Foreign investors were net buyers of Asian shares on hopes the U.S. Federal Reserve would slow with its monetary tightening measures this year and trade talks would unwind some tariffs, bolstering world trade.
Indeed, there are some good signs. U.S. officials visited Beijing for trade negotiations last month, led by Robert Lighthizer, the hard-nosed United States Trade Representative, which promises some agreements to take place in May. Meanwhile, the Fed also pointed towards only one rate hike in 2019.
Inflows into ETFs have been particularly strong YTD, especially in India, Brazil, South Africa, Saudi Arabia, and Vietnam. In Vietnam, USD 110 Mn has flown into ETFs tracking the stock index in only two months of 2019, much higher than the previous 12 months.
It seems that most of the good news about US-China trade, growth and interest rates has been priced in. If inflows into ETFs continue, the ‘party’ can last but it will eventually end at some point. The VN-Index has done well lately and could test the 1030-1050 level, however we doubt there is juice to push past that for now.
Vietnam remains a stock picking environment. Thus, we recommend investor to focus on stocks with sound fundamentals and a good growth stories. Many of those are in the midcap space and some smart money will eventually find them, as what happened with Textiles and Thermal Power stocks.
Volume is the main indicator to watch: if stocks move up on lower volume, it indicates that investors are not participating.
Some events of notice set to happen in March such as the two ETFs reviews, FOMC, Brexit, US-China trade negotiations continued, may leave the equity market fluctuating in a narrow band. We think that this situation is necessary to help the market rebalance, especially as VNIndex faces resistance at 1000-1025 points.
March 2019 Strategy Webinar Invitation
On the back of the latest Strategy Report, VDSC is organizing March 2019 Strategy Webinar on Friday, March 8, 2019 4:00 PM – 5:00 PM (GMT +7). If you would link to join the event to receive VDSC’s top investment ideas and to learn how its strategy will help your investment decisions.
Registration URL: https://buff.ly/2C4V5Yv
(if the link doesn’t work, copy & past it in your browser)
Topics will include:
- VDSC’s view on the current Vietnam macro picture
- Stock market outlook for March and the rest of the year
- Some of top investment ideas
There will be a Q&A session.