(TIỂU LUẬN) besides, investors in vietnamese stock market often over react with rumors and make quick decisions without scanning the information

CONTENT TABLE INVESTMENT POLICY STATEMENT FUNDAMENTAL ANALYSIS I MACRO ECONOMY II STOCK MARKET ANALYSIS III INDUSTRY ANALYSIS METODOLOGY I STOCK PICKING II PERFORMANCE EVALUATION PERFORMANCE EVALUATION REFERENCES APPENDIX INVESTMENT POLICY STATEMENT Target clients: People who age from 35 to 50 Budget: VND 200 billion Time horizon: 5-10 years Overall risk level: Moderate in relative to Vietnam stock market Asset allocation: 100% invested in stocks listed on HOSE Objectives:  Long term growth and capital preservation  Level of risk: Conservative  Short term liquidity needs: None  Target return for portfolio: 7% (based upon historical rates of return) Portfolio selection guidelines: In general, long term investment performance is determined by asset performance Historically, stock assets offer higher rates of return along with greater volatility Fixed assets generally yield lower rates of return, lower correlation with equities and less risk Diversification across asset geography and size is recommended Legal and regulatory issues: Vietnamese stock market is still young and not yet well-regulated It is considered to be lack of information transparency and the information, which is available, does not fulfill its tasks in supporting investors to make accurate decisions Corporation may provide enough information as required by law but not on time For example, corporation does not make information public on the corporation’s website at the same time it sends those information to State Securities Commission of Vietnam This causes inside information which destroys the fairness in the market Besides, investors in Vietnamese stock market often over-react with rumors and make quick decisions without scanning the information FUNDAMENAL ANALYSIS I MACRO ECONOMY After a sharp decline in 2018, the pace of global economic activity is still quite weak The driving force in manufacturing activity, in particular, has weakened dramatically, to a level not visible since the global financial crisis Increased trade and geopolitical tensions have increased uncertainty about the future of global trading system and international cooperation in general, losing confidence in global business and investment decisions A noticeable change on the side of monetary policy that increased accommodation through both action and communication has reduced the impact of emotional stress and financial market activity, while a service industry typical cases have supported job growth Emerging market economy groups have partially driven the projected growth slowdown in 2019 and accounted for the majority of the expected recovery in 2020 including those who have suffered severe or ineffective stress compared to the previous average The world economy is expected to grow at 3.0% in 2019 before recovering to 3.4 percent in 2020 A slightly higher growth rate is expected for 2021–2024 This global growth model reflects a major recession and expected recovery in a group of emerging market economies In contrast, growth is expected to moderate among a group of systematic economies like Europe, United State, China, and Japan (Firgue 1) Over the past 30 years, Vietnam has experienced significant changes in social and economic development Vietnam underwent the Doi Moi program, launched in 1986, the economy has experienced rapid growth and transformed from one of the poorest countries in the world to a lower middle-income country In the 21st century, Vietnam is in the process of integration into the global economy Most of Vietnamese businesses are small and medium enterprises (SMEs) Vietnam has become a leading agricultural exporter and an attractive destination for foreign investment in Southeast Asia In 2019, in the context of complicated fluctuations in the world and regional economies, Vietnam's economy is still on impressive growth momentum Vietnam's GDP grew at 7.02% Despite high economic growth, the economy still ensures macro stability The consumer price index is at 2.79%, ensuring the target of controlling the consumer index below 4% The current per capita income is about 2740 USD (if the economy scale is omitted, it is over 3000 USD) which will narrow the gap with the high-middle-income country (according to the World Bank's 2019 price benchmark) of 3,996 USD Real GDP growth is forecast to remain robust at around 6.9% in 2020 and 2021 The economic impact of the improved transportation system, along with a series of broad-based economic reforms, became evident in the 2000s Average economic growth grew sharply by 7.4% per year from 1998 to 2007 and the poverty rate decreased from 35% in 2000 to 16% in 2006 The benchmark interest rate in Vietnam was last recorded at 6% From 2000 to 2019, the interest rate in Vietnam was 7.21% on average, reaching an all-time high of 15% in June 2008 and a record low of 4.80% in August 2000 The annual inflation rate in Vietnam rised to 5.23 percent in December 2019 from 3.52 percent in the previous month This is the highest inflation rate since January 2014, when inflation accelerated for housing and construction materials (5.12% compared to 3.73% in November); food and catering service (9.17% compared to 5.61%); education (4.25 percent vs 4.23 percent), while transportation costs rebounded (3.52 percent vs -2.13 percent) Meanwhile, inflation decreased for textiles, footwear and hats (1.49% compared to 1.59%) The annual core inflation, excluding volatile commodities, increased to 2.78% in December from 2.18% in November, the highest level since the chain started in April 2015 On a monthly basis, consumer prices increased by 1.40%, the highest since September 2012 Inflation Rate in Vietnam averaged 6.22% from 1996 to 2019, reaching an all-time high was 28.24% in August 2008 and a record low of -2.60% in July 2000 II STOCK MARKET ANALYSIS Despite some fluctuations, Vietnam’s domestic economy is in good shape and provides a floor for the stock market in 2019 This economic expansion is driven by strong growth in production and stable expansion in consumption, and is underpinned by an increase in FDI, urbanization, and infrastructure costs The role of FDI industries in promoting manufacturing industry growth is likely to increase as the pace of relocation of factories from China to Vietnam is increasing across a range of industries However, the growing importance of emerging domestic corporations such as Vingroup that are expanding their footprint into the industrial sector Vietnam has increased by 73 points or 8.22% since the beginning of 2019, according to CFD, following this benchmark from Vietnam Historically, the Ho Chi Minh Stock Index of Vietnam reached an all-time high of 1211.34 in April 2018 The Ho Chi Minh Stock Exchange in Vietnam is expected to trade at 961.43 points By the end of this quarter, follow the global macroeconomic model of Trade Economics and analysts expect Looking ahead, we estimate it will trade at 933.96 over a 12-month period III INDUSTRY ANALYSIS Currently, 37 different industries listed on Ho Chi Minh Stock Exchange (of 11 sectors) Based on our analysis and forecast of the macro economy and the industry itself, the most potential ones (in to 10 years) are: Insurance, Diversified Finance, Banks, Materials, Consumer Durables & Appear Energy, Software and Computer Services,,… INDUSTRY Insurance POTENTIALS The life segment was the most lucrative market in 2017, with a total written premium of $ 2.9 billion, equivalent to 61.6% of the overall market value A growing middle class with an improved awareness of insurance products has led to demand in the market in recent years The increase in disposable income of the population, in line with the strong growth of the domestic economy, has boosted the demand for insurance products Diversified Finance Bank Vietnam's banks have cleaned up their balance sheets and the quality of their support assets and we expect the problematic lending rate across the system to fall to 4.8% by the end of 2020 from the 5.1% at the end of 2018 Profitability will be improved as banks increase lending to more productive retail segments and small and medium enterprises, while credit costs will be stable as banks continue to deduct make provision for assets with inheritance Energy and Materials problems Vietnam has become a hot spot for energy investors to spend up to $ 150 billion over the next decade to meet rising energy demand, with coal going to dominate despite signs of efforts Government forces to green With a population of about 100 million and an annual GDP growth of about 7%, Vietnam forecasts that electricity output will need to increase from approximately 47,000 megawatts (MW) to 60,000 MW in 2020 and 129,500 MW in Consumer Durables & Appare Energy 2030 Vietnam's consumer market is constantly evolving, driven by changes in lifestyle, income and behavior of consumers The country has experienced a steady growth in disposable income in recent years, which can see a rapid growth of total consumer spending from US $ 80 billion to US $ 171 billion since 2010 to 2018 This shows that Vietnamese consumers have more money to spend In fact, in the first nine months of 2018, the country experienced 11.3% of additional spending This growth in consumer activity has certainly created opportunities for businesses to provide new products Software and Computer Services and services available to consumers Vietnam's information technology industry is experiencing high growth, driven by low costs and high quality labor Vietnam has now become the eighth largest IT service provider globally The IT industry is supported by the government with tax and labor incentives, further promoting its growth METHODOLOGY I STOCK PICKING Based on industry analysis above and combined with top-down process, we decided to choose 30 stocks with potential growth in the future with high expected return Choosing 30 companies allow us to significantly reduce the systematic risk and well diversified our portfolio With deep and clear analysis about Vietnam economy, stock-market, industry and company, we find out the safe and potential companies to invest in We listed out stocks of the best performance companies basing on valuation historical data including ROA, ROE, and net income  ROA and ROE are high compared among other companies in same industry  Net income has increased in latest consecutive years, earnings growth and stability %ROE Net income %ROA 2016 PNJ DPM GAS CTG HPG VHM MSN SSI VPB EIB MBB ROS STB DST SAB REE VJC 28.34 8.58 25.41 8.25 23.48 49.03 18.11 14.69 22.83 4.53 19.17 3.22 7.48 2.22 27.36 19.16 43.32 17.44 6.54 18.4 0.48 13.06 16.71 7.68 6.13 2.45 0.44 1.81 1.78 0.66 2.04 18.83 11.98 15.08 449,574 1,164,775 7,172,410 6,765,211 6,606,203 2,207,299 3,772,497 874,997 3,935,045 308,932 2,883,551 470,146 88,609 943 4,654,589 1,173,659 2,495,987 2017 724,856 707,840 9,937,793 7,458,902 8,014,757 1,565,489 3,607,690 1,161,105 6,440,767 822,830 3,490,415 848,132 1,181,560 -11,650 4,948,599 1,522,825 5,073,651 2018 959,923 712,474 11,708,565 5,416,429 8,600,551 14,776,319 5,621,505 1,302,937 7,355,568 660,590 6,189,901 184,978 1,790,156 7,390 4,402,750 1,884,759 5,335,090 TCB VIC MWG 21.56 4.98 38.66 2.87 1.51 11.3 3,148,846 3,513,068 1,578,251 6,445,595 5,654,942 2,206,897 8,473,997 6,190,881 2,880,309 VNM 40.79 28.4 9,363,830 10,278,175 10,205,630 NVL BVH HDB VCB 19.14 6.95 18 25.46 5.41 1.02 1.4 1.38 1,659,349 1,164,949 914,498 6,851,001 2,061,643 1,603,096 1,954,407 9,110,588 3,267,070 1,088,733 3,201,511 14,622,062 VRE 8.81 6.26 2,439,648 2,027,676 2,413,227 GMD FPT BBC KDC 27.13 18.71 12.61 0.48 17.37 9.57 9.23 0.33 443,735 2,575,691 81,281 1,183,883 581,436 3,528,114 97,329 440,105 1,900,250 3,233,997 109,523 147,631 After identifying 30 good companies in various industries, data about their stock price from November 22nd to December 20th, 2019 had been collected In order to evaluate their historical performance over one year period, historical mean return, historical standard deviation, and historical variance for each security were calculated Standard Varriance PNJ DPM GAS CTG HPG VHM MSN SSI VPB EIB MBB ROS STB DST SAB REE VJC TCB VIC MWG VNM NVL BVH HDB VCB VRE GMD FPT BBC KDC 0.012% 0.020% 0.013% 0.023% 0.022% 0.009% 0.101% 0.015% 0.038% 0.012% 0.026% 0.050% 0.014% 0.599% 0.005% 0.007% 0.002% 0.019% 0.000% 0.017% 0.014% 0.011% 0.045% 0.042% 0.022% 0.025% 0.014% 0.014% 0.051% 0.017% coefficient Deviation 1.082% 1.429% 1.125% 1.502% 1.482% 0.955% 3.181% 1.209% 1.952% 1.082% 1.599% 2.228% 1.181% 7.737% 0.724% 0.835% 0.447% 1.394% 0.187% 1.291% 1.165% 1.056% 2.131% 2.046% 1.485% 1.589% 1.166% 1.193% 2.251% 1.301% 346.470% 1190.949% -634.910% 2650.286% 712.071% -252.280% -354.371% -279.910% -3014.143% -2184.403% -632.327% -219.806% 3873.655% 2595.514% 5633.958% 25035.404% -1400.366% 1926.200% -913.595% 639.274% -788.951% 999.044% -3219.988% 1183.741% 507.051% -111260.116% -1826.751% 846.121% 6815.869% -624.190% The estimation of a stock’s mean return and market mean return is not only based on its historical return but also our forecast and subjective judgment By using Solver analysis, we came up with the followings stock in our portfolio with minimum variance: Share Names Weights (W) Fund allocated (mil VND) PNJ 5.236% 10,471 DPM 10.037% 20,074 HPG 7.634% 15,267 VHM 4.796% 9,591 EIB 5.896% 11,793 MBB 0.234% 468 STB 1.346% 2,691 SAB 3.632% 7,264 REE 1.888% 3,776 VJC 9.663% 19,325 TCB 3.322% 6,644 VIC 4.542% 9,085 MWG 8.179% 16,357 NVL 10.120% 20,239 HDB 12.065% 24,131 VRE 5.768% 11,536 FPT 2.906% 5,813 BBC 0.693% 1,386 KDC 2.044% 4,088 100.000% 200,000 Total II PERFORMANCE EVALUATION The portfolio performance will be evaluated in order to answer these following questions:  Does portfolio’s return outperform market return with the same given of risk?  Is the portfolio completely diversified from all unsystematic risks relative to the portfolio benchmark (VN-Index)?  Can manager’s skills bring higher portfolio’s return? In order to answer above questions, we will apply some technical measurements (Treynor ratio, Sharpe ratio and Jensen’s measure) to evaluate the performance of the firms In general, the portfolio we conduct has a lower average return than the VN-Index benchmark From calculation, we can easily observe that our portfolio risk is less than the market More specifically, the portfolio average return is -0.058% compared with -0.032% in market average return; the portfolio standard deviation is 0.624% while it is 0.537% for the market 1 TREYNOR RATIO Treynor ratio is a risk-adjusted measurement of return based on systematic risk It indicates how much return an investment, such as a portfolio of stocks, a mutual fund, or exchangetraded fund, earned for the amount of risk the investment assumed The higher Treynor ratio is, the better portfolio performs A high Treynor ratio shows that the investors can receive high return for each unit of market risk they have to face with Treynor ratio is calculated as follow: Treynor ratio = The treynor ratio of our portfolio is 0.167% which is more than the market’s ratio which is 0.145% This implies a higher return our portfolio can bring out compared to the market SHARPE RATIO Sharpe ratio measures the performance of an investment compared to a risk-free asset, after adjusting for its risk It is defined as the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment Like the Treynor measure discussed above, the greater a portfolio's Sharpe ratio, the better its risk-adjusted performance is Sharpe ratio is calculated as follow: Sharpe ratio = Our portfolio has a ratio of 27.85% while that number of VN-index is 31.98% Just like the Treynor ratio discussed above, Sharpe ratio is lower reveals more loss than market over one unit of total risk CONCLUSION According to the methodology, there are totally four steps to build a portfolio, which comprises market timing, asset allocation, sector selection, and security selection However, our group just had the ability to carry out only the last two steps in this study without considering the time entering into the market as well as the asset allocation which are always considered to have big influence on the results of any investment activities Therefore, if we have more choice in the time and asset allocation decisions, we hope to construct an investment bringing out a better return REFERENCES http://en.stockbiz.vn/Industries.aspx http://finance.vietstock.vn/ https://tradingeconomics.com/vietnam/gdp https://www.hsx.vn/ https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=VN&start=2000 https://data.adb.org/dataset/gdp-growth-asia-and-pacific-asian-development-outlook APPENDIX Appendix 1: Investment Policy Statement The Investment Policy Statement with the promised required rate of return and moderate level of risk will be reflected consistently in the construction of this portfolio We will use the Investment Policy Statement as a guideline during the investment period and frequently review it to adjust the portfolio characteristics and investors’ references Appendix 1.1: Investment Objectives This strategies focus on long term total return strategy Total return accounts for two categories of return: income and capital appreciation Income includes interest paid by fixed-income investments, distributions or dividends Capital appreciation represents the change in the market price of an asset This type of fund is suitable to investors who still want to make a profit, but accept the average returns various asset classes produce With the long term investment, they have the rights to hope that Vietnam economy will have positive signal especially the following industry that we will concern about Appendix 1.2 Target return for portfolio As the nature of risk–return tradeoff and the downward trend of the market, the investors require an appropriate return to compensate to their risk taken As we follow the total return strategy, we demand for moderate rate of return instead of aggressive return The target return for portfolio is 7% Appendix 1.3 Level of risk The risk is defined as both unsystematic risk and systematic risk and is measured by standard deviation and beta variables The risk level of the portfolio,however, is standardized as the beta implied that the unsystematic risk can be eliminated by diversified efficiency thanks to reasonable number of stocks in our portfolio Appendix 1.4 Constraints The average risk of this common stock fund is slightly lower than the one of the market index benchmark, VN-INDEX in particularly, the risk level is compensated by both the amount of dividend and capital gain by investing in this type of fund The fund is high liquid because investors need funds for short-term purpose, such buy a house or making college tuition payments The time horizon of the fund is set as long term investment, with a time frame set to 10 years Taxation is a concern to individual investors Appendix 1.5 Investment guidelines and strategy The promised rate of return is higher than market just a little so that the portfolio follows moderate risky strategy which invests the entire fund into almost large Vietnamese listed companies Considering the level of risk references, the portfolio is diversified across the high return industries to attain the target return in terms of minimizing risk The strategy will be examined periodically to maintain the investment policy statement and actively react to the change in the market prices Fund allocated Share Weights Expected Names (W) Return (ER) Variance ER * W (V) (mil (W^2)*V VND) PNJ 5.236% 0.312% 0.016% 0.054% 0.0001% 10,471 DPM GAS 10.037% 0.000% 0.120% -0.177% 0.012% 0.000% 0.034% 0.078% 0.0003% 0.0000% 20,074 - CTG 0.000% 0.057% 0.000% 0.050% 0.0000% - HPG 7.634% 0.208% 0.016% 0.050% 0.0003% 15,267 VHM 4.796% -0.379% -0.018% 0.023% 0.0001% 9,591 MSN 0.000% -0.898% 0.000% 0.053% 0.0000% - SSI 0.000% -0.432% 0.000% 0.082% 0.0000% - VPB 0.000% -0.065% 0.000% 0.142% 0.0000% - EIB 5.896% -0.050% -0.003% 0.051% 0.0002% 11,793 MBB 0.234% -0.253% -0.001% 0.065% 0.0000% 468 ROS 0.000% -1.014% 0.000% 0.051% 0.0000% STB 1.346% 0.030% 0.000% 0.080% 0.0000% 2,691 DST 0.000% 0.298% 0.000% 0.028% 0.0000% - SAB 3.632% 0.013% 0.000% 0.094% 0.0001% 7,264 REE 1.888% 0.003% 0.000% 0.124% 0.0000% 3,776 VJC 9.663% -0.032% -0.003% 0.032% 0.0003% 19,325 TCB 3.322% 0.072% 0.002% 0.071% 0.0001% 6,644 VIC MWG 4.542% 8.179% -0.020% 0.202% -0.001% 0.017% 0.052% 0.051% 0.0001% 0.0003% 9,085 16,357 VNM 0.000% -0.148% 0.000% 0.237% 0.0000% - NVL 10.120% 0.106% 0.011% 0.035% 0.0004% 20,239 BVH 0.000% -0.066% 0.000% 0.051% 0.0000% - HDB 12.065% 0.173% 0.021% 0.034% 0.0005% 24,131 VCB 0.000% 0.293% 0.000% 0.184% 0.0000% - VRE 5.768% -0.001% 0.000% 0.040% 0.0001% 11,536 GMD 0.000% -0.064% 0.000% 0.039% 0.0000% - FPT 2.906% 0.141% 0.004% 0.139% 0.0001% 5,813 BBC 0.693% 0.033% 0.000% 0.112% 0.0000% 1,386 KDC 2.044% -0.208% -0.004% 0.116% 0.0000% 4,088 0.0032% 200,000 Total 100.000% 0.070% ... which destroys the fairness in the market Besides, investors in Vietnamese stock market often over- react with rumors and make quick decisions without scanning the information FUNDAMENAL ANALYSIS... class with an improved awareness of insurance products has led to demand in the market in recent years The increase in disposable income of the population, in line with the strong growth of the. .. However, the growing importance of emerging domestic corporations such as Vingroup that are expanding their footprint into the industrial sector Vietnam has increased by 73 points or 8.22% since the