The VN-Index moved sideways within a range of 670-690 during the month, but was more inclined to a slight downtrend, finishing October at 675.8, down 1.45% from the end of September. The VN-Index started off the month weak and fell to the bottom of the month at 674.19 on October 10, mainly sparked by a big sell-off in the steel sector when the market became anxious on news of big expansion commitments from HPG and HSG and the possibility of excess capacity. The market thereafter pushed higher and tested the 690 resistance level by reaching an eight and a half year high at 688.89 on October 19, the highest level since February 2008, mostly fuelled by the financial sector amid market speculation that authorities would decrease the compulsory reserve and increase FOL. Q3 earning results lowered the market P/E valuation to 15.7x in October after this ratio moved to above 16x in the two previous months.
A small foreign net inflow (USD6.1 million) returned after the market incurred the strongest net outflow of the last five years (USD125.9 million) in September. Foreign investors had strong interest in the consumer, real estate and energy sectors with VNM and CII attracting the most foreign capital in October of USD20.9 million and USD17.9 million, respectively. VNM benefited from its promising Q3 earnings while CII was bolstered by the increase in FOL to 70%. Investor expectations about OPEC’s final agreement on cutting oil production at its meeting in November 30 stimulated the investment inflows to energy stocks, such as PVD and PVS.
October witnessed decreases in share prices of almost all sectors. Although the price performance of almost all sectors declined this month, total market share price still mildly rose 0.7% due to the share price surge of the industrials sector by 26.8% MoM. ROS was the main factor inducing this increment as its share price surged 146.6% MoM, contributing 27.4% to the sector’s price increase. The energy sector endured the sharpest decline in share price of 7.7% MoM in October with the largest contributions from PVS, PVD and PVT. Oil prices, after hitting USD53.14 per barrel on October 10, the highest level since August 2015, started to fall during the rest of the month, causing doubts about the recovery of oil prices in the short term.
The government continued to show determination in SOE equitization and stock market reform. Habeco was listed on UPCoM starting from October 28, 2016 under the ticker BHN and with the listing price of VND39,000 per share. The listing of Habeco marked a big milestone in the State pushing SOEs to operate under the rigors of a listing regime. In addition, the government also made greater efforts in developing Vietnam’s equity market through such directives as Document 1768/TTg-DMDN, which urged the listing of equitized SOEs which have not completed the listing application, and Circular 115/2016/TT-BTC, which required share auctions of SOEs through stock exchanges to be automatically registered on the UPCoM within 15 days. These attempts by the government should encourage broader participation in the IPO process.
The VNX Allshare is expected to improve the transparency of the local stock market and pave the way for the eventual merger of both exchanges. Vietnam officially launched the VNX Allshare Index on October 24, combining the two existing local exchanges, HOSE and HNX, to reflect more clearly a benchmarking of Vietnam’s stock market performance. The new index has 451 listed stocks, including 237 stocks on HOSE and 214 stocks on HNX, and accounts for 92% of Vietnam’s market capitalization and 94% of the market’s trading value. The VNX Allshare Index starts from 1,000 points and is updated during the daily trading session.
Important global events will act as key catalysts to the market through to the end of the year. Uncertainties from the US presidential election on November 8 and OPEC’s final decision a reduction in oil supply in late November are major events that will influence the VN-Index in November. Moreover, the high possibility of a Fed rate hike in December, given the positive economic performance of the US in October, will also have a major impact on global and Vietnamese markets with the direction depending on how the decision is telegraphed to the market.
VCSC