Strategy Note /

Vietnam investment strategy – April 2020: Looking at stocks for the long term

  • Covid-19 impact: liquidity or debt crisis may not happen due to appropriate fiscal and supportive monetary policies

  • Sectors heavily affected include aviation, textile, insurance, O&G, securities, retail, logistic, construction

  • Most sectors (retail, insurance, F&B and power) could recover quickly after the pandemic is contained

Lam Nguyen
Lam Nguyen

Banking, Market Strat

Hoang Nguyen
Tu Vu
Son Tran
Rong Viet
7 April 2020
Published byRong Viet

The outbreak of Covid-19 in countries outside of China since mid-March resulted in an extreme reaction by financial investors globally, raising concerns of an upcoming economic crisis. In Vietnam, however, we think a liquidity crisis or debt crisis may not happen due to appropriate fiscal and monetary supportive policies from the government and the State Bank of Vietnam (SBV). 

The lockdown situation, not only in Vietnam, but also in countries that are Vietnam’s main trading partners could result in a short-term demand shock. A slowdown of the economy will negatively impact companies’ business results in 2020. To take account for the pandemic, our analysts have reviewed the outlook for their sectors and have revised down their estimation on companies’ business results. Our base case is that the pandemic will be contained by the end of Q2 2019 globally. As such, our conclusions are the following: 

1. Sectors that will be heavily affected include aviation, textile, insurance, O&G, securities, retail, logistic and construction;

2. It is a demand shock much more than a supply shock. Some businesses will be more affected than others;

3. Supportive policies from the government will merely help companies go through the difficult period rather than be a long-term booster for companies’ bottom-line;

4. Meanwhile, we believe that most sectors could recover quickly after the pandemic is contained, especially in areas such as retail, insurance, F&B (milk) and power;

5. Our adjusted market forecast NPAT and EPS growth for 2020 are 11% and 7% yoy, respectively, significantly lower than the forecasted growth of 22% and 18% yoy at the beginning of the year. Industrials, consumer services, financials and banking are sectors which will see a sharp downward adjustment;

6. After a tough year in 2020, 2021 will be a high-growth-year for sectors such as industrials, consumer services and banks. 

We know that the spread of the pandemic is still a moving variable with no way to predict when it will subside. Therefore, we predict that high volatility for the stock market will be with us for a while until there are signals that the pandemic is controlled globally. The high volatility in the market suggests that there are opportunities for investors to benefit from mis-priced stocks. For most of investors, we believe that a buy-and-hold at low price strategy is still applicable at this time. Our ideas for this month include stocks with high dividend yields or with strong fundamental companies yet oversold. 

Some of our favourite stocks this month are: MWG, VPB, PNJ, HPG, FPT, MBB, VNM, ACV and ACB.