HSC Daily Market Watch

Market commentary – The VN index increased with turnover still below recent averages. Market breadth widened while we also see that 31 stocks went to the ceiling and 18 stocks fell to the floor. Foreigners were less active net buyers to a small degree. The put through market was less active with a large deal TCB & ROS and then a smaller deal in PPC seen going through.

 

Foreigners were active buyers of VNM; HPG and DXG. And net sellers of VHM and DXG.

 

  • Bank shares performed very well today, led by VPB, HDB and STB. BID closed at the ceiling.

     

 

  • Non-banks shares were mostly up, led by brokerage stocks.

     

 

  • Consumer and retail names were all higher, except some losses for KDF and BHN.

     

 

  • Tech stocks were all up.

     

 

  • Manufacturing names were broadly higher, led by HSG and NKG closing at the ceiling.

     

 

  • Resource names were all higher, led by GAS and PVD.

     

 

  • Real estate and construction stocks were broadly higher, led by DXG and CTI.

     

 

  • Agriproducts and aquaculture stocks were mixed with gains for GTN and PAN while there were losses for VHC and HNG.

     

 

  • Pharmaceutical stocks performed quite well, led by IMP and DHG.

     

 

  • Utilities, transport and logistics stocks were mixed to higher, led by airline stocks.

     

 

Vietnamese stocks jumped today – The markets staged a major rally today in line with regional exchanges. GAS was the biggest gainer in terms of index points as oil prices jumped with PLX and PVD also making sympathetic movements. Then consumer name VNM continued to rally as did MSN along with retailers MWG & PNJ. Then banks such as VCB; CTG; TCB; VPB; HDB; MBB and STB all made strong gains today as credit growth is likely to be strong this month.

 

On the other hand, real estate developer VHM slipped. Aquaculture play VHC continued to lose ground as it has down recently. Brewer BHN and agriproducts play SBT also both lost ground. Broad based rally with most blue chips advanced led by resource; banks and selected consumer & retail names.

 

The four futures contracts made significant gains today ranging from 14.1 to 55 index points which basically straddled the gains made by the VN30 cash index. At the close they still traded at a discount to the cash index ranging from 6.7 to 21.7 index points. As the January contract lagged the other three contracts. Strong move although we don’t see any strong signal here for tomorrow’s trading.

 

The pre-Christmas rally now has grown much longer legs over the weekend and will most likely which should carry us higher until Tet. With the trade issue removed from market concerns for the time being; the U.S. dollar has fallen back somewhat while oil prices have surged. Then trading volumes improved significantly while foreigners were net buyers by a noticeable margin.

 

This combination of above factors is always a major positive for Vietnamese equity markets and enabled the VN index to push higher towards the trio of major resistance levels at the 50; 100 and 200 MA lines. Indeed, the first of these, the 50-day MA line was breached today. And of course, we still have decent upside potential as the most important of these, the 200-day MA at around 1008 is still about 6% higher than where we are right now.

 

Provided the external mood remains upbeat the market has a better than even chance of breaking above the 200-day MA in the next few weeks. With trade concerns now diminished for a while and the Fed expected to take a softer line after the next rate hike in December, two major headwinds for equities will have been greatly lessened in the space of a week. And then the very strong PMI number for Vietnam in November should remind us that the FDI theme is very alive as new capacity would appear to be coming on stream at an accelerated rate. With obvious implications for GDP growth this and next year.

 

Macro note – NIKKEI Markit November Vietnam PMI reported a headline reading of 56.5, up from 53.9 in October. The index signaled a healthy manufacturing sector expanding at a much faster pace, showing one of the sharpest improvements in the 8-year survey history. Which stood in sharp contrast to regional PMIs and suggests that the ongoing trade dispute between the U.S. and China has encouraged a shift in manufacturing activity from China to Vietnam something that anecdotal also supports.

 

Output, new orders and new export orders continues recording growth momentum. New orders increased sharply last month for both domestic and international markets. Strong growth of new orders led manufacturers to increase their output. Then sentiment jumped to the highest level since February 2016.

 

Employment, inventories and backlogs of work surged. In response to such a surging demand, manufacturers increased their staffing level at a rapid rate. They also increased their stocks of both inputs and finished goods in anticipation of further rising sales in coming months. The order backlog rose the first time in six months hinting some pressure on capacity.

 

Both input costs and output prices increase. Input costs rose at the sharpest rate in 3 months. Manufactures responded to this with a price increase, the first one in 3 months.

 

Asian shares & major currencies – Asian shares rose sharply today after Wall Street’s gains on Friday. As for currencies, the US$ (96.841) fell back today when measured against its trade weighted ICE index. Then the Euro (1.1355) traded higher; Pound Sterling (1.2780) also edged higher; the Japanese Yen (113.44) continued to gain ground while the Chinese Yuan made nice gains at (6.8835).

 

Oil prices surge – Crude oil traded higher today with the active month WTI futures crude oil contract trading at US$ 53.16 in late Asian trade. Trade understanding plus OPEC plus and Canadian supply cut hopes lead to a breakout in oil prices.

 

At the G20, Russia and Saudi Arabia agreed to extend their production cut deal to manage the crude market into 2019. The body language between the two leaders suggest a close relationship and now the conversation can move to how much of a production cut we can expect at this week’s OPEC plus meeting in Vienna. The market now seems to be moving towards a number of 1.3 million barrels a day which is just below the Saudi request and higher than where consensus suggests several days ago.

 

To add to the short term bullish factors in oil, the Canadian state of Alberta ordered curbs of 325,000 barrels a day to production in the state starting from January given the growing glut of supplies. Which may be reduced to 95,000 barrels a day later on if inventories fall.

 

This means we have; the truce in the trade dispute; agreement on some kind of OPEC supply cut with details as yet unknown and then the Canadian supply cut. With oil at current low prices and long positions in crude oil having been steadily slashed over the last few weeks to five-year lows this paves the way for at least a major trading rally in coming days. Of course, U.S inventory releases from API and EIA midweek will also need to be watched although the hint is that with refinery production being ramped up, stocks might be about to stabilise. 

 

Qatar has announced that it will leave OPEC from next January having been a member since 1961. Qatar is not a major oil producer producing around 600,000 barrels of crude oil per day.  As most of its production comes from gas fields where it is the largest exporter of LNG. No details were given as to why they intend to leave although the ongoing diplomatic dispute with other OPEC neighbours which has led to a trade blockade may well be a factor. Neutral for prices.

 

In global macro and general news – Regional markets rallied today following a positive encounter between President Trump and President Xi which resulted in a freeze on new tariffs thus allowing for talks to take place in a calm environment. The timeline for the freeze is 90 days which is fairly short but could be extended of course if progress is being made. This allows for talks on knotty structural issues such as alleged IP property theft; forced technology transfer and non-tariff barriers which lie at the heart of the dispute to be stepped up. While the Chinese have promised to step up purchases of agricultural and industrial goods from the U.S. A plus for both sides then although the talks are likely to be tough and this issue will return to haunt the markets in several months’ time.

 

Having decided to engage in talks and step away from ratcheting up tariffs it may be hard for the U.S. to return to a confrontational path in 90 days unless the deal on offer falls far short of what they want. Here the playbook from the NAFTA renegotiation example is illuminating. The final deal looked not that much different from the original one. But contained enough changes so that it could be spun as a success. Therefore, it may well be that some judicious concessions on various issues may be seen as sufficient to lock-in a new understanding between the two countries. Although it may take a lot longer than 90 days.

 

Caixin Media Co. and research firm Markit reported today that the private sector Caixin China manufacturing purchasing managers’ index edged up to 50.2 in November from 50.1 in October. This index tracks more SME type businesses compared to the official PMI and suggests perhaps that the broader manufacturing economy in China is fairly stable at the moment. Although the sub index for export new orders weakened further.

 

 

 

 

 

HCMC – The VN index rose today as turnover expanded to VND 4,692.44 billion or US$ 201.65 million. The index gained 2.70% and closed at 951.59. 223 stocks up while 83 stocks down. And 16 stocks went to the ceiling while 6 stocks dropped to the floor. Foreigners accounted for 12.66% of the buying value and 9.62% of the selling value.

 

Foreign buying fell in actual terms and also in percentage terms. While foreign selling also fell further in actual terms and also in percentage terms. Foreigners turned net buyers to the tune of VND 142.85 billion worth of shares in HCMC. And we saw thirty six transactions in the put through market today.

 

Foreigners were active buyers of VNM; HPG; DXG; VHM and VRE. They also actively sold HPG; VNM; VRE; VHM and DXG. The put through market was less active today with two enormous; one super jumbo; six jumbo; four large and some medium sized & smaller deals accounting for 24.75% of total turnover.

 

We saw 24,000,000 shares of TCB; 6,380,000 shares of ROS; 3,000,000 shares of PPC; 415,500 shares of VHM and 929,300 shares of HPG going through. Foreigners were less active in the put through session in the VHM & HPG deals and then six other smaller deals today in the market.

 

E1VFVN30 was up 3.12% today closing at VND 15,180.

 

Hanoi –  The Hanoi market went up today while turnover came to VND 677.47 billion or US$ 29.11 million. The HN index was up 2.69% to close at 107.64. 99 stocks up while 57 stocks down. And 15 stocks went to the ceiling while 12 stocks dropped to the floor. Foreigners accounted for 1.03% of the buying value and 3.52% of the selling value.

 

Foreigners were net sellers to the tune of VND 16.90 billion worth of shares. And we saw eleven medium and small sized deals today during less active put through session in Hanoi accounting for 2.50% of total turnover.

 

We saw 418,013 shares of ACB; 278,400 shares of UNI and 87,400 shares of DNP along with some smaller transactions in the put through market today.

 

 

 

 

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