2022 Macroeconomic & Stock Market Highlights for Vietnam

We would like to present you our monthly Macroeconomic & Stock Market Highlights for Vietnam alongside with the monthly performance update of the TIM Vietnam Actively Managed Certificate for December 2022.

Vietnam’s Update – Economy

As December 2022 macroeconomic highlights:
• In Q4/2022, Vietnam’s GDP grew by 5.9% y/y, concluding the full year 2022 with a growth of 8.0% despite rising interest rates and weakening global demand. The strongest driver was the service sector (41.3% of GDP), growing by 10.0% y/y, thanks to the rebound of the wholesale and retail industry (+10.2% y/y), transportation & logistic (+11.9%) as well as accommodation and food services (+40.6% y/y). Such outstanding growth was encouraged by the pent-up demand in consumption and the strong recovery in tourism as the country welcomed over 3.6mn international tourists. The output of the Industrial & construction sector (38.3% of GDP) was up by 7.8% y/y. Manufacturing proved very resiliently, growing by 8.1% y/y. Last but not least, the agriculture, forestry and fishery sector (11.9% of GDP) posted 3.4% y/y growth thanks to a steady livestock and cattle production. As for 2023, we expect GDP growth of 6.0%, coming in at the low end of Vietnam’s long-term growth trend (6.0% – 7.0%). Especially in H1/2023, the country is likely to suffer from weak export demand. Yet, long-term growth drivers remain solid with stronger public investment, resilient FDI inflow and the reopening of China in 2023, fueling the tourism industry and cushioning the expected trade slowdown with the West.
• 2022 retail sales grew strongly by 19.8% y/y. Real retail sales, adjusted for the price effect, went up by 15.6% y/y. Such outstanding growth was driven by a rebound in services, especially in the hospitality and the tourism sectors. In 2023, we expect a weaker demand for consumer discretionary products due to higher interest rates. However, demand for consumer staples is expected to be resilient, and the country’s growth will also be supported by the strong return of international tourists.
• Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 46.4 in December, down from 47.4 last month. The latest reading suggests a further deterioration in business conditions in the manufacturing amid continued subdued demand conditions from key export markets. Manufacturers responded to lower new orders by scaling back production as well as price cuts to stimulate demand. On the back of recovering demand, S&P Global Market Intelligence is predicting a rise of 6.8% in Vietnam’s industrial production for 2023, a bit slower than the 7.7% growth in 2022.
• The December CPI rose by 4.5% y/y, slightly higher than our forecast of 4.4% y/y. Nevertheless, it is still an encouraging number in a global context. 2022 inflation was driven by food & foodstuff (+5.2% y/y) and by higher prices for housing & construction materials (+7.1% y/y). The former one increased due to higher input material prices, which lead to higher prices for processing food such as for corn, for starch, for rice noodle and for instant porridge. The latter was mainly driven by higher rental prices as more people rent due to low new housing supply. For 2023, as the government plans to reduce subsidies and to adjust essential service prices like electricity and healthcare, and as China’s reopening may lift global commodity and food prices, we expect 2023F inflation to increase by 4.3% y/y
• In 2022, total FDI disbursement was $22.4bn (+13.5% y/y), the highest in the past 5 years. In 2022, many large international firms have chosen Vietnam to expand and to diversify their activities: Lego, Samsung, and Apple are some examples.
• 2022 trade balance recorded a trade surplus of $11.2bn. We have seen weaker exports and imports in December due to slower demand from the West. We expect this pattern to last in most of 2023. However, we think that the negative impact can be partially mitigated by the reopening of China and by resilient FDI inflow from multiple sectors, keeping the trade balance positive.
• The strong US dollar has created some pressure on the Vietnamese currency (VND), especially in the first 9M2022. To support the domestic currency, the State Bank of Vietnam (SBV) has sold approximately one fifth of its foreign reserves (USD20bn) during the year and raised policy rates by 200bps. After the USD peaked when the FED disclosed its rate hiking plan, and thanks to strong year-end USD supply, the VND regained its strength and closed the year with a mere depreciation of 3.6% against the USD vs its nearly 9.0% depreciation in the first nine months. As for 2023, we expect the VND to depreciate vs the USD by a mere 2.3% to 24,143 thanks to (1) a positive differential between VND and USD interest rates; (2) resilient USD inflow from remittances, from trade surplus and from FDI inflows.

Vietnam’s Update – Stock Market

•The market traded sideways to lower in December, finishing the month with a decline of 0.4%. The VN-Index, which is a gauge for Vietnam’s stock market, ended the year also with a decline of 34.1%. Various events dampened market sentiment during 2022, from global events such as interest rate hikes, inflation, the Russian-Ukraine war to the overaggressive anti-corruption campaign in Vietnam, which seriously hurt the corporate bond and the real estate market. The Vietnamese equity market is dominated by retail investors, which account for more than 80% of the total trading volume. Hence, these unfavorable factors have substantially increased their fear level, accelerating the downtrend despite the country’s resilient economy.
• The negative market sentiment caused all sectors to finish 2022 in negative territory. Materials (-52.1%), real estate (-47.8%), and Industrials (-45.9%) were hurt the most. On the other hand, information technology (-7.6%) and utilities (-10.0%) were the least affected by the market volatility. Consumer staples (-19.6%) and healthcare (-21.4%) also held up better than the general market, driven by stable consumer demand. Notably, stocks in outperforming sectors were generally overlooked by retail investors due to their simple business model and less room for speculation.
• The average daily trading volume on the three bourses in 2022 was $876mn, 52.7% lower than in 2021. Foreign investors were one of the crucial drivers behind the recovery in December with net purchases of $557mn, resulting in total net purchases of $1,201mn YTD. Meanwhile, retail investors’ activities were subdued in December, and it may take them quite a long time to gain back confidence. Although no official figures are released yet, we think that margin lending levels of several brokers have declined significantly by around 20-30% q/q in Q4/2022. Fading confidence and rising interest rates were the main factors that discouraged investors to take leverage.
• Going forward, there are several uncertainties that are likely to affect the market: Geopolitical tensions, global recession fears, a rising interest rate environment coupled with elevated inflation, are likely to continue to be the main themes of the global economy next year. Although most of these factors are not very relevant for Vietnam, they may impact the country’s export activities and possibly its monetary policy as well as investors’ general sentiment. However, the long-term prospects of Vietnam’s stock market remain intact, fueled by solid corporate earnings and stable economic growth. Recent upbeat news such as the SBV’s instruction to banks to put a ceiling on deposit rates, the government’s fiscal boost as well as the state’s policy to tackle issues in the corporate bond and in the real estate market are likely to support market sentiment. As a result, we expect a better performance of the financial and of the real estate sector, which are the two largest contributors to the VN-Index. These two sectors should benefit from strong credit demand and policy support. Other market segments such as materials, healthcare, utilities, and consumer staplers should also gather momentum, driven by stable demand and China’s reopening as trading and tourism activities will resume.
• In the meantime, Bloomberg data shows that the VN-Index is trading at an attractive level with a 2023F P/E of 9.6x, compared to regional peers such as Thailand (15.4x), Indonesia (14.2x), Malaysia (13.1x), and the Philippines (13.2x). The recent market sell-off has sent prices of many stocks far below their fair valuations. Thus, this offers a good opportunity to buy stocks of companies with healthy financials that are currently trading at attractively low levels.
• At the end of December, Vietnam’s Top 100 stocks were trading at a 2023F P/E of 10.4x, at a P/B of 1.5x, and at a 2023F EPS growth of 8.6% (vs. 12.5% in 2022F). Meanwhile, the stocks on our buy recommendation list were trading at a 2023F P/E of 9.5x, at an average P/B of 1.6x and at an EPS growth of 13.1% (vs. 14.9% in 2022F).


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Please download the December 2022 Factsheet for our TIM Vietnam Actively Managed Certificate. We are also offering investment advisory mandates and research services for the Vietnamese stock market. Furthermore, we offer our clients Discretionary and Investment Advisory Mandates for the purpose of investing in listed Vietnamese equities.

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