day falling -2%. It’s a pleasant change to see a week of straight market recovery albeit small. And it does give a boost to dampened spirits and sentiments.
The market ended the week at 933.39. It closed significantly higher by +2.61% week over week. Volumes have made a noticeable recover trading about VND3.3trn (USD143mn) daily. A rough 40% improvement week over week when we were seeing liquidity dry up to below USD100mn daily.
As companies start reporting their Q2 earnings, we are getting early indications that results are in-line with expectations (which is a relatively positive sign).
Also, today was the last day for the rebalancing of the E1VFVN30 ETF to comply with the new change in the VN30 index (which will be valid next Monday). So, many orders were added in the ATC session.
Finally, part of the positive sentiment can be attributed to large asset managers believe that the recent pull back in Emerging and Frontier markets has been excessive. The world’s largest asset managers such as BlackRock and Franklin Templeton Investments stated that over USD7 trillion in stocks slid into bear territory. Strategists are saying that cheap prices, rising corporate profits and strong fundamentals will outweigh risks from a tit-for-tat trade war, rising interest rates and a potential US recession.
The view has been that E&FM assets offer a combination of a global growth backdrop, decent earnings expectations for corporations and valuations. However this bullish view has been in the minority. Pessimism towards E&FM stocks have hit their highest level in 23 years stated BAML Risk-Love indicator. BAML strategists said that it’s “normally a sign to increase exposure” rather than to “reduce it” as long as it doesn’t coincide with a recession. A further herald to buy the market has been by Franklin Templeton stating that recent headwinds such as trade war tensions or a stronger dollar shouldn’t derail stocks much longer.
Additional tidbits worth noting
1) Developing and emerging markets stocks have rallied an average of 32% in the 12 months after their deepest drawdown of the year according to data compiled by SunTrust Private Wealth. So what does that mean for Vietnam? If we call 900 as the near term bottom, then 32% up from there would means that the VNIndex could possibly rally by year-end back to 1200.
2) Weekly outflows from emerging-market debt funds hit the lowest since the U.S. election in the week ending June 27, according to EPFR Global data. (The last three redemptions of that magnitude or greater preceded rallies in developing-nation dollar bonds during the next three months.)
3) If the past decade is any guide, dollar strength isn’t likely to prove a headwind for emerging/frontier market assets much longer. Sharp rallies in the greenback have typically lasted three to eight months and rarely exceed a year. The latest one is five months deep. (Source:Bloomberg).
Rong Viet Securities Equity Research Summary
Sai Gon Thuong Tin Real Estate JSC (HoSE: SCR) – Robust Apartment Sales to Boost Revenue
TTC Land is a real estate developer, owning a 1,799 hectare land bank. The company is planning to expand its business with industrial parks and tourism.
The company is planning increase its current charter capital by more than 67% in 1Q19 in order to support M&A activities. Share issuance for current shareholders will be prioritized.
TTC Land expects to sell nearly 3,000 units of apartments/villas/land lots in 2018. Major contribution will come from sales from Charmington Iris, which was first launched in 2Q18. Sale was recorded smoothly in 6M 2018 thanks to longstanding experience and TTC Land’s brand names. We see this as important factors to boost the company’s sales in 2018.
Masan Consumer Corporation (UPCoM: MCH) – Positive Growth thanks to Premium Products
Thanks to catching up the trend of FMCG through the “premiumization” of its core portfolio, MCH recorded a remarkable growth rate of 78% in 1Q18, also its revenue is expected to be VND7.646tn (USD333.88mn) (+39% YoY) in 1H18.
Although the growth of FMCG in the 1st five month of 2018 has been slowdown in both urban (+3.8%) and rural (+4.3%) according to Kantar Worldpanel.
In the 2H18, MCH will continue to launch its new innovation pipeline of core portfolio, seasoning and convenience foods.
MCH has signed strategic partnership with Jinju Ham – a leading Korean meat processing company with more than 30 years of experience, owns the lead research and development platform, an important step for MCH to penetrate into the potential meat processing market.
By Marc Djandji, CFA
Head of Institutional Sales, Rong Viet Securities (VDSC) | marc.djandji@vdsc.com.vn
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