MARKET S STRATEGY TEAM REASEARCH DEPARTMENT

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1 MARKET S STRATEGY TEAM REASEARCH DEPARTMENT Friday, 22 nd April, 216 EQUITY MARKET REPORT Q1.216 Indexes are expected to reach their old peaks in Q2. Q Highlights IN THIS ISSUE Equity market report in Q1.216 Market outlook in Q Indexes sank in January due to disruptive news from worldwide market. However, after Lunar new year break, market recored positive factors which supported well shortterm upbeat rythm. High segmentation between sectors. Oil & Gas, after a long period of being dovish, showed impressive growth. Meanwhile, Securities and Bank recorded low interest in compared to the other sectors. Large-caps was the main driver of bearish force in the first-half of Quarter and in the bottom interest compared to the other two. Midcaps and pennies were under lackluster impact to downward force in January and brought attractive profit to investors in Q1. Tran Minh Hoang (ext. 112) tmhoang@vcbs.com.vn Le Thu Ha (ext. 117) ltha_ho@vcbs.com.vn Net-sold value recorded by the foreign in Q1. Nevertheless, net-sold value slowed down at the end of Quarter indicated that there was an improvement in Foreign trading. Market Statistic Q1.216 Statistics HSX HNX Index (-3.8%) 79.5 (-1.13%) Volume (mln/day) (+37.22%) (+5.36%) Value (bln/day) 2,24.39 (+28.4%) (-16.68%) Market Outlook Q2.215 Market stands a high chance of experiencing positive movement when new trend formed. Indexes broke out from MA2. It is likely that index will approach its own peak of 64. See disclaimer at Page 8 Macroeconomic, Fixed-Income, Financial and Corporation Information updated at VCBS Bloomberg Page: <VCBS><go> From the end of May till the beginning of June, market may experienced least bright movement as gaining momentum dwindle; risk from macroeconomics from both domestic and foreign market show up when new headlines released. Foreign may reactive in the first half of Q2. We believe that largecap shall regain their spot in top tickers purchased by foreigner. Recommendation: Given the positive status of the market in the first half of Quarter 2, we recommend investors to stay focused on leading stocks group or tickers in the market, stocks with good fundamental factors in the market, or individual supportive news. However, we do exclude chance that overall trend reversed when the positive factors of supportive news dwindled. Research Department VCBS

2 EQUITY MARKET REPORT Q1.216 COMMON TREND OF THE MARKET Indexes sank in January due to disruptive news from worldwide market. Indexes bounced back in the remaining time of Quarter. 216 was the least expect opening due to chaos from worldwide market. Many top stock markets such as the US, Japan logged in Bear market. If in the end of 215, indexes slightly pulled back with condensed liquidity then the early 216 experienced selling-off pressure heated up in almost every sector especially in large-caps tickers. At the end of January, VN Index dived 9.1% and reached the trough of 52. After that, liquidity shrank before and after the Lunar new year holiday. Indexes fluctuated in a tight band around 54 level when investor appeared not to be ready for any trading. However, inflow returned to market later on. As mentioned in Macroeconomic report Q1.216, exchange rate as well as foreign exchange market was well-supported by many factors. Consequently, exchange rate risk partially cooldown was one of the drivers of index s recover at the end of Quarter 1. At the same time, spotlight was the rebound of commodities price. Therein, the most important one was crude oil. All the factors above in accordance with the rumor the business performance of listed firms boosted indexes 11% (calculated from the trough recorded in January) and approached strong resistance level 58. After some unsuccessfully effort of passing 58 level, indexes logged in correction phase, which was around 56 for VN Index and 78 for HNX Index. In the middle of April, there was a twist when indexes broke from 58 level, forming a new trend, which was Research Department VCBS Page 1

3 1/4/216 1/11/216 1/18/216 1/25/216 2/1/216 2/15/216 2/22/216 2/29/216 3/7/216 3/14/216 3/21/216 3/28/216 1/4/216 1/11/216 1/18/216 1/25/216 2/1/216 2/15/216 2/22/216 2/29/216 3/7/216 3/14/216 3/21/216 3/28/216 EQUITY MARKET REPORT Q1.216 against every investor s expectation. 6 Volume VN-Index 3 82 Volume HNX-Index Market s P/E in Q1 edged up but still remained at a low level. P/E ratio of Vietnam market (HSX) was 12.3 at the end of Q1, a slight increase compared with the end of Quarter 1. We believe that the up-trend of P/E in Q1 was dominated by the significant market price increase from some stocks, which strongly influenced index such as VNM, GAS, PVD etc. In the next period, large-caps are likely to regain the leading role. Therefore, we expect that P/E level will continue to press higher. With the price volatility in Q2, investors can reassess P/E ratio of each stock to make reasonable investment decisions. 18 P/E of HSX Source: Bloomberg, VCBS OIL & GAS AND MINERAL STOOD OUT, BANK AND SECURITIES RECORDED LOWEST INTEREST IN Q1. Oil & Gas, Minerals rebounded sharply. Banking, Securities were at the bottom in Q1. In Q1.216, against the gloomy movements in 215 and January 216, Oil & Gas and Mining Products stocks rebounded sharply and became the market s highlights with attractive yields at +2.3% (qoq) and % (qoq), respectively. The positive increase was mainly due to the recovery of crude oil prices from its trough of $26 per barrel to around $4 per barrel. However, we put this recovery down to speculative factor rather than from fundamental factor such economy warm-up. Accordingly, it is unlikely that this positive effect shall remain in Q2. Therefore, we expect that Oil & Gas group shall move sideways or rise slightly in Q2 rather than boosted as it did in Q1. Research Department VCBS Page 2

4 EQUITY MARKET REPORT Q % VCBS Sector Indices 2% 1% % -1% -2% -3% VCBS Oil & Gas Index VCBS Mining Products Index VCBS Food Products Index VCBS Securities Index VCBS Real Estate Index VCBS Banking Index VCBS Insurance Index On the other hand, Q1 recorded the bleak from Banking stocks. Unlike last year, Banking sector did not recognize the mutant factors. Moreover, positive expectations had partly been reflected in the prices, which was a major barrier for banking stocks to break out in Q1. Even this group ended up in red territory at the end of Q1. Additionally, the segmentation among stock groups in was the main reason why this sector could not break through and play the leading role. Reviewing information factors, expectation about the negative impact of Circular No.36 amendment to the Banks operation was also a notable factor. (See more details in the Banking sector update report). With securities sector, the gloomy movements in late 215 and early 216 were considered as a direct factor to downgrade investors expectations of the business performances of Securities firms. However, investors may still consider disbursing on these high beta stocks, especially in the context in which indices likely to move upward in the first half of Q2. Small-cap stocks outperformed the other two groups. Large-cap group fell slightly in Q1 after a strong decline in January. When it comes to capitalization factor, large-cap group was the main factor pulling indices down in early first quarter and only recovered slightly by the end of quarter. Though not being spotlight of market, many mid-caps and pennies rallied durably. Notably they brought huge profits for investors who did bottom-fishing before and after the Tet holiday. However, the opportunities in these stocks did not seem to benefit majority of investors, except for the ones who got themselves accessed to the information in advance. 8% VCBS MarketCap Indices 4% % -4% -8% -12% VCBS LargeCap Index VCBS MidCap Index VCBS SmallCap Index Research Department VCBS Page 3

5 EQUITY MARKET REPORT Q1.216 FOREIGN INVESTORS NET SOLD IN Q1 THOUGH POSITIVE SIGNS WERE RECCORED AT THE END OF THIS QUARTER Moving same direction with worldwide market, foreign investors net sold erratically in January and tent to flee from risky assets. With bearish force of the world s stock market, foreign investors tent to flee from risky assets specially stocks. As a result, foreign investors extended their net sold chain in January and February. However, the foreign all of a sudden turned their position into net-bought. It was predicted that foreign trading in Q2 will soon support upbeat rhythm. 2, 1,5 1, , -1,5-2, -2, ,27 Monthly net bought/sold value by the Foreign 1,675 1,462 1,547 1, , ,121-1, When it comes to Top stocks traded by the foreign: - Foreign investors focused on net buying MBB when it loosens room. On the other hand, 2 ETF funds made a great contribution to the remaining net-bought tickers such as SBT, ASM, NT2, etc. on the basis of their portfolio restructure procedure in February. - Meanwhile, foreign investors focused on net selling mainly VIC with pressure from the convertible bonds from foreign organizations. Nevertheless, many other large-caps such as DRC, HSG, and HPG etc. were also on top of net selling stocks. This indicated money flow appeared to flee from large-caps in Q Top 1 net bought stocks by the 8 Foreign Top 1 net bought stocks by the Foreign VIC DRC HPG HSG PVD PPC HHS BID HAGVCB Research Department VCBS Page 4

6 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 9/15 1/15 11/15 12/15 1/16 2/16 3/16 NAV (USD) No. Outstanding Shares (mn) EQUITY MARKET REPORT Q1.216 ETF FUNDS TRADING WAS DOVISH ETF net withdrew sizable fund certificates. At the same time, the value of net asset also decreased sharply compared with value recorded in Q ETF funds trading was dovish compared to their trading in the same period last year. Generally, Q1 usually experiences strong disbursement by the foreign. However, unfavorable movements at the beginning year extended string of net withdrew capital from the market of two ETF funds Total Asset (mn.usd) VNM FTSE No. Outstanding Shares & NAV No. Outstanding Shares of VNM No. Outstanding Shares of FTSE NAV of VNM NAV of FTSE In Quarter 1, FTSE withdrew about 663 thousand fund certificates, which worth over VND281 bln in Vietnamese stock market. Meanwhile, VNM Fund also recorded a net withdrawal of 2.1 million fund certificates which correspond with value of net withdrawal about VND541 bln. Thus, either the volume of fund certificates in circulation or the value of the two ETFs dived compared to the end of Q This trend was on the contrary to slight net-bought occurred same period last year. We believe the main reasons were (1) disruptive movement from the worldwide market (2) the exchange rate risk especially in the medium and long terms, (3) sharp decline in the large-caps recently. Q2 OUTLOOK: POSITIVE IN THE FIRST HALF Q2. AT THE SECOND HALF, RISK OF REVERSAL With the movement in the market, indexes are likely to maintain positive status in the first half Q2. Market experienced a twist when VN-Index officially overcame 58 with support factors such as cash flow and the breakthrough of many industry giants. Accordingly, we believe that the market might fluctuate in narrow band with uptrend in the first half of Q2. (1) Some of large-caps in Real Estate, Consumer goods, Oil such as VIC, VNM, GAS, etc regained the leading role. Consequently, these tickers supported well upward beat thanks to the individual support information such as business results, the process of extent room for foreign ownership or the risks from the global stock market temporarily halted. (2) That Foreigner began disbursing into the market after the net-sold chain helped to boost inflow to market. At the same time, this movement also support significantly psychological of domestic investors. Research Department VCBS Page 5

7 EQUITY MARKET REPORT Q1.216 (3) Extend room for foreign ownership: shareholders 'meeting season enters the peak period in April. Therein, notably information about the process through shareholders' opinion about extending foreign room or necessary procedures to initially fulfill 6 Decree. In our view, though it is not so massively and were conducted in a number of special businesses such as VNM, DHG, DMC, REE etc. but this information may become spotlight amid the least bright market outlook. (4) In addition, the wave of foreign investment in Vietnam to catch up the TPP trade agreement help to promote bright prospects in a number of sectors such as Real estate, Industrial infrastructure, Building materials, Port, etc. We expect a number of special stocks will be able to outperform the market. Market could witness a reversal by the potential risk at the second half Q2. However, in June, we do not exclude the possibility that the bear side will dominate market. In particular, the motivations shall derive from: (1) The growth of domestic economy had signs of slowdown. Specifically, GDP growth in Q1 settled at only 5.46%. Notably, the slowdown of the manufacturing sector continued to be reflected when the Industry sector increased only 6.2%, much lower than 9% of Q The least bright outlook of worldwide economy particularly from China had a negative impact on the economy of Viet Nam. Accordingly, we maintain a cautious assessment about the economic growth of Viet Nam in Q2 as well as the overall 216. (2) The commodities price appeared to press lower once again after the recovery period. We did not appreciate this statement because the recovery was not accompanied with fundamental factors, especially the warming of the economy. (3) Meanwhile, the dearth of supportive information usually shows up at the end of Q2 when corporate earnings season and the general meeting come to an end while in the semi-annual business results have not been announced or leaked out. (4) Given the lull in the exchange rate pressure in Q1 and that the exchange rate is forecasted to remain stable in Q2, investors may concern about interest rate risk when lending interest rate was under upward force as deposit interest rate hiked in Q1. (5) In addition, the factors related to the Legal Risk. We consider the impact of modifying Circular 36, Circular 7 toward tighten capital management issue. In the context of the National Assembly Elections held in May, we assume that the new legislation may not be released quickly or else there will be a time lag for these legal documents. Thus, this factor will be worth concern in the second half 216. The factors bring duplex impacts: (1) We recommend investors to concern about commodity price movements in the worldwide market. This factor may have a significant impact on production and business situation of corporations particularly manufacturing firms as far as CoGS is concerned. In particular, a reasonable inventory policy may help corporations improve the profit margin as well as business result. On the other hand, without reasonable inventory policy, firms are under pressure of narrower profit margin. (2) In the context of the serious drought in the Middle and the South, Agricultural firms are Research Department VCBS Page 6

8 EQUITY MARKET REPORT Q1.216 likely to suffer negative effects. In reverse, Thermal power enterprises and their raw material suppliers may gain significant benefits. The large-cap stocks in Bank, Real Estate, Construction, Consumer goods may be market drivers. Foreign capital flows are expected to bounce back due to supportive information. In Q2, in the context of the index has successfully conquered the strong resistance level and formed a new trend, we recommend investors to prioritize allocating the portfolio on stocks which drive the market s trend and attract inflows. Besides, the stocks have good fundamentals and supportive information will remain in the spotlight. We assess the Q2 prospects of some sectors as follows: (1) Banking sector: banking profit shall witness a high segmentation. Commercial banks have a negative outlook of earnings when (i) High pressure of provision (ii) NIM settles lower with a view to meeting regulations. On the other hand, commercial banks, which have already completed restructuring process, shall record positive earning. (2) Real Estate- Construction sector: Demand for Construction and Real estate has a considerable growth prospect thanks to the foreign investment ahead of free trade agreements TPP. In addition, the movement of raw material price is the factor that investors should bear in mind. (3) Consumer goods: the spotlight is VNM with information about extending room for foreign ownership. (4) Oil & Gas sector: The movement of this group depends on the crude oil price fluctuation in the worldwide market. The price volatility of this group is very unpredictable and suitable with risk lover investors. Accordingly, we prioritize a short-term strategy before oil prices set a stable price level. (5) Security sector: Market expectation remained positive at the first half of Q2 that made us expect brighter business result from Securities sector over the same period last year. That Foreign has completed the selling convertible bonds of VIC (nearly VND 3, bln since the beginning of 216 to ) is considered as a positive signal. Besides, in Q2, the worldwide economy has recorded supportive new (1) Fed is more cautious in the interest rate hike; (2) Many countries around the world promoted loosing measures such as EU, Japan, etc.; (3) the lull of Chinese risk when the measures which prevent the slowdown momentum, begin to take effect. Meanwhile, the domestic economy also recorded stability with the lower exchange rate risk and opportunities from the TPP agreement, etc. We assess foreign will be active again in Q2 and became an important factor supporting the cash flow as well as domestic investors sentiment. However, the level of excitement will be lower than the same period in 215- when a great deal of supportive information occurred. On the other side, investors may consider restructuring their portfolio in case foreign investors record a net sold especially at the end of Q2. Research Department VCBS Page 7

9 EQUITY MARKET REPORT Q1.216 DISCLAIMER This report is designed to provide updated information on the fixed-income, including bonds, interest rates, some other related. The VCBS analysts exert their best efforts to obtain the most accurate and timely information available from various sources, including information pertaining to market prices, yields and rates. All information stated in the report has been collected and assessed as carefully as possible. It must be stressed that all opinions, judgments, estimations and projections in this report represent independent views of the analyst at the date of publication. Therefore, this report should be best considered a reference and indicative only. It is not an offer or advice to buy or sell or any actions related to any assets. VCBS and/or Departments of VCBS as well as any affiliate of VCBS or affiliate that VCBS belongs to or is related to (thereafter, VCBS), provide no warranty or undertaking of any kind in respect to the information and materials found on, or linked to the report and no obligation to update the information after the report was released. VCBS does not bear any responsibility for the accuracy of the material posted or the information contained therein, or for any consequences arising from its use, and does not invite or accept reliance being placed on any materials or information so provided. This report may not be copied, reproduced, published or redistributed for any purpose without the written permission of an authorized representative of VCBS. Please cite sources when quoting. Copyright 212 Vietcombank Securities Company. All rights reserved. CONTACT INFORMATION Tran Anh Tuan, CFA Tran Minh Hoang Le Thu Ha Head of Research tatuan@vcbs.com.vn Chief Economist tmhoang@vcbs.com.vn VIETCOMBANK SECURITIES COMPANY Investment Analyst ltha_ho@vcbs.com.vn Ha Noi Headquarter Ho Chi Minh Branch Da Nang Branch Phu My Hung Transaction Unit Giang Vo Transaction Unit Can Tho Representative Office Vung Tau Representative Office An Giang Representative Office Dong Nai Representative Office Hai Phong Representative Office Binh Duong Representative Office Floor 12th & 17th, Vietcombank Tower, 198 Tran Quang Khai Street, Hoan Kiem District, Hanoi Tel: (84-4) ext: 14/143/144/149/15/151 Floor 1 st and 7 th, Green Star Building, 7 Pham Ngoc Thach Street, Ward 6, District No. 3, Ho Chi Minh City Tel: (84-8) Floor 12 th, 135 Nguyen Van Linh Street, Thanh Khe District, Da Nang City Tel: (84-511) ext: 81/82 Lawrence Sting Building, 81 Nguyen Luong Bang Street, Phu My Hung Urban Zone, District No. 7, Ho Chi Minh City Tel: (84-8) Floor 1 st, Building C4 Giang Vo, Giang Vo Ward, Ba Dinh District, Hanoi Tel: (84-4) Floor 1 st, Vietcombank Can Tho Building, 7 Hoa Binh Avenue, Ninh Kieu District, Can Tho City Tel: (84-71) Floor 1st, 27 Le Loi Street, Vung Tau City, Ba Ria - Vung Tau Province Tel: (84-64) /75/76/77/78 Floor 6 th, Nguyen Hue Building, 9/9 Tran Hung Dao Street, My Xuyen Ward, Long Xuyen City, An Giang Province Tel: (84-76) F24-F241 Vo Thi Sau Street, 7 th Block, Thong Nhat Ward, Bien Hoa City, Dong Nai Province Tel: (84-61) Floor 2 nd, 11 Hoang Dieu Street, Minh Khai Ward, Hong Bang District, Hai Phong City Tel: (+84-76) Binh Duong Route Phu Hoa Ward Thu Dau Mot City - Binh Duong Province Tel: (+84-76) Research Department VCBS Page 8