03/15/2021

Korea Investment Management Co., Ltd.

VN Market Weekly Commentary – 12th March 2021

The VNIndex edged up by +1.1% WoW this week, led by Materials (+2.8% WoW), Healthcare (+2.4% WoW), Financials (+1.9% WoW), Information Technology (+1.4% WoW), and Real Estate (+1.2%); while being pulled back by Energy (-3.9%) and Utilities (-0.4%). Two key headwinds continue to have downward pressure on the market this week – the trading glitch issue of HOSE and continuing foreign outflows.
We have mentioned the trading glitch in our weekly commentary last week. The Ministry of Finance has turned down the proposal to increase the trading lot from 100 stocks to 1,000 stocks on HOSE, which is investor-friendly towards retail investors. Some companies volunteered to switch to HNX’s system, but it is not a popular decision for most of the HOSE-listed companies. We expect the trading glitch to prolong and there would be no improvement at least in the next 2-3 months. However, in our opinion, the trading glitch does not change the fundamentals of the firms and this should not impact long-term investors’ views on the stocks.
On the foreign outflows, this week foreigner’s net selling value reached US$155m (vs. last week’s number of -US$134m) and cumulative foreign net outflows YTD have reached a considerable number of US$567m. The foreign selling concentrated in some major blue-chips, including VNM, VHM, HPG. We observe the selling pressure is higher when VNIndex is approaching 1,200 pts, the level at which the market achieved in early 2018 – a period in which foreign inflows were very strong.
We noticed Dragon Capital divested one of its top holding, a leading private bank ACB, through several put-through transactions worth ~US$150m this week. The buyers are mainly other foreign funds, some of which have sold other stocks to buy ACB. This may partially explain the strong foreign net selling amount recently. On the other hand, we believe Dragon Capital will likely rotate the proceeds to other stocks, which should lead to foreign buying in the time to come.
The fact that the market is very resilient amid the strong selling of foreign investors demonstrated the strong inflow of domestic investors. We think the new retail account opening will continue to maintain solid growth in the near future.
Another important news is on VP Bank. There are rumors that VPB will do partial divestment of its consumer credit arm FE Credit at a valuation around US$3bn, translating in PBR of ~4.0x. Shares of VPB rose +6.5% during the week.
Most companies will publish Annual General Meeting agenda during the month of March. So far, we have observed positive signals on profit guidance, - especially in the banking sector with high double-digit growth. Solid 2021 earning number would support investors’ sentiment and attract capital inflows into the stock market.

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