Listed corporate profits estimated to increase by 15%, mainly thanks to banks maintaining growth momentum

The above comments were made by analysts in the financial and securities sector, with the expectation that listed profits will continue to increase thanks to the recovery of banking and real estate.

Estimated full-year listed company profits to increase by 15%

With the economic recovery, Director of Analysis of Shinhan Securities Vietnam ( SSV) - Bui Thi Thao Ly expects that profit growth of listed enterprises will boost the stock market in the second half of 2024.

"By the end of the first quarter of 2024, profits of listed enterprises on HOSE will grow by about 11.5% over the same period last year and are estimated to increase by 15% for the whole year, mainly thanks to the growth in bank profits and the recovery of the real estate sector in the second half of the year," Ms. Bui Thi Thao Ly predicted.

In a recent banking industry report, Dragon Capital Securities (VDSC) forecasts that 2024 will continue to be a relatively challenging year for the banking industry, but some credit institutions will see improvements in profit growth. VDSC expects the average after-tax profit growth of banks on the watch list to reach 18% over the same period, with interest income growing 19%.

Along with the gradual recovery of the economy, the stock market has also had a positive recovery since the end of 2023. However, Ms. Ly said that the VNIndex is currently trading at a P/E valuation of around 14x, lower than the 10-year average of 15x, showing that market sentiment is still cautious.

"Statistics by industry group show that the real estate and banking sectors currently have P/E and P/B valuations lower than the average of the past 5 years, while other industry groups have valuations equivalent to or higher than the average, partly reflecting the current risks of these two industry groups," said Ms. Ly.

Listed corporate profits estimated to increase by 15% mainly thanks to banks maintaining growth momentum

In addition, the record net selling of foreign investors is probably the thing that investors are most concerned about in the current period. This group has been net selling continuously for the past 5 quarters and reached a record net selling value in the second quarter of 2024, with more than 30,000 billion VND.

This can be explained by the fact that the interest rate difference has caused investment capital to withdraw from Asian and emerging markets, including Vietnam, and flow to the US.

But currently, the foreign ownership ratio in the Vietnamese stock market is at 17.5%, down only about 0.75% compared to the end of 2023. At the same time, the VNIndex still increased by 11% during this time thanks to the abundant capital flow of domestic individual investors, which absorbed all the selling volume of foreign investors.

Thus, individual investors are the main driving force of the stock market and this group currently contributes to 90% of the total transaction value of the entire market. Therefore, SSV believes that if the low interest rate environment continues to be maintained, it will be an important factor to help individual investors continue to pour money into the stock market in the coming time, absorbing the net selling volume of foreign investors if capital withdrawal activities continue.

At the same time, SSV forecasts that foreign capital withdrawal pressure will decrease in the second half of 2024 and 2025 when the exchange rate cools down following the US Federal Reserve's (Fed) interest rate cut roadmap. More positively, foreign capital flows will soon return if there are more obvious steps in Vietnam's process of upgrading to an emerging market.

Ms. Thieu Thi Nhat Le, General Director of UOB Asset Management Vietnam ( UOBAM Vietnam) said that according to statistics from companies in UOBAM Vietnam 's monitoring portfolio , net profit increased by an average of 14.3% year-on-year and 24.4% quarter-on-quarter.

Exports recorded growth amid improving demand from Vietnam's major export markets. Domestic consumption demand also showed signs of strong growth again with the acceleration of the tourism industry. Capital flows from FDI capital sources continued to grow well...

A sustained low interest rate environment will impact stocks.

In addition, Ms. Bui Thi Thao Ly, Director of Analysis at SSV, said that deposit interest rates have decreased significantly since the end of 2022, although they have increased slightly in June 2024, we expect them to remain low in the second half of 2024. The low interest rate environment is always an ideal condition for the stock market. The amount of investor deposits at securities companies as well as outstanding margin loans are on an upward trend.

There is still room for margin lending to increase as the margin/equity ratio is currently at 77% at the end of Q1/2024, relatively low compared to the peak of around 115% in Q4/2021 and Q1/2022.

"Thus, with a target P/E around the current 14x range and an expected 15% growth in listed company profits, we estimate the reasonable threshold of VNIndex for 2024 to be around 1,390 points, corresponding to a 23% increase compared to the end of 2023 and 10% higher than the current time (end of June 2023)," Ms. Ly added.

At the same time, SSV has higher expectations for the prospect of emerging market upgrade. After nearly a decade of missed deadlines, the opportunity is becoming clearer as some of the following solutions are implemented.

Specifically: (1) Approving the Draft Circular amending circulars related to foreign investors' margin solutions and English information disclosure; (2) Resolving issues regarding foreign ownership limits and room for foreign investors; (3) Improving the level of liberalization of the foreign exchange market; (4) CCP mechanism...

In the most optimistic scenario, Vietnam will be upgraded to emerging market status by FTSE and MSCI in 2025 and 2026, respectively, estimated to attract 4-7 billion USD from investment funds focusing on emerging markets.

Statistics show that the stock market usually booms in the two years before an upgrade and has an average increase of about 23% between the announcement of the upgrade and its effective date.

Despite an optimistic outlook for Vietnam's macroeconomic and stock market prospects in the second half of 2024, monetary policy risks and escalating geopolitical tensions remain present and require attention in the second half of 2024.

However, the Fed’s ability to continue to delay rate cuts or to cut them more slowly and gently than other central banks around the world could keep the dollar strong against other currencies for longer. And as rates rise, imports become more expensive, which would spur inflation and increase pressure on monetary policy.

UOBAM Vietnam General Director Thieu Thi Nhat Le also commented that the low interest rate environment will continue to be maintained (although policy interest rates may increase slightly) to support economic growth; FDI capital continues to grow well, mainly due to the potential of Vietnam's semiconductor industry.

At the same time, the government's policy of promoting public investment to boost economic growth; and the determination of the government and management agencies in upgrading the Vietnamese stock market from a frontier market to an emerging market... are factors that will positively impact the stock market in the coming time.

The next factor is that the low interest rate base is being maintained at a low level to support growth. Although savings interest rates and OMO interest rates have increased slightly recently, they are still quite low compared to before. This will also positively support the stock market.

The government’s policy of boosting public investment to boost economic growth. In addition, exports are positive, attracting increased FDI capital, and at the same time, Vietnam is gradually upgrading its stock market from a frontier market to an emerging market…

For investors who have long been considered to have the ability to withstand risks, once the savings interest rate level drops, investors will switch to other investment channels, including stocks.

According to Ms. Le, unlike before, many people think and in fact, many investors come to the stock market with the intention of just surfing, but now the investment strategy of many investors has a more long-term view, instead of just short-term. This is also a positive thing for the Vietnamese stock market.

But it is also important to note that the risks mentioned above such as: the US Federal Reserve (Fed) not lowering interest rates soon, escalating geopolitical tensions may continue to put pressure on the VND/USD exchange rate and impact investor sentiment.

Source: https://baodautu.vn/loi-nhuan-doanh-nghiep-niem-yet-uoc-tang-15-chu-yeu-nho-ngan-hang-duy-tri-da-tang-d218852.html