Assuming that the business environment of the banking industry will be less favorable from the second half of 2018 onwards, it is less likely that banking stock prices can perform as well as in the first part of the year, warned VDSC.
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Monetary policies have been changing in order to tackle rising inflationary pressures worldwide, stated VDSC in its latest investment strategy report .
The US, the EU and the latest, Japan, are attempting to end their quantitative easing programs. "This is not supportive for equity markets," the brokerage said.
Moreover, as the US Federal Reserve (Fed) has increased rates, emerging market currencies have depreciated in part due to rising US bond yields.
"Accordingly, large outflow of money out of emerging and frontier markets has been evident. Vietnam is no exception. For markets with positive dynamics, capital may eventually return. However, considering the uncertainty surrounding the US President Donald Trump and the trade war tensions, we believe the process will take time," assessed VDSC.
"Overall, we are seeing less liquidity in the market, and a certain diversion in corporate earnings results. Therefore, we think that we are in an environment where stock picking is what matters," the report continued.
"It is not a bad idea to be conservative and cautious and retain some cash," said the report.
"There is no need to rush in to buy because it will probably take time for stock markets to digest the headwinds that we are now faced with," VDSC added.
Cautious about banking stocks
Banking stocks recorded a 38% after-tax profit growth in the second quarter. However it appears that the results were not as good as they were in the first quarter.
Assuming that the business environment of the industry will be less favorable from the second half of 2018 on, it is less likely that banking stock prices can perform as well as in the first part of the year. Therefore, investors should be cautious about banking stocks, VDSC analysts said.
According to VDSC, the banking sector is the largest component of Vietnam's various stock indices. Therefore, banking stocks have a huge impact on the direction of the market given the fact that they can draw large inflows or outflows of money.
Among sectors which poorly performed in the first half of 2018 was oil and gas. Results were the worst with more than a 91% year-on-year decrease in after-tax profit. VDSC expected that 2018 will be a bad year for oil and gas companies. However, given that there are some new big projects that will go into construction in 2019, oil and gas stocks could be worth looking at.
