To provide investors with a clearer perspective on cash flow movements and current investment trends, Saigon Investment sat down with Mr. Đào Hồng Dương, Director of Industry and Stock Analysis at VPBankS, for an in-depth discussion.
JOURNALIST: - Given the rising liquidity, what range do you expect the VN Index to reach in the first half of the year?
Mr. ĐÀO HỒNG DƯƠNG: - While I do not necessarily expect the VN Index to surge to 1,400, 1,450, or 1,500 points, it could surpass expectations if favorable factors emerge. When analyzing the current market landscape, several positive technical indicators stand out. For example, the VN Index has experienced six consecutive weeks of price increases, coupled with rising liquidity and a successful break above the 1,300-point resistance level. Based on these observations, it is likely that the market will fluctuate within the 1,280 to 1,305-point resistance zone, similar to 2023 when all major waves peaked in this range.
At present, the market remains strong, as evidenced by key technical tools such as RSI and MSI over a 14- to 20-day period. The VN Index has yet to show signs of adjustment and is still in an accumulation phase following its recent six-week surge. From a technical perspective, we can identify two critical support levels. The first is around 1,280–1,300 points, representing the resistance level successfully surpassed in the past six weeks. For more conservative investors, the 200-day moving average (MA200) suggests additional support around 1,265 points.
- Recently, many investors have been discussing the E/P index. Could you explain this index and its practical applications?
- Market analysts often use P/E (price-to-earnings) and P/B (price-to-book) ratios to assess valuation and determine support levels. These are crucial comparative indicators that help identify historical upper and lower limits, as well as market peaks and troughs. However, the P/E ratio has some inherent limitations. For instance, the presence of newly listed large-cap stocks can inflate the overall market’s P/E, making it less reliable for comparative purposes. Additionally, structural changes in how earnings are calculated can distort the P/E index.
A more effective alternative is the E/P index, which is the inverse of the P/E ratio. It measures the return on investment relative to the invested capital, based on total after-tax corporate profits. This allows investors to compare stock market returns with other investment vehicles, such as corporate bonds or savings deposits. Personally, I compare the E/P index with the 12-month fixed deposit interest rate. Historically, significant differences between these rates have indicated major stock market uptrends.
When the E/P index is high or interest rates are low, the stock market becomes more attractive. The highest recorded gap between E/P and deposit rates was 2.5 percentage points. Currently, deposit interest rates are on a downward trend, signaling the start of another substantial market upswing. We observed similar patterns between 2015–2017, June 2020–March 2022, and December 2022–September 2023, where the stock market thrived whenever E/P outperformed deposit rates. At present, the difference between E/P and deposit rates stands at 2 percentage points, reinforcing the stock market’s attractiveness as an investment avenue. With deposit rates likely to decline further, the market appears to be at the beginning of a significant upward wave.
- Which sectors are currently attracting the most cash flow in the stock market, and what are the key investment opportunities in 2025?
- The banking sector remains the most attractive investment option based on its high after-tax profit levels. Banks have an E/P ratio of approximately 10% per year, which is significantly higher than the VN Index’s average. Additionally, with a P/B ratio of around 1.55 times, banking stocks remain highly attractive compared to fixed deposits and other asset classes.
Following banks, the household goods industry stands out with an E/P ratio of 7.7%, a P/E of 13 times, and a P/B of 1.56 times. The tourism and entertainment sector, despite having a relatively high P/B ratio, boasts an E/P of 7% with a robust earnings-per-share (EPS) recovery, having achieved three consecutive quarters of profit growth. Another noteworthy industry is real estate, which is currently undervalued, with a P/E of 6.4 times and a P/B of 1.23 times—presenting a compelling investment opportunity.
Other industries also present distinct investment prospects. For example, the basic resources sector, particularly the steel industry, has strong growth potential due to recent price fluctuations and anti-dumping tax regulations. The chemical industry, which faced significant challenges in 2024, is also expected to recover in 2025 as cyclical commodity price trends drive profit growth.
In addition, there are promising opportunities in the food and beverage sector. Companies like Masan Group (MSN) are poised for strong growth, supported by the recovery of the retail and consumer goods market. Masan Consumer Holdings (MCH), a subsidiary of MSN, posted double-digit profit growth in 2024. The retail sector, which has already priced in the 2024 recovery, is expected to maintain positive momentum in 2025.
With rising liquidity, favorable macroeconomic conditions, and declining deposit rates, Vietnam’s stock market is well-positioned for continued growth in 2025. The banking, real estate, and tourism sectors appear particularly promising, while manufacturing industries such as steel and chemicals could see cyclical recoveries.
However, investors should remain cautious and consider risk management strategies. Market fluctuations are inevitable, and while the current environment appears favorable, external factors—such as global economic trends, geopolitical events, and policy changes—could influence market performance.
By carefully analyzing valuation indicators such as E/P, P/E, and P/B, investors can make informed decisions to capitalize on emerging opportunities. Those who stay ahead of market trends and sectoral shifts will be best positioned to maximize returns in this evolving investment landscape.
- Thank you for sharing your insights!
