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Vietnam Strategy: June 2021 – Prepare for new opportunities

  • Although buying opportunities will become more limited, we note that macro data continues to improve
  • This is an apt time to restructure investors’ portfolio; we continue to favour HPG, PNJ, LHG, MWG, VCB, ACB, TCB and DXG
  • Investors should consider reducing PPC and DPM

The market will move into a "quiet period" once Q1 21 business results are fully released. Although buying opportunities will become more limited, we note that macro data continues to improve compared with the previous month (the annual growth figure has become rather meaningless due to last year’s lockdown restrictions in April), reinforcing the sustainability of the economy post-Covid. The index of industrial production (IIP) increased by 1.1% mom; April total retail sales of consumer goods and services inched up by 2.3% mom; PMI expanded for the third consecutive month, reaching 54.7 points in April.

According to IHS Markit, Vietnam's manufacturing sector has witnessed the eighth consecutive month of increase in the number of total new orders while the number of new export orders also continued its rise amid improving international demand. The increased number of new orders also indicated customers’ stronger confidence in the sustainability of the growth outlook. 

Meanwhile, April CPI decreased by 0.04% mom, and increased by only 0.89% in 4M 21, indicating that inflationary pressure is not something to worry about yet and the low interest rate environment is expected to continue for the foreseeable future. This, in our view, is favourable for leading companies to record positive business results in coming quarters. Within our covered stocks, 2021 net profit of some large-cap stocks are forecast to see quite robust growth, including real estate stocks (+128 % yoy), steel producers (+ 104% yoy), banking stocks (+ 25% yoy), retailers (+ 25% yoy), and IT (+ 21% yoy). We are positive on equities for the rest of 2021. 

We believe this will be an appropriate time to restructure investors’ portfolio and wait for opportunities to accumulate/hold stocks that are forecast to outperform in 2021 and 2022. Accordingly, we continue to favour HPG, PNJ, LHG, MWG, VCB, ACB, TCB and DXG. 

On the other hand, investors should consider reducing PPC as the one-off high cash dividend plan has materialised following the company’s recent AGM. This also applies to DPM as the company’s Q1 21 results missed our expectations and we are less optimistic about its Q2 21 outlook because: (1) DPM will cease production for machine maintenance for about a month and (2) unfavourable output price movement.

Finally, we recommend adding four stocks to investors portfolios: LTG, GMD, SMC, and MSH.


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