Macro 2018M6_Unknown foreign factors _20180706

Macroeconomics

• Q2 FY2018 GDP increased by 7.38% YoY, the highest level in 10 years. Industrial and construction sector recorded the highest growth sector with 9.07% YoY.
• PMI in June increased to 55.7 points, as some indicators in the manufacturing sector grew more strongly thanks mainly to the fact that the manufacturing sector maintained a high growth rate.
• Total retail sales of consumer goods and services 6M2018 were estimated at VND 2,120 billion, up 10.7% over the same period last year.
• Total registered FDI of 6M2018 reached USD 16.234 million (down 3.4% against the same period of 2017). The manufacturing and real estate industries are the two leading sectors in attracting FDI.
• The fluctuation band of the interbank exchange rate in Q2 was narrower than Q1 and fluctuated between 22,765 - 22,990 VND/USD. The interbank rates increase slightly, and the frequency of SBV net withdrawal in Q2 showed that the liquidity of the system has declined but still in an abundance state.

Stock market

• Both HSX and HNX shook sharply in June with strong support stocks while VIC and VHM supported the index. The VN-Index and HNX-Index lost -1.08% MoM and -7.61% MoM respectively; -2.38% Ytd and -9.15% Ytd.
• Average liquidity on both exchange decreased 21.88% compared to May 2018, and remained at 5,519 bil per session and equivalent to nearly 242 million per session. Compared to the second half of 2017, order matching value in the first half of 2018 increased 49%.
• Foreigners were net buyers on the HSX with a value of VND 120.17 bil and net-selling on the HNX with VND 341 bil. In the first half of 2018, foreigners net bought VND 33,924.3 bil on the HSX and net sold VND 1,020 bil on the HNX.
• The VN-Index and HNX-Index reached 18.11 and 11.24 respectively, -1.67% MoM and -7.13% MoM respectively; -0.05% Ytd and -10.05% Ytd. The P/E of the HNX-Index dropped one position to 16th position, the VN Index dropped one position to the sixth position in the region.

Market outlook

• The market is testing the old bottom, and in the accumulating trend waiting for news. The second quarter results will be supportive news for investors in the short term. The market has the opportunity to create a bottom and rise back over 1,000 points, nevertheless. the world factors are the variable of the capability to attract cash flow and help the market recover. Investment activities focus on fundamental stocks that are well -priced. In the third quarter, BSC provided two scenarios for the market as follows:
• In positive case, the VN Index, after fluctuating in the first half of July, will be tested at the 1,000 points levels in the second half of July and maintained a rally mid-August. Adjustment will take place in September. Liquidity will be improved due to the demand of foreign investors and cash flow of domestic investors, although the market will be highly divided. VN-Index will accumulate around the 1,000 points level and its SMA200 moving average.
• In negative case, the VN-Index will perform well until mid-August and continue to decline due to lacks of supportive news and the restructuring process of foreign investors. Index will be tested at short-term bottom and have possibility to drop below 900 points when the blue-chip stocks have weakened significantly.
   

Stock recommendation:

• Industry sector and stocks that we consider positive in the industry report of 2018  (Link) and (Link);
• Banking and Finance stocks have highly improved business results and these stocks benefited from the Law on Supporting Restructure of Credit Institutions and NPLs.
• Real estate and construction stocks benefited from the economic recovery cycle.
• Leading retail stocks have high growth and dividend yields.
• High defensive stocks in consumer, pharmaceutical and electricity sectors.