Commentary on stock market in the last month of the year

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The stock market recovered quickly in the first half of December. Photo: Internet

Price Earnings Ratio (P/E) may return a reasonable valuation in December

According to market research units and experts, since November, the stock market has recovered, which is a driving factor for the market. There will be more positive signals in the last month of the year.

The massive sell-off on the Vietnamese stock market lasted in the first half of November, and the VN-Index fell to a low of 873.78 points.

In the second half of November, the market recorded an impressive recovery. The VN-Index gained 20% from the bottom and closed at 1,048.42, up 2% from the previous month and down 30% from the previous year.

The strong recovery of the market in the second half of November, based on the expectation of the Government's supportive policies, will help prevent the instability in the real estate and financial market from becoming more serious and the significant net purchasing of foreign investors.

The stock market data shows that at the end of the trading session on December 14, the VN-Index increased by 2.98 points or 0.28% to 1,050 points.

According to Mirae Asset Vietnam Securities Company, the P/E at the end of November was 11 times, which is the low valuation in history. However, it is forecasted that the P/E may return to a reasonable valuation about 12-13 times by the end of December thanks to factors such as: the decrease in interest rates after recent FED signals, recovery of the global financial markets, improvement of market sentiment, the recovery of exports to China.

DSC Securities Joint Stock Company said the market's strong recovery in November mainly resulted from bottom-fishing foreign cash flow. From November to early December, the market sharply increased from below 900 points to 1,100 points within three weeks. As a result, the VN-Index surged, exceeding many people's expectations. Since December 5, the market has a certain accumulation. The market is waiting for the results from FED's meeting in December for the next development steps.

The company said the market is still stable in the short term, supporting the recovery trend. The accumulation period within 1-3 weeks is needed during each bull run. "If the December Fed meeting has good signals, domestic investors will be more confident. There may be a new uptrend in the short term between the end of the old year and the beginning of the new year. The second half of December may witness more drastic investment. In the negative scenario, 980-1,000 points will play a very strong supportive role when this is the point where foreign investors buy very aggressively", DSC said.

VN-Index may return to the range of 1,180 - 1,200 points

According to experts, factors affecting the market in December. The public investment activities were promoted at the end of the year to achieve the targets; FDI capital recorded positive signs; the foreign exchange market, interest rates and liquidity reduced the pressure to repay maturing corporate bonds; China gradually eased Covid-19 pandemic prevention and control measures in addition to effective supporting solutions for the real estate market and domestic people; information on the expanding of credit room to support the economy and enterprise was provided.

Forecasting the stock market scenarios in the last month of the year, experts from the Securities Company of Bank for Investment and Development of Vietnam (BSC) said there are two possible scenarios. According to scenario 1, foreign investors' cash flow maintains a strong net buying momentum, positively impacting the market.

The FED's message to reduce the interest rate increase since December 2022 after the US inflation data showed signs of peaking and the gradual removal of Covid-19 prevention and control measures by China will create favourable conditions for the Vietnamese Government to take measures to support the domestic economy.

In addition, the acceleration in disbursement in the year-end period and positive signs of the bond market will help VN-Index return the range of 1.180-1.200 points.

Besides, the urgent disbursement of public investment capital in the last month and the optimistic signals about the bond market will motivate VN-Index to return to the range of 1,180 - 1,200 points.

In scenario 2, the bond market does not have positive signs and the measures to support domestic enterprises and disbursement of public investment do not meet expectations. On the other hand, the slowing down on foreign investors' net buying momentum and the investors' profit-taking sentiment will make VN-Index return to the threshold of 1,000 points. If there are adverse information and developments in the country and in the world, VN-Index may return to lower points.

Mr Do Bao Ngoc, Deputy General Director of Vietnam Construction Securities Company (VNCSI), said the VN-Index fluctuates around the threshold of 1,030-1,050 points. Although, currently, investor sentiment is more cautious, investors will often close the book, so the end of this year will not have many fluctuations in the index. Ngoc said that the VN-Index would be at the threshold of 1,030-1,100 points at the end of 2022.

According to the recommendation of some market research units on investment strategy, investors should prioritize large-cap stocks, groups of stocks that will benefit if China opens its economy soon. Besides, investors need to monitor foreign cash flows and domestic and international developments - especially the opening situation in China and the decisions of the Fed, and the ECB in the December policy executive meeting.