VN-Index may make some leaps, reaching the 1,300 point mark

SSI Research: VN-Index may make some leaps, reaching the 1,300 point mark

Record low interest rates will be a major growth driver for cash flows, especially for individual investors. This capital flow is the driving force that can help the VN-Index achieve some breakthroughs in 2024.

Bad debt mystery: Real estate and banking industry prospects may not be favorable in 2024

In the 2024 Strategy Report recently published by SSI Securities Company Analysis Center (SSI Research), experts said that this will be a year of strong fluctuations, with a strong recovery that can follow immediately after a deep adjustment.

Stock markets are often influenced by both money flows and fundamentals. The movement between money flows and fundamentals could lead to different stock market reactions in 2024.

In terms of fundamental factors that may affect the market, analysts from SSI Researcho emphasized that 2023 is a year with many measures to “delay the time” for the real estate and financial markets to return to normal. Therefore, a recovery is expected to help the financial system avoid major challenges in 2024.

In SSI’s view, economic recovery is likely to become more evident in the second half of 2024, with exports increasing thanks to lower global interest rates and a gradual return of consumer confidence. Domestically, the main focus will still be on the recovery of the real estate industry in the context of real estate businesses needing to quickly resolve legal issues of projects and facing a high real estate lending rate. If liquidity in the real estate market and corporate bonds does not recover quickly, consumer confidence will be affected.

In 2023, the real estate industry recorded key highlights including the relatively slow resolution of legal issues of existing real estate projects and a number of important new regulations (Land Law, Housing Law and Property Law) recently passed by the National Assembly with the aim of strengthening the protection of homebuyers' rights and making the market healthier.

In 2024, if the legal issues of existing projects are not resolved soon, SSI Research forecasts that M&A activities will increase sharply and focus on projects that have sufficient legal status. Estimated supply will therefore be able to improve positively from a low base level in 2023. Market liquidity continues to improve for the mid-range segment in major cities, where there is a large shortage of supply, although the rate of improvement may be slow due to high selling prices. On the other hand, the resort real estate segment may continue to face many challenges.

Basically, capital raised from selling legally qualified projects can help real estate companies buy more time until legal issues for pending projects are resolved.

“We forecast that the recovery of the real estate market will be differentiated between segments and will take more time to fully recover. Only real estate companies with good financial health can overcome the challenges in 2024.” With close ties to the real estate industry, SSI Research forecasts that the bad debt ratio of banks may peak in the third quarter of 2024 and then decline again according to the baseline scenario.

The outlook for the real estate and banking sectors may not be favorable in 2024. The expected recovery process is gradual, not to mention a number of factors that need to be closely monitored, including the draft land tax currently being developed by the Ministry of Finance, which will have a major impact on real estate demand. In addition, other fundamental factors that need to be closely monitored include the global geopolitical situation and policies supporting domestic economic recovery.

VN-Index at the end of 2024 is 1,300 points, cheap capital flow motivation

In terms of cash flows, record low interest rates will be a major driver of growth, especially for individual investors. Bank deposits are still growing as other investment channels are quite limited (gold prices have increased significantly, while the real estate sector and corporate bonds need a long time to recover).

“This capital flow may return to the stock market in stages in 2024. Since individual investors account for up to 92.2% of the average daily trading volume of the entire market in 2023, VNIndex will have some leaps in 2024 thanks to this capital flow,” SSI's analysis team predicted.

Meanwhile, foreign cash flow is not expected to recover immediately, but at least the selling pressure is not as strong as last year. Foreign investors had a net withdrawal year in 2023, but this securities company expects this trend to reverse in 2024 following the Fed's gradual interest rate cut and the opportunity for the Vietnamese stock market to be upgraded by FTSE Russell in 2024-2025. The upgrade to Emerging Market is an event that investors have long awaited.

According to SSI Research's calculations, although growth in 2024 is not too strong, some industries can recover significantly with after-tax profit growth of more than 30%, including steel, retail and securities, which stand out compared to other industries. Some other industry groups that the company also maintains a positive view on are the information technology industry and industrial park real estate based on long-term growth potential.

“Both retail and foreign investor flows have been favorable for the stock market this year, while fundamentals remain questionable given the aforementioned factors to watch. 2024 is expected to be a volatile year, with a strong recovery likely to follow shortly after a deep correction. We recommend buying on a sharp correction,” the report said.

SSI Research believes that the fair value for the VN-Index at the end of 2024 is 1,300 points, although there may be times during the year when the market exceeds this threshold. According to SSI's analysis group, profit growth will be the main driving force for stocks to increase significantly this year. In addition, in the context of record low interest rates, high dividend yields also become an attractive factor.

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