“Under normal conditions, a market P/E around 15x is the bottom”
The market last week experienced great fluctuations, VN-Index VN-Index dropped 150 points, HOSE capitalization evaporated 26 billion USD from the peak. Although the market recovered slightly at the end of the week, the strong shaking during the session showed that investor sentiment was still quite heavy.
Assessing the market in a recent sharing session, Mr. Ngo Quoc Hung – Senior Researcher, Market Strategy Department, MBS Securities said that although domestic investors sold strongly, foreign investors tended to net buying trend in the last 4/5 weeks. Even in the week when the market fell sharply, foreign investors continued to collect shares. The expert believes that the net buying trend of foreign investors continues to be positive in the second and third quarters of this year.
According to Mr. Hoang Cong Tuan, Chief Economist of MB Securities Company (MBS), in order to assess the market trend, it is possible to point out a few drops in the past. Accordingly, the market has witnessed 4 sharp declines in recent years. The first is the decline in 2018 that caused the market to lose 25% since the peak; the second is the drop of more than 30% of VN-Index when the Covid epidemic occurred. Even in a great year for stocks like 2021, the market also had 2 drops in January and July when losing 17% and 14.2% respectively.
“Many people question whether the market will decline like in 2018, I say no. Because the context of 2018 the market is very different from the present time. Firstly, the market valuation in 2018 is quite expensive. when P/E is up to 22 times, while having just experienced a strong growth of 55% in 2017. Currently, the market is still attractively priced, along with market quality has also changed with Large number of new investors opened and liquidity exploded. Therefore, the bubble level of the market in 2018 was much higher.”Mr. Hoang Cong Tuan analyzed.
Mr. Tuan also emphasized that it was the deep downward adjustment in the past week that made Vietnam’s valuation more attractive. Up to now, the market P/E is 15.4 times, compared to other countries in the region, which is very attractive. Meanwhile, international organizations have assessed that Vietnam’s growth will lead Southeast Asia this year.
“One thing you need to keep in mind, from 2015 until now, in normal conditions whenever the market hits a P/E of 15 or around 15, it’s a bottom. I emphasize in terms of conditions. Normally, except for the time of Covid epidemic because the epidemic can directly affect the business results of businesses and cash flows on the stock market. /E market never “perforates” the 15x mark. Therefore, it can be said that this is a very strong supportive P//E level of the stock price, which is a point that investors should pay attention to”Chief Economist of MBS said.
According to experts, the psychological pressure of investors may not come from concerns about recent negative information, but rather from stock price fluctuations. If the stock recovers strongly in the next week, it is possible that the information investors are currently worried about will be gone. After the correction, the stock market continued to go up strongly. Therefore, in the current context, experts say that investors should not be too pessimistic about the market. The market went up thanks to the stable macroeconomics as well as the internal foundation of the business, not from rumors. Therefore, even though the market faces shocks, many visionary and brave investors will still win and reap sweet fruits.
“Investors own the stock of the company, not the market, not the bull market that makes us profitable. What matters is whether the investor has a good grasp of the stock and future growth. “, MBS expert assessment
Looking at investment opportunities, the expert suggested two groups of promising industries. Firstly, the securities industry group, because although the market declined, securities companies reported positive growth in the first quarter. Besides, market liquidity is still at a good level compared to the same period last year and the business environment is still favorable. However, investors should pay attention to choosing securities companies that focus on service activities, not just profit from proprietary trading.
Secondly, the power sector is also forecasted to recover strongly after the low background from Covid. The growth rate of electricity mobilization in the first quarter was 8.5%, much higher than over 3% in the previous year. Therefore, investors can consider disbursing into stocks in this industry.
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