According to the May strategy report, VNDirect Research expects a series of recently issued support policies such as Circular 02-03 or Decree 12 to help improve investor sentiment and cash flow in the stock market.
VNDirect experts believe that the negative business results of the first quarter of 2023 have been largely reflected in the recent correction. The 1,000-1,030 point zone will be a strong support zone for the VN-Index and if the market corrects to this zone, it will open up attractive opportunities to buy and hold stocks for medium and long-term goals.
The driving force for the increase in points includes the more dovish monetary policy from the Fed and the soon-to-be-issued support policies such as the revised Circular 16 or the National Assembly 's Resolution on VAT reduction, etc. The risk of a decline in points comes from the risk of recession in the US and Europe.
Regarding the investment sector, VNDirect said that public investment is still the focal point throughout 2023 when total realized public investment capital increased by 18.1% over the same period in the first quarter of 2023, to VND91,500 billion, higher than the growth rate of 12.3% over the same period last year.
In addition, the analysis team believes that a series of policies recently issued will help improve the banking industry's prospects. In addition, the banking industry is one of the few industries to maintain positive profit growth in the first quarter of 2023 as well as the whole of 2023 and valuations are attractive compared to history.
The spread between market yields and deposit rates has widened due to rate cuts (Source: VNDirect).
VNDirect forecasts that market profits will fall by about 14% in the first half of 2023, then be more positive in the second half, bringing the full-year growth to about 12-14%. Aviation is the industry that recorded outstanding profit growth thanks to the almost complete recovery of international flight frequencies.
Construction materials will have a better year as input prices (coke, iron ore) reverse. In contrast, 2023 profit growth in the chemical and oil and gas sectors will decline from a relatively high base in 2022.
Comparing the correlation between the earnings per share (E/P) ratio of VN-Index and the average 12-month deposit interest rate of commercial banks, VNDirect believes that the average (E/P) of VN-Index in March was around 8.7% (excluding the dividend yield of 1.7%).
The gap between E/P and 12-month bank deposit rates continued to widen in April as deposit rates fell and the stock market also fell.
Although the current gap between E/P and deposit interest rates is not as attractive as in October-November 2022 for investors to be able to disburse aggressively into the stock channel, with the expectation that deposit interest rates may continue to decrease in the next 1-2 months, the gap may continue to widen and investors can consider gradually increasing the proportion of stocks in their investment portfolio.
VNDirect forecasts that the profit growth of the whole market will recover in the second half of 2023 (Source: VNDirect).
Recently, on the night of May 3, the US Federal Reserve (Fed) decided to raise interest rates for the 10th time in just over a year, by 0.25 percentage points, to a range of 5-5.25%, the highest level since the summer of 2007.
With this increase, the US central bank's lending rate has increased a total of 5 percentage points from near zero in March 2022, marking the fastest period of increase since the 1980s.
But the Fed has now signaled that it may not continue to raise interest rates, which were designed to curb high inflation in the United States but have also contributed to the collapse of three banks in the past two months.
Accordingly, VNDirect Securities expects the State Bank to further reduce operating interest rates such as refinancing interest rates, ceiling interest rates for deposits with terms of less than 6 months, etc. by 50 basis points in the second half of 2023 (high probability in the third quarter of 2023).
At the same time, it is expected that a series of policies will be issued to remove difficulties and support business growth. Circulars 02 and 03 of the State Bank issued on April 23 open up a legal corridor for banks to restructure debts and support liquidity for the corporate bond market.
At the same time, the Government has just issued Decree 12, effective from April 14, allowing an extension of tax payment deadlines for certain types of taxes to support people and businesses .
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