3 scenarios of VN-Index in 2023: When will the historical price peak return?

Securities companies have begun to consider to make forecasts for the stock market, in the context that there are only about 2 more trading weeks and the VN-Index is still fluctuating to find the end point of 2022.

As 2022 comes to an end with difficulties due to high inflation destabilizing macro, central banks acting aggressively, volatile commodity prices and zero-COVID policy in China affecting the global supply chain. ACBS said it is cautiously optimistic about a more positive global outlook for 2023, although perhaps it must be until the second half of the year since macro difficulties are expected to continue in the early 2023.

Will VN-Index return to the historical peak in 2023? (Image: Quoc Tuan)

​​Domestically, market sentiment has become quiet as year-long anti-corruption efforts affect investor confidence and the pressure on USD/VND exchange rate and consecutive interest rate hikes from the SBV (total of 200 points) further dampened enthusiasm for the stock market. ACBS is nevertheless reviewing its market forecast for 2023 early; Although the problems the world is facing are not yet quickly fixed, it is expected that the actions of the central banks will start to have the desired effect of reducing the rate of inflation in the first half of 2023. Nationally, anti-corruption efforts will be effective in increasing market transparency and some of the credit constraints affecting businesses will drop in 2023.

Accordingly, experts from ACBS Analysis Department have proposed 3 scenarios for VN-Index on the basis of future assumptions.

In the base scenario, ACBS assumes that Vietnam's economy will continue to grow and corporate profits will increase in the range of 8-10%. Market psychology will improve compared to now with market multiples increasing, anti-corruption efforts will decrease and credit markets will normalize. Global macro difficulties will largely subside by the end of 2023 and central banks will complete their monetary tightening cycle, which will ease pressure on the VND and allow the SBV to loosen monetary policy. Under these assumptions, the index will trade at multiples in the 11-12x range, as the recent depressed sentiment makes it difficult for the market to return to its historical valuation. The VN-Index is likely to trade around 1,300 points by the end of 2023, corresponding to an expected P/E of 2023 about 9.3 times.

The optimistic scenario is based on strong public investment in 2023, a faster-than-expected recovery of the domestic real estate market and continued strong FDI inflows, as well as credit problems that the market has encountered will be resolved. The global economy will keep inflation under control in the first half of 2023 and investor psychology will improve thanks to the easing of global monetary policy. Under these assumptions, we could see a 17-20% increase in corporate earnings, while the market valuation could be higher than the current level but still below the 3-year average due to prolonged instability of the global macroeconomic situation and will be around 12-13x, bringing the VN-Index up to about 1,550 points by the end of the year.

In the pessimistic scenario, according to ACBS, it can be seen that inflation concerns may continue to be high, central banks continue their hawkish monetary policy and drag down global growth, while the protracted war in Ukraine and the zero-COVID strategy in China continue to strain global supply chains. Domestically, GDP will continue to grow, however, growth may be hampered as lower consumer confidence affecting domestic consumption, recession fears in key export markets affected the manufacturing sector and the stagnant credit market affecting the resilience of the real estate sector. In this scenario, we could see earnings increase from average to modest and market psychology remaining low throughout the year with market multiples in the 9-10x range. Other investment channels are more preferred by investors, making the index almost flat at the end of 2023.

(Source: ACBS)

Although the scenarios are quite far apart, it can be seen that the common point is that the basis of the assumptions are derived from the global macro context (improvement or fear of inflation, growth , monetary policy), China's supply chain and zeroCOVID strategy, the war in Ukraine; monetary factors in the nation according to trends and variables of developed economies, level of inflation, public investment, FDI or credit... Accompanying is market psychology, corporate income and attractiveness from the valuation of VN-Index.

Ngoài ra, dù ở kịch bản cơ sở - kịch bản trung bình của dự báo, VN-Index cũng vẫn tăng trưởng điểm so với cuối 2022. Điều này tương ứng với những đánh giá lạc quan về triển vọng thị trường trên nền định giá thấp, đầy hấp dẫn của nhiều ngành, nhóm và cổ phiếu. Song lưu ý rằng kịch bản thấp nhất - bi quan, tuy là kịch bản mà nhà đầu tư trên thị trường hoàn toàn không mong đợi và cũng hết sức tin tưởng khó có thể xảy ra, lại đang hàm chứa sự gắn với nhiều biến có thể diễn ra trong các dự báo vĩ mô khác; với gần như chắc chắn lạm phát năm tới sẽ cao hơn 2022; cùng với đó là tín dụng thắt chặt hơn. 

In addition, even in the base scenario - the average scenario of the forecast, the VN-Index will still grow points compared to the end of 2022. This corresponds to the optimistic assessment of the market's prospects on the basis of valuation. attractive low price range of many industries, groups and stocks. However, note that the lowest - pessimistic scenario, although it is a scenario that investors in the market completely do not expect and also strongly believe in, is unlikely to happen, but it is associated with many variables may occur in other macro forecasts; with almost certain inflation next year will be higher than 2022; along with tighter credit.

At the end of the mid-December trading session, the VN-Index increased slightly by 2.98 points, or 0.28%, to 1,050.43 points. Many industry groups are leading, market indicators such as banking and securities have recorded an improvement while real estate, production and business groups have diverged. After a month of net buying in the market in November, foreign investors reduced their net purchases on December 14, leading to a cautious cash flow. Although positive information is still being released, such as tomorrow's forecast, after the meeting, the US Federal Reserve (Fed) concludes on the level of interest rate hike in December, and reflects the monetary policy of 2023 in the following direction: The Fed may soon cut operations, the extent of the FFR rate hike.

The basis of this forecast is that the US economy has just released CPI data in November 2022 which is quite surprising and positive for the market. In which: CPI: +7.10% (compared to the same period last year) lower than market expectation +7.3%- CPI: +0.10% (compared to October) lower than market expectation +0 .3%- Core CPI +6.00% (YoY) lower than market expectation 6.1%- Core CPI: +0.20% (Yo-October) lower than market expectation 0 ,3%.

These data reinforce the signal that inflation has cooled down and an opportunity for economies to ease inflationary pressures, the stock market index may go ahead reflecting the benefits received through the more optimistic scenario.

However, it remains to be seen whether the Fed has really lifted concerns about accelerating CPI, energy prices, besides some other important data.

AN ĐINH

According to Dien Đan Doanh Nghiep