Having just gone through a turbulent second quarter, what will the stock market situation look like in July?
July is the time when businesses start to publish their second quarter and semi-annual financial statements, this is an important source of information to create motivation for the stock market. In fact, VN-Index also has a high probability of gaining in July with the last 6/10 years prospering, especially the 5-year consecutive increase in July from 2013 to 2017.
However, the trend has begun to reverse in the past 2 years, the market had many unfavorable movements in July with the VN-Index falling quite deeply. In 2021, this index even dropped nearly 7%, recording the strongest volatility in the past 10 years.
There are many reasons that can explain the unfavorable fluctuations in the past 2 years mainly due to the impact of the Covid-19 pandemic. Distance measures limit production and business activities, negatively affecting the profits of many listed companies. This partly makes the market lack of momentum.
It should also be noted that, before entering July of the last 2 years, the market had strong periods of prolonged increase. Therefore, the pressure to take profit is inevitable, VN-Index’s fluctuations are not really favorable nor too surprising.
The context of this year has been markedly different when the market has just experienced a turbulent second quarter, the VN-Index has lost 20% after 3 consecutive months of decline and is fluctuating around the 15-month trough. Liquidity gradually dried up, showing that the supply of stocks has also somewhat dwindled after recent consecutive deep declines.
According to data from Algo Platform, VN-Index’s trailing P/E is currently around 12.8 times, much lower than the 5-year average (16.3x) and 10-year average (14.5x). The current valuation is only equivalent to the beginning of July 2020 (13.4x) and much lower than the figure of nearly 18.8x before entering July 2021.
In the short-term, it is difficult to accurately forecast market movements, but the long-term prospects of Vietnam’s securities are still considered positive thanks to the stable macro situation, relatively reasonable valuation and strong growth. Profit growth of listed companies is high.
In a recent report, VNDirect forecasts that Vietnam’s GDP growth in 2022 will remain unchanged at 7.1% over the same period, of which GDP growth may reach 7.8% over the same period in 6 months. end of 2022. In the next 2 years, this securities company expects the growth rate of net profit of companies listed on HoSE can reach 21% over the same period, double the rate of the past 15 years.
Similarly, Dragon Capital assesses that the profit growth of the whole market is quite certain with an expected level of over 20%. With the index around 1,200 points, the market valuation is already quite cheap with a forward P/E 2022 of about 11.x times. Mr. Le Anh Tuan, Deputy General Director of Investment Dragon Capital said that “We are on the gold mine in the next 5 years” but also noted that investors need to prepare psychologically to go through the “bomb craters” before touching. to the “gold mine”.