Hanoi (VNS/VNA) – After declining in the first two quarters, the VN index showed signs of recovery in the first half of the third quarter.
Last month, the benchmark index even experienced a remarkable breakthrough with a gain of more than 74 points, or 6.2%, compared to the previous month.
The strong rally helped the VN-Index become one of the best-performing stock markets in the world in August, financial website cafef.vn said, citing statistics from Stockq.
The index’s performance outpaced most markets in the region, such as Malaysia, Singapore, Indonesia and Thailand, with these markets growing in the range of 0.5-4.3%, but it just lags behind the Philippines benchmark, which rose 6.9%. in August.
Market capitalization of Ho Chi Minh Stock Exchange (Pipe) also rose by VND300 trillion ($12.74 billion) last month, with the average trading value across three exchanges reaching VND18.5 trillion, up 34% month-on-month .
As a reference NV Index ending last month at 1,280.51 points, its price-to-earnings (P/E) ratio was 13.67x, 12.95 times higher than at the end of July, according to data from Algo Platform. Attractive valuation was one of the factors that drew bottom fishing cash flow to the market.
Capital inflows over the past month flowed into many sectors like retail, securities, chemicals, oil and gas, and building materials, supporting market rallies.
According to VNDirect Securities Corporation, the rebound in the index was fueled by certain events, including lower inflation in the United States and Vietnam, improving domestic market sentiment with expectations that the United States Federal Reserve would slow its rate hike in the last quarter of the year and speculative cash flows.
Liquidity has also recovered significantly, with an average trading value on HoSE of almost VND 15.8 trillion per session in August, a 36% increase from the previous month. Liquidity rebounded across all sectors.
However, the recovery in liquidity was not in line with a gain in new investors. In July, the number of new accounts was just 198,988, down 57% from the record high set in June. It was also the lowest since last November.
Foreign investor activity was also more positive after net selling in July. Their trade value totaled VND45.46 trillion last month, of which they bought nearly VND23.3 trillion and sold VND22.29 trillion. Consequently, foreign investors bought a net worth of VND 980 billion, the lowest monthly value since the start of 2022.
In its latest update, VNDirect said the current market valuation is attractive for long-term investors, who are looking for high earnings growth companies.
With the strong growth in earnings per share (EPS) over the 2022-2024 period, the securities firm said the Vietnamese stock market is still more attractive than in the past and other markets in the region.
Vietnam is a bright spot among emerging markets with a forward P/E of 12.2x in 2022 and the expected 10.4x in 2023, well below the average P/E of the past five years. The market backdrop is improving and the correction is creating outflow opportunities for investors to build portfolios in the fourth quarter and into 2023.
Meanwhile, according to the Vietnam Maritime Commercial Join Stock Bank (MBS), the market is expected to be affected by the global market correction, but could rebound quickly on the back of diversified cash flows. Therefore, declines will be opportunities to restructure portfolios.
Data from the past ten years have shown that September is still the month with a positive growth rate. Thus, the domestic stock Exchange may move in a different direction from negative global trends.
In its bullish scenario, if the VN index returns to 1,300 points, cash inflows will increase to surpass the July high of 1,315 points and head towards the 1,350 level. However, in the baseline scenario, the index will move sideways and oscillate around 1,280-1,305 points./.