Rising public investment to lift various stocks

The situation is much better for the plastic pipes subindustry, thanks to the fiscal stimulus.

HANOI: Public investment is expected to soar in the last months of 2022, giving a big push to various sub-industries.

Based on the regular pattern of public disbursement, which moves slowly in earlier the year but much faster later, KB Securities Vietnam JSC (KBSV) has forecast higher public spending for the fourth quarter.

Recent governmental moves have borne out the forecast.

The Transport Ministry gave the go-ahead to 12 sub-projects in the North-south Expressway Project, second phase, in mid-july.

All sub-projects in landing areas of the Long Thanh International Airport project were planned to begin construction in December.

Three decrees were issued and six working groups were dispatched to speed up the process.

The government’s Resolution No 124 promulgated in mid-september stipulates that public disbursement reach around 95% to 100% of the target set by the Prime Minister.

At least 50% of the SocioEconomic Recovery and Development Programme must be delivered in 2022.

KBSV projected public investment to accelerate and reach around 90% to 95% of the target this year, equivalent to roughly 200 trillion Vietnamese dong (Rm39bil) spent in the last four months.

“Rising public expenditure is expected to give a major boost to the steel sub-industry, as higher construction demand drives steel consumption,” said KBSV.

The same goes for the stone sub-industry. Major beneficiaries include Hoa An JSC and Bien Hoa Building Materials Production and Construction JSC, which owns Tan Cang and Thien Tan quarries.

Cement is the next sub-industry to benefit from higher public spending. However, the boost from the public sector would be of minor effect as it is absorbed by the supply-demand imbalance in the sub-industry.

Specifically, cement producers oversupply about 50 million tonnes annually and the figures are expected to climb to 58 million tonnes by 2023. For investors, it is advisable to monitor HT1 stock and BCC stock.

The situation is much better for the plastic pipes sub-industry, thanks to the fiscal stimulus and the falling prices of PVC, an input material.

Tien Phong Plastic JSC is expected to be the largest beneficiary as it operates in an economic zone targeted by public investment.

Higher public spending would be equally beneficial to the bitumen sub-industry, but the benefit is believed to come late as bitumen surfacing only begins in the last phase of the projects.

Petrolimex Petrochemical JSC is a stock worth monitoring in the sub-industry since the company holds roughly 30% of the market shares.

The company produces around 350,000 tonnes of bitumen annually, outpacing all rivals.