FINANCIAL INVESTMENT REPORT 2

FINANCIAL REPORT Lecturer Vo Thi Thuy Anh Group 4 Lam Binh Chi Le Thi Minh Hieu Doan Ngoc Yen Nhi Nguyen Le Anh Quan 45K07 1 202111 UNIVERSITY OF ECONOMICS DA NANG UNIVERSITY Table of Contents INTRODUCTION 6 PART 1 THREE STEP PROCESS 7 1 1 General Economic Influences 7 1 1 1 World Macroeconomic Overview 7 1 1 2 Vietnam Macroeconomic Overview 8 1 1 3 Vietnam Stock Market 14 1 2 Industry Analysis 16 1 2 1 Real Estate Industry 17 1 2 2 Food Industry Analysis 19 1 2 3 Conclusion 20 1 3 Corporation.

Table of Contents

1.1 General Economic Influences: 71.1.1 World

Lam Binh Chi

Le Thi Minh Hieu

Doan Ngoc Yen Nhi

Nguyen Le Anh Quan

PART 2: INVEST IN A TWO-RISKY-ASSET PORTFOLIO AND RISK-FREE

2.5 The Minimum Variance Frontier And The Efficient Frontier 30

3.1 Our Portfolio Is Better Than The Market Portfolio (VN-INDEX): 35

3.3 The Maximum Fee In Percentage That We Could Charge Our Clients: 37

Table of Tables

Table 1 Real GDP in the period 2019-2020 and forecast for 2021 5

Table 6 Data about Industry Groups in November, 2021 13Table 7 The financial information of FLC at 22/10/2021 (Source: tradingview.com)

18Table 8 The financial information of MSN at 22/10/2021 (Source: tradingview.com)

20

“Why should we invest in the Stock Market?”

All people really want to get more money and stocks is one of the most popular wayswhich is chosen to invest Investing in stocks has numerous advantages, highlightlylisted the following:

Get profit from idle money without operating the corporations.

Higher potential returns than alternatives such as bank CDs, gold, and government bonds

The ability to begin slowly Investors can start buying stocks with a small amount of money because many online brokers charge no commissions and allow them to buy fractional shares.

The ability to diversify one's portfolio across multiple industries

Therefore, with the majority of advantages given above and the basics of the

Investment Course, our group is going to identify and advise clients which securitiesare suitable to invest in

Financial analysis is used to assess economic trends, set financial policy, create term business plans, and identify projects or companies for investment This is

long-accomplished by combining financial numbers and data In this report, we will not

only point out the three-step process including macroeconomic, industry andcorporation analysis but also have a solid understanding of indices and how to invest

in stocks from all market sectors, as well as consider economic figures and stockgrowth

PART 1: THREE-STEP PROCESS

1.1 General Economic Influences:

1.1.1 World Macroeconomic Overview:

Table 1 Real GDP in the period 2019-2020 and forecast for 2021

(Source: IMF, World Economic Outlook Update, July 2021)

From the above data, it can be seen that the outbreak and spread of the COVID-19pandemic worldwide has made the world economic picture in 2020 very gloomy RealGDP dropped sharply in 2020 Experts have predicted that real GDP can increasesharply again in 2021 In general, the world economic situation improves in 2021when countries strongly implement the Covid-19 vaccination strategy, which hashelped to rapidly reduce the number of infections and deaths However, the growth ofthe economies is different due to the different speed of vaccine deployment andsupport policies in different countries.However, in reality, many outbreaks of thedisease have returned to many parts of the world giving us a signal worrying aboutthis growth

Inflation is becoming a top concern of all countries, especially countries in Asia whenthe inflation rate is also high In recent years, Japan and China have been assessed asthe countries with the lowest unemployment rates in the world (under 5%).Meanwhile, Europe and America remain relatively high Although these are countries

with highly developed economies, ranked at the top of the world, unemployment stilloccurs due to other strict requirements for the labor force

b) Society:

Epidemics become the world's outstanding events in 2020 whose impact is evident in

2021, and they may even last through 2022 or beyond If in 2020, countries in Asia,with good disease control ability, have gradually risen to be more developed, then in

2021, Western countries will gradually regain their position However, despite facingthe COVID-19 epidemic, many "steps" in peace and cooperation also appeared, such

as the aid of vaccines, pharmaceuticals and medical supplies between countries to helpthe bilateral relationship and multilateralism is getting better and better Besides, theissue of competition for power, interests and strategic position among countries,especially between the US, China and Russia is taking place increasingly fiercely.That situation leads to an increasing trend of alliances, gathering forces andconfrontational arms races that tend to give rise to hot spots in many regions of theworld, making the world security situation worse

1.1.2 Vietnam Macroeconomic Overview:

a) GDP:

GDP measures the health of a country's economy It represents the total value of allgoods and services produced within a country's borders over a specific time period Italso can be used by investors when making financial decisions: a bad economy meanslower earnings and lower stock prices When GDP rises, corporate earnings rise,which is good for stocks When GDP falls, businesses and consumers spend less,leading to the markets to fall

Table 2 GDP in Vietnam from 2019 to 2021 ( Source: https://www.statista.com/)

Vietnam has an impressive and steady growth momentum of both the renovationprocess in general and the improvement of the investment environment andcompetitiveness in particular Based on the data table, we can see that Vietnam's GDP

in 2019 is quite high (7%) In 2020, GDP will still achieve positive growth despite theimpact of the Covid 19 pandemic Vietnam's GDP forecast for 2021 is stillcontroversial After the third quarter of negative GDP growth of 6.17% and thecomplicated effects of the Covid-19 epidemic, GDP growth for the whole year 2021 isexpected to be quite low (1.5-1.9%) The two economic dynamic regions of the Southand the North are still trying to overcome the serious consequences of Covid-19 on thesocio-economic situation At the same time, the 4th outbreak also revealed manyissues that need attention in management and administration as well as the resilience

of businesses and people during this outbreak This has a significant impact on GDPgrowth for the whole year

b) Inflation rate:

Table 3 Inflation rate in Vietnam from 2019 to 2021

( Source: Vietnam: Inflation rate from 1986 to 2026*, https://www.statista.com/)

Overall, Vietnam's average inflation rate from 2019-2021 is around 2.8% Inflation in

2019 was well controlled thanks to the decrease in world commodity prices, thegovernment's prudent credit policy, stable exchange rates and relatively unchangedprices of medical services However, in 2020, due to the impact of the COVID-19pandemic, domestic demand increased sharply for essential goods and healthcare, andinflation increased (3.85%) Data from the General Statistics Office shows that theinflation rate in October 2021 is estimated to decrease by 0.1% - 0.15%, on average 10months increase by 1.81% - 1.83% over the same period last year Core inflation in 10months is estimated to increase by 0.82% - 0.86% To maintain low inflation, thegovernment needs to apply micro and macro policies

A glance at the table reveals the date about the unemployment rate of Vietnam fromthe year 2019 to 2021 Due to the COVID-19 pandemic, those figures all had a slightincrease throughout the time frame

In 2019, the unemployment rate in working age (men aged 15-59 years old andwomen aged 15-54 years) was 2.17%, of which it was 3.11% in urban areas and 1.96

in rural areas

In the first year of the pandemic, 2020 witnessed a rise which was 0.09% higher thanthe year before, because of proactive and creative countermeasures at all levels,decisive policies to prevent economic decline, despite the negative effect of COVID-

19 to the whole world economy

Figure 1 Vietnam Unemployment rate (Source: tradingeconomics.com)

The complicated developments of the fourth Covid-19 pandemic in many localities,particularly in key economic provinces and cities (Ho Chi Minh, Ha Noi, Da Nang,etc), have made the labor and employment situation difficult in the Q3 of this yeareven worse, 3.72% The number of employed people fell dramatically compared to theprevious quarter and the same period last year, while unemployment andunderemployment rates reached an all-time high, 2.67% for three quarters

d) Balance of trade:

According to preliminary data, Vietnam's trade surplus dropped to USD 1.1 billion inOctober 2021 from USD 2.94 billion the previous year, owing primarily to increasingimports Exports increased 0.3% year on year to USD 27.3 billion, while imports rose8.1% to USD 26.2 billion The trade goods sector witnessed a USD 1.45 billion deficit

in the first 10 months of this year, as exports continued to increase 16.6% to USD267.93 billion while imports rose 28.2% to USD 269.38 billion

Figure 2 Date about Vietnam Balance of trade in 2021 (Source: tradingeocomics.com)

e) Monetary and Fiscal Policy:

The year 2020 witnessed a success in terms of the coordination and administration ofthe Government's, ministries', and branches' macroeconomic policies In specific, theco-ordination and management of fiscal policies - monetary policy - remained ashining light in the sense of the Covid-19 pandemic, African swine fever pandemic,natural disasters, floods, saline intrusion, and other unexpected figures in all aspects ofsocioeconomic life

Total state budget expenditure in 2020 was at 1,781.4 trillion VND, equivalent to82.8% of the plan submitted to the National Assembly A positive light in themanagement is the improvement in the public investment disbursement progresscompared to the previous year Investment and development spending was estimated

at 82.8% of the plan The state budget deficit was tightly monitored within the limitsset by the National Assembly, amounting to approximately 3.93 percent of GDP.Despite the Government's efforts to increase public investment to strengthen theeconomy in the context of global and domestic economic challenges, caution should

be exercised in expecting too much public investment in 2021 due to the increasingbudget deficit, which has been a chronic problem in Vietnam for many years.

As of June 30, 2021, The Government has spent about 21,5 trillion VND on theprevention and control of the COVID-19, 7,65 trillion VND for buying and usingvaccine COVID-19, and supported nearly 13 million people; at the same time, itproposed to supply 36.6 thousand tons of national rice reserves to provide relief andhunger relief for the people in Central Vietnam to overcome the consequences ofnatural disasters

In terms of total budget expenditure, the Ministry of Finance reported that the statebudget expenditure in the first six months of the year was estimated at 694.4 trillionVND, or 41.2 percent of the total estimate According to the Ministry of Finance,because the spending schedule is lower than the budget collection schedule, the statebudget balance in the first six months of the year had a surplus (revenue greater thanexpenditure), with the central budget balance having a deficit of approximately 63trillion VND and the local budget balance having a surplus of nearly 150 billion VND

f) Asset market – Money and Financial Markets:

Table 5 Exchange rate (Source: The State Bank of Vietnam.)

According to tradingeconomics.com, the USD/VND increased 3,000 VND or 0.01%

to 23,133 VND on Tuesday November 23 from 22,670 VND in the previous tradingsession

In 2021, the VND had overcome many unfavorable factors, including concerns aboutthe long-term effects of the COVID-19 epidemic, which caused slow growth, a trade

deficit, and a monetary policy difference with the Federal Reserve System (Fed).However, these issues may become more prominent next year.

According to the HSBC research team, the USD/VND exchange rate will reverse to23,000 VND/USD in 2022, as the current account turns into a deficit and foreigndirect investment (FDI) slows The VND could be under pressure as the greenbackstrengthens in the international currency market and the renminbi weakens (CNY)

● Domestic gold price:

The domestic gold price followed the same trend as the global gold price The averageglobal gold price on May 25th, 2021 increased by 4.38 percent over April 2021 Asdigital currencies fell in value, money flowed into the gold market; the USD and 10-year US government bond yields dropped sharply, creating momentum for gold's price

to go up Furthermore, investors' concerns about the financial situation of the UnitedStates and Europe make gold more appealing

Domestically, the gold price index fell 1.68 percent in May 2021 compared to lastmonth, 0.88 percent compared to December 2020, and 13.02 percent compared to thesame period last year

g) Capital and Money Market

COVID-19 revitalised Vietnam's capital markets, forced corporations to look beyondbank loans to other forms of debt, and forced a much-needed upgrade of thetechnology underlying the country's stock exchanges

Figure 3 The Interbank Rate of Vietnam in 2021

(Source: tradingeconomics.com | The State Bank of Vietnam)

The given chart illustrates that after hitting a peak approximately at 2.3% in Feb 2021,the figure for Interbank Rate dropped significantly to 1.3% in April 2021 From thattime to July 2021, the percentage had a steady rise, following a slight decline untilSeptember In October, the rate increased to 1.58% on Tuesday November 23 from1.55 percent in the previous day

1.1.3 Vietnam Stock Market

Vietnam has two major stock exchanges, one in Ho Chi Minh City and one in Hanoi.Aside from that, there is an Unlisted Public Market The Ho Chi Minh StockExchange is Vietnam's largest stock exchange (HOSE) In late 2020, the HOSEmarket cap surpassed USD 160 billion, with approximately 500 listed securities at thetime The Hanoi Stock Exchange (HNX) was established later in 2005 and is muchsmaller, attracting smaller companies With around 350 listings, it was still a fractionunder USD 10 billion late last year Last but not least, the Unlisted Public Market(UPM) contained a lot of companies, totaling approximately 900 companies with amarket cap of more than USD 70 billion in 2020

Vietnam Stock Market Overview in recent years.

The year 2021:

In the first nine months, the average trading value reached 10.94 trillion VND persession, up 5.3% from the previous year Specifically, liquidity rebounded strongly inAugust as market valuations were enhanced Total trading activity on the three mainbourses increased 15.3% month on month to 30.2 trillion VND per day, up 363.2 %year on year.

The benchmark VN-Index in Vietnam is predicted to fluctuate in a range of 1,480 points in November, buoyed by increased vaccination coverage, economicrecovery, and stimulus packages The Vietnamese stock market closed last month at1,447.27 points, up 7.6% from the start of October and 22.4% for the year

1,380-According to a VN-Direct Securities Corporation report, cash flows tend to pour intosmall-cap stocks in October, while exiting large- and medium-cap stocks Even so, theVN-Index reached new historical highs and formed short-term rallies, followingwhich the securities firm expects cash flows to return to large- and medium-cap stocks

in November

The prediction in 2022:

VN-Direct anticipates a 21% year-on-year increase in earnings per share on the HOSE

in 2022 The index for 2021 is expected to fall to 26% (from 30% previously) due tosignificant disruptions from the pandemic's fourth wave in the second half

Domestic consumption will rebound strongly in that year because of the reopenedeconomy with government support policies As a result, food and beverage, retailers,and airlines are three of the industries that will benefit the most Moreover, Oil, Gas,and Commodity exporters will benefit from the strong customer demands and theworldwide economic growth recovery

According to VN-Direct, infrastructure development will be a priority in the comingyears as it is an important key to strengthening the economy In addition to road,aviation infrastructure and industrial zones, power infrastructure will garner attention

in the next two years

Demand and supply stocks in Real Estate and Food Industry:

● Real Estate:

The field of commercial premises for rent, offices for rent, hotels, andapartments is most visibly affected in the real estate industry The pandemic hasstopped people from shopping directly at shopping malls (down about 70-80%

in February and March in 2020, according to CBRE; many store owners havereturned to their premises, or negotiated to Tenants reduced prices, and manylandowners have actively reduced rents by 20-40%) The epidemic delaysinvestment activities in the office block, and rental growth is expected Becausethe number of workers remotely either rises or slows down the rate of officeuse, homeowners on short-term leases will be the most vulnerable

● Food: Food remains one of the world's most thriving industries, owing to its

essential business nature and strong consumer connection

As people restricted their movement and governments prohibited dine-outoperations because of the coronavirus outbreak, it benefited at-home foodconsumption According to the International Food Information Council's (IFIC)

2020 Food & Health Survey report, 60% of Americans began cooking at homemore after the coronavirus outbreak, while 32% increased their snacking Intotal, 27% of those polled said they are thinking about food more than usual

Table 6 Data about Industry Groups in November, 2021 (Source: cophieu68.vn)

Both 2 Industries are having surplus in point, at that time According to the tableabove and the data in part 1 about macroeconomic analysis of the whole world andVietnam, Real Estate and Food are 2 of 25 Industry groups we chose for ourassignment

1.2.1 Real Estate Industry:

Vietnam's real estate market remains fundamentally strong, buoyed by genuine occupier demand that has remained resilient despite the COVID - 19 pandemic

owner-With a booming economy and new laws making it easier for foreigners to buyproperty, Vietnam is widely regarded as the next luxury property market hotspot Inaddition, Vietnam's improving infrastructure is a plus "Vietnam focuses oninfrastructure investment, including 2,000 kilometers of new highways, subwaysystems in Hanoi and Ho Chi Minh City, and numerous airport expansion andconstruction projects," according to JLL Thus, wealthy international investors havebeen flocking into the country in recent years

Despite the ongoing effects of the pandemic, Q1/2021 (the first quarter of the year)saw the Vietnamese GDP increase to 4.48%, a growth rate of 3.68% compared to thesame period last year Following CBRE Vietnam, Q1 also saw an 80% absorption rateamong new projects, a positive sign, particularly as the high-end and luxury segmentslead the market The EPS of this industry is at 3,388 The ROA index in 2021 is about6% The return on equity (ROE) of the industry is quite high, about 15%

According to experts, Vietnam's real estate market remains the most stable investmentchannel, particularly for visionary developers responding to buyers' strict and evolvingrequirements

So, why did we choose Real Estate Industry for our investment?

a) Great benefits from urban development policy, infrastructure planning:

Real estate investment enjoys great benefits from the state's policies on urbandevelopment and infrastructure planning, which other types do not have For example,the Government or investment companies spend a large amount of money on transportinfrastructure such as roads (highways, tunnels, overpasses, ), railways, airports orinvesting in the construction and development of utility services to serve the peoplesuch as schools, hospitals, factories, shopping centers, etc Thanks to theseinfrastructure planning and public utilities, Real estate value has more opportunities todevelop

b) Diversify investment types with high returns:

Compared with other forms of investment such as gold, bank savings, securities, etc.,real estate has more diversified types of investment, such as apartments, land plots,shophouses, houses commercial streets, resort villas, factories,… With a channel withmany types of investment, investors will easily choose for themselves the type thatbest suits their needs and financial capabilities.

c) The price is not listed, both sides can negotiate:

Unlike with gold or stock prices that are often listed on the market, with real estateinvestment, investors can negotiate prices to bring in good profits

d) You Can Use the Equity to Increase Your Real Estate Portfolio

A favorite way to use an investment property’s equity is to grow your real estateportfolio For example, let’s say you have $50,000 equity in a home You canrefinance the mortgage on it, take out the $50,000, and use it as a down payment onyour next property

Depending on the value of your properties, you may even be able to pay cash forfuture properties, increasing your portfolio and the equity in it even faster

e) Real estate investments can serve as a hedge against inflation:

Real estate ownership is generally considered a hedge against inflation, as homevalues and rents typically increase with inflation

f) You May Be Eligible for Tax Deductions:

When you own investment real estate that you live in, you get very few deductions.Most homeowners don’t itemize their deductions, so they can’t take advantage of realestate savings Even if you itemize, you can only deduct your property taxes andmortgage interest in most cases

When you buy and hold real estate, renting it out, you own a business rather than just

an investment The IRS allows you to take many deductions just like you would if youowned a brick-and-mortar store

Any expenses you incur to maintain the property, handle business, or even conductbusiness (buying a laptop, traveling to the property, etc.) can be written off on yourtaxes This reduces your tax liability and increases your profits.

1.2.2 Food Industry Analysis:

Food is one of the industries least affected by the economic crisis This is one of theessential goods of society, with high stability in demand

Living standards of VietNamese people are increasingly improving, creating favorableconditions for the development of the food industry Vietnamese consumers haveincreasingly improved living standards, are more concerned about food hygiene andsafety, and have a high demand for delicious and quality food This is also one of thefavorable conditions for the development of Vietnam's pharmaceutical industry

EPS of the industry is relatively high, equivalent to 5,094 VND/share (2021) ranking5th out of 20 industries and tending to increase in the future The ROA index in 2021

is about 14% The return on equity (ROE) of the industry is the highest ratiothroughout 25 industries, about 23% The debt-to-equity ratio is at the 19th lowestlevel among 20 industries, ahead of the master's industry in 2021 Although theindustry's profit on equity is decreasing, and the debt ratio fluctuates, the profit aftertax of the industry is relatively high and tends to increase, the industry's internals arequite good

Moreover, the government has issued many legal documents to manage food hygieneand safety, including documents related to issues such as State policy in thepharmaceutical sector, management of food safety and hygiene State regulations ondrug prices, conditions for drug trading, management of drugs on the list of drugssubject to special inspection, quality standards, drug testing facilities, etc Theseregulations will help create favorable conditions for pharmaceutical companies.Vietnamese retailers import or acquire, promote domestic enterprises to improve,focus on developing in depth to be able to compete with multinational companies

So, why did we choose the Food Industry for our investment?

a) Basic needs: