ANTD.VN - Declining profits of listed companies in the third quarter, along with several other factors, caused the stock market to fall sharply in October. However, experts still expect the market to recover soon from these "bruises".
Listed companies' profits declined in the third quarter.
The third quarter was not a very positive one in terms of business results for listed companies. Many companies recorded worse-than-expected business results.
According to estimates by VNDirect Securities, contrary to expectations of a recovery in the third quarter, the net profit of listed companies on the three exchanges (HOSE, HNX, UPCOM) decreased by 5.5% compared to the same period last year.
Of the 46 companies on this securities firm's watchlist, 46% fell short of expectations, 41% closely followed forecasts, while only 13% exceeded predictions.
The optimism from the second-quarter earnings season was not replicated in the third quarter, leading to a more negative investor sentiment.
"Due to higher market expectations for earnings results in the second half of 2023, the third-quarter earnings season failed to stem the recent sharp sell-off," VNDirect stated.
According to reports, steel and oil and gas were the leading contributors to growth, while chemicals, electricity, and real estate were disappointing.
Mid-cap and small-cap companies recorded more negative business results compared to large-cap companies in both the third quarter and the first three quarters of the year.
The total net profit of small and medium-sized companies decreased by 14.8% and 24.6% respectively compared to the same period in the third quarter.
The total net profit of VN30 in the third quarter decreased by 3.1% year-on-year and by 3.8% compared to the previous quarter. However, 14 companies recorded year-on-year net profit growth, led by PLX (+646%), VJC (+232%), SSI (+111%), and VRE (+66%).
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Third-quarter profits of listed companies fell short of expectations. |
Among the 16 companies that recorded a decline in profits, MSN and MWG saw decreases of 91% and 96% respectively compared to the same period last year. Notably, VIC's net profit decreased by as much as 171% in the third quarter compared to the same period last year, due to the company recording a significant one-time revenue from the transfer of shares in a subsidiary worth VND 8,937 billion in the third quarter of last year.
One of the "headwinds" for businesses is high interest costs, which put pressure on profits.
Accordingly, despite reaching a multi-year high in Q2/2023, interest expenses continued their upward trend into Q3, increasing by another 0.2 percentage points compared to the previous quarter, reaching 6.8%. This indicates that the State Bank of Vietnam's interest rate cuts have not yet impacted the profits of businesses.
Therefore, overall operating profit is still being eroded by financial costs despite the State Bank of Vietnam having cut policy interest rates several times since March and deposit interest rates returning to pre-Covid-19 levels. Experts expect interest costs to decrease in the coming quarters as banks have started lowering lending rates since the third quarter.
Additionally, the leverage ratio reached a record low of 60.7%, 0.3 percentage points lower than the previous quarter, as companies focused on debt repayment.
Will the market recover by the end of the year?
In the third quarter, the Vietnamese stock market was not very positive, especially in October.
By the end of October, the VN-Index had lost 10.9% compared to the previous month, erasing most of the gains since the beginning of the year and recording its largest monthly decline in 12 months.
According to Maybank Investment Bank (MSVN), the factors causing the market decline, in addition to lower-than-expected third-quarter profits, include: increased foreign exchange pressure, escalating geopolitical tensions (Israel – Hamas), and a decrease in informal margin lending activity.
However, MSVN believes that although profit growth in the third quarter was weak, it will be better in the fourth quarter. Based on the low comparison base in the fourth quarter of 2022, the analysis team estimates that the profits of the entire market in the fourth quarter of this year will increase by approximately 36% year-on-year.
Regarding the macroeconomic situation, Maybank believes that the control of exchange rates and inflation allows the State Bank of Vietnam (SBV) to continue its supportive policies. MSVN maintains its inflation forecast at 3.4% for 2023 and 3.5% for 2024. Furthermore, in the foreign exchange market, the combination of the SBV's issuance of treasury bills and the movement within the range of the US dollar index (DXY) has temporarily halted the recent depreciation of the VND against the USD.
Analysts predict that the State Bank of Vietnam (SBV) will sell USD to stabilize the market if the VND depreciates by another 1-2% (or 5-6% since the beginning of the year). The SBV may even accept a further depreciation of the VND this year (compared to the previous 2-3% annual rate) as pursuing more accommodative policies to support the recovery of domestic businesses is currently the top priority.
Based on the State Bank of Vietnam's supportive stance on loose monetary policy and the projected increase in Q4 2023 profits, MSVN expects the stock market to recover from the "bruises" of October.
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