Strategy Note /

Vietnam investment strategy – March 2020

  • Spread of COVID-19 leads to net selling in equity and bond markets

  • We stay cautious on most sectors, until we see some upside from resumption of operational activities

  • The AGM season and upcoming IPO of VN Diamond will likely balance market outlook

Lam Nguyen
Lam Nguyen

Banking, Market Strat

Hoang Nguyen
Tu Vu
Son Tran
Rong Viet
5 March 2020
Published byRong Viet

The spread of COVID-19 outside China has raised concerns for foreign investors in Vietnam, leading to net selling in equity and bond markets. As a highly liquid frontier market, Vietnam’s stock market is subject to obvious net selling pressure in the current risk-averse environment. Until the outbreak is contained to some extent, we believe the net selling from foreign investors will not stop.

We believe the ability to resume the supply chain of raw materials for textile, footwear, electrical and electronics industries will be important. Since most of Vietnam’s raw material supply come from China (more than 30%), the country’s ability to control the disease outbreak and the restoration of business operations will be important.

The Vietnamese government and various ministries have been evaluating the impact of COVID-19 on corporations and proposing supportive measures. The size of those has not been confirmed yet, but it will focus on (1) reducing borrowing rates, rolling over overdue loans and (2) reducing taxes (corporate income tax, environment tax etc). Besides, the government will boost its budget for public projects, aiming to create jobs and stimulate demand. The synergy of monetary and fiscal policies, if they are applied correctly, could potentially offset the impact of COVID-19 for companies’ 2020 business results.

However, until we see more upside towards the resumption of operational activities, we stay cautious on sectors such as agriculture, fishery, import-export, hotels, restaurants, tourism, aviation, F&B, transportation, textile, O&G and education.

Beyond the gloomy outlook from COVID-19, the AGM season and the upcoming IPO of VN Diamond will balance the outlook for the market. We expect the market’s low PER could attract local investors in the late part of March. Hence, investors could allocate a part of their portfolio to stocks related to those beat-up names at that time. We recommend that investors not use leverage at this time.

Some of our favourite stocks in March include:

  • Pharmaceutical: PME (Buy), IMP (Accumulate)
  • Industrial: REE (Buy), DRC (Buy)
  • Bank: VPB (Buy)
  • Retail: PNJ (Buy)
  • Following COVID-19: ACV (Accumulate), SCS (Buy), VHC (Buy)