Evaluate Stocks of Different Sectors

At a discussion with SGGP Investment & Finance, Mr. Dao Phuc Tuong (picture), Investment Director of APS Fund Management (Singapore), delivered a short analysis on some companies which will have direct impact on the GDP growth in 2019.
JOURNALIST: - In your opinion, which sectors are expected to have the highest growth?
Mr. DAO PHUC TUONG: - Looking at the GDP growth in Q1/2019, we found that the two sectors which help GDP to grow sustainably are banking and mining. 
The stocks of banking sectors have been continued growing and is one of best choices of investors in Vietnam.
 When analyzing the real estate stocks, investors should take care of the companies’ cash flow, especially cash flow from the ‘advances from customers”.
The mining sector, which is mainly contributed by petroleum companies, has not grown, even gone down since beginning of this year. However, the dropping speed is slower than same period last year. The mining sector is still a foundation for GDP growth. 
The other sectors have been grown weaker than same period last year.
Moving our observation to the listed companies, we see that bank is the only sector which is expected to grow this year, although the growth is slower.
The other sectors performance is expected to go down in 2019, although the projections of listed companies and brokerage companies have been very positive. So the sector, which have good profitability growth as well as potential investment stocks, is bank. 
However, the problem here is which stock to invest, not which sector, given the different stories of different sectors.
- How do you think about the real estate stocks this year?
- When doing the real estate stock analysis, I usually look into 3 angles of the market: supply, demand and capital. 
In regard of the real estate supply, it has been dropped since Q2/2018, although many projects have been prepared. We do not see a big growth of real estate projects in the coming time, except few projects of big property companies. 
 The stocks of banking sectors have been continued growing and is one of best choices of investors in Vietnam.
How’s about the demand? Based on our observance, over 2017-2018 there has been the big investment flow of foreign investors, especially Korean and Chinese investors. However, the demand of these foreign investors are very short-term. They will soon sell out. So the key questions to ask are how long the foreign demand will remain, how big is it, will it be big enough to support the demand. The answers for these question are still opened. 
Meanwhile, the domestic demand is mainly for speculation. The demand from real households is very low, even in the mid-end real estate segment. 
Regarding to the capital for real estate market, based on the banks’ lending policies which apply to the real estate activities, I think the capital for real estate market is not much.
Evaluate Stocks of Different Sectors ảnh 1 The stocks of banking sectors have been continued growing and is one of best choices of investors in Vietnam. 
If the State Bank continues to tighten its money policy, control the bank loans that relates to real estate activities, the capital amount for real estate market is very minimal. This creates the big liquidity challenge for the real estate market.
Some studies have forecasted that the real estate market liquidity will be bad in the coming times. In my opinion, the real estate market has already entered its peak area of its market cycle. However, when analyzing the real estate stocks, I don’t care much about the companies’ profitability. I prefer to look on the companies’ cash flow, especially cash flow from the ‘advances from customers”.
- How’s about the growth of petroleum and textile stocks?
- Regarding to petroleum stocks, this sector is planning to invest in some big projects. Since 2018-end, investors have been expecting the implementation of several projects, hence petroleum stocks have been forecasted to grow and have high liquidity. However, this time, we should raise the question of whether we should invest or speculate in petroleum stocks. The answer is dependent on the implementation progress of these huge energy projects and we may have the conclusion in the end of this year.
If the current status lasts long, petroleum companies don’t have real profit. The growth of petroleum stocks is dependent on the future expectation. If these huge projects are not implemented, investors should be careful with petroleum stocks.
In regard of textile sector, the stocks of textile companies have been grown well since Q4/2018. However, investors should focus more on the operation capacity of these textile companies. Not every company still has room for growth. For example, to open an effective textile factory, the company needs to hire at least 500-700 labors, do many machines installments and training courses. Current companies’ operation capacity show that most of them are at their peaks, running at full utilization rate.
The textile stocks are evaluated very good, but most of them already hit their peaks. Frankly speaking, we don’t have much textile stocks on the stock exchange. Further, most of them are for speculation. Hence, if investors don’t have deep analysis, and continue to invest in full-capacity textile companies, they will get risk.
- Thank you very much.

Luu Thuy

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