ANTD.VN - Declining profits of listed companies in the third quarter along with a number of other factors caused the stock market to fall sharply in October. However, experts still expect the market to soon recover from these "bruises".
Listed corporate profits fall in Q3
The third quarter was not a very positive quarter in terms of business results of listed companies. Many companies recorded more negative business results than expected.
According to VNDirect Securities estimates, contrary to expectations of recovery in the third quarter, the total net profit of listed companies on the three exchanges (HOSE, HNX, UPCOM) decreased by 5.5% over the same period.
Of the 46 companies in the securities firm's tracking portfolio, 46% fell short of expectations, 41% were close to projections while only 13% exceeded forecasts.
The optimism from the second-quarter earnings season was not repeated in the third quarter, leading to more negative investor sentiment.
“As the market has higher expectations for business results in the second half of 2023, the third quarter business results season has not been able to contain the recent strong market sell-off,” VNDirect said.
Steel and oil and gas were the top growth contributors, while chemicals, electricity and real estate disappointed.
Mid- and small-cap companies posted worse performance than large-cap companies in both the third quarter and the first three quarters of the year.
Total net profits of mid- and small-cap companies fell 14.8% and 24.6% year-on-year, respectively, in the third quarter.
Total net profit in the third quarter of VN30 decreased by 3.1% compared to the same period last year and decreased by 3.8% compared to the previous quarter. Of which, 14 enterprises recorded net profit growth compared to the same period last year, led by PLX (+646%), VJC (+232%), SSI (+111%) and VRE (+66%).
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Third quarter profits of listed companies fall short of expectations |
Among the 16 companies that recorded a decline in profits, MSN and MWG saw their profits fall by 91% and 96% year-on-year, respectively. Notably, VIC’s net profit fell by 171% year-on-year in the third quarter, as the company recorded a significant one-time revenue from the transfer of shares of its subsidiary worth VND8,937 billion in the third quarter of last year.
One of the “headwinds” for businesses is high interest costs, putting pressure on profits.
Accordingly, despite reaching a multi-year high in the second quarter of 2023, interest expenses continued to trend into the third quarter when they continued to increase by 0.2 percentage points compared to the previous quarter to 6.8%. This shows that the SBV's interest rate cut has not affected businesses' profits.
As a result, total operating profit is still being eroded by financial costs despite the SBV cutting policy rates several times since March and deposit rates returning to pre-Covid-19 levels. Experts expect interest costs to decline in the coming quarters as banks have started lowering lending rates since the third quarter.
In addition, the leverage ratio hit a record low of 60.7%, down 0.3 percentage points from the previous quarter as companies focused on debt repayment.
Will the market recover by the end of the year?
In the third quarter, the Vietnamese stock market was not very positive, especially in October.
By the end of October, the VN-Index had lost 10.9% from the previous month, erasing most of its gains since the beginning of the year and recording its biggest monthly decline in 12 months.
According to Maybank Investment Bank (MSVN), the factors causing the market to decline, in addition to the third quarter profits of businesses not being as expected, include: increased foreign exchange pressure, escalating geopolitical tensions (Israel - Hamas), and a decrease in informal margin lending activities...
However, MSVN believes that although profit growth in the third quarter was weak, it will be better in the fourth quarter. Based on the low comparison in the fourth quarter of 2022, the analysis team estimates that the profit of the entire market in the fourth quarter of this year will increase by about 36% compared to the same period last year.
On the macro front, Maybank believes that the controlled exchange rate and inflation allow the SBV to continue its supportive policies. MSVN maintains its inflation forecast at 3.4% for 2023 and 3.5% for 2024. In addition, in the foreign exchange market, the combination of the SBV's issuance of treasury bills and the movement within the range of the USD index (DXY) has stopped the recent depreciation of the VND against the USD.
The analysis team forecasts that the SBV will sell USD to stabilize the market if the VND depreciates by another 1-2% (or 5-6% since the beginning of the year). The SBV may even accept a further depreciation of the VND this year (compared to the previous 2-3%/year) because pursuing looser policies to support domestic businesses to recover is now a top priority.
Based on the SBV's stance of supporting looser policies and forecasted increased profits in the fourth quarter of 2023, MSVN expects the stock market to recover from the "bruises" in October.
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