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 November 2021.
Key November 2021 macroeconomic highlights:
• Two months after the lockdown, Vietnam has come back to normal life as it changed the strategy from “zero-COVID” to “new normal”. Restaurants and recreational places are permitted to resume operations and provide dine-in services. Workers also back to work, and most manufacturers are ramping up capacity to meet the accumulated demand. Also, we observed that construction activities are very active as real estate developers are speeding up building in order to handover projects to clients on time. Ho Chi Minh City and Hanoi are planning to allow students back to school from mid-December.
• As the country started to reopen, the number of new COVID-19 cases has been rising again to approximately 13,000 cases per day. The Southern provinces remain to be the hot spot, but the vaccination rate in this area is high (65-90% of the population is vaccinated) and we believe the situation is under control. More cases are also found in the Northern provinces near Hanoi, where vaccination is still rather low (25-45% of the population). Hence, the government is pushing vaccination activities in these provinces.
• Regarding vaccination, 71mn people got at least 1 dose of vaccine, and 49.7mn people are fully vaccinated, equivalent to 51.5% of Vietnam’s population.
• The November Consumer Price Index (CPI) rose by 2.1% y/y and by 0.32% m/m. The main driver was transportation prices, which were up by 20.7% y/y because: (1) higher global oil and petroleum prices; (2) increasing petroleum consumption following the country’s reopening. The petroleum price has cooled off a bit as of late, but we think it will remain high going forward because the economy just started to reopen. Food & foodstuff (36.6% of the CPI basket) was unchanged from November 2020, mainly thanks to stable hog prices. Housing & construction materials prices were also unchanged, but we think that they will soon start to increase as construction activities are ramping up. Hence, we maintain our view of rising inflation for December 2021 and for 2022, but the price increase should stay moderate around 3%.
• According to the Ministry of Planning & Investment, FDI disbursement slightly declined in 11M/2021 by 0.6% y/y to $17.1bn. However, disbursement in November was $1.95bn, which was up by 4.3% m/m and by 39.3% y/y, showing a strong recovery.
• Retail sales continued to rebound in November, increasing by 6.2% m/m. Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 52.2 in November from 52.1 in October, signaling a modest improvement in business conditions.
• November’s trade balance amounted to +$100mn. This is the third consecutive month that Vietnam is recording a trade surplus after months of trade deficits. We think that the trade balance will remain positive in December as demand from international markets during year-end is usually quite strong. Hence, Vietnam should be able to record a slight trade surplus for FY2021.
• In November, government budget spending reached $2.1bn, up by 14.7% m/m. However, for 11M/2021, total spending was nearly $16bn, down by 8.7% y/y, completing only 73.8% of the plan. Going forward, we believe that the government will push spending more strongly to support economic growth.
• The Ministry of Planning & Investment submitted a proposal to the government, asking for a stimulus package of $34.8bn (nearly 10% of 2021 GDP) to support the economy including tax reduction, public investment, public housing, etc. The government agreed that the stimulus package is essential to support economic growth and that the final budget amount is expected to be released soon. Although there is some concern on rising inflation, we think the likelihood of a sharply higher CPI is rather low because 36.6% of Vietnam’s CPI basket is food & foodstuff, which Vietnam can mostly grow domestically and where the government can control prices. The supply chain issue, which caused globally rising prices in 2021, should ease next year as other countries are reopening. The government does have room for further leverage given public debt / GDP was 48%, lower than the ceiling of 60%. Also, Vietnam’s 5-year government bond yield is currently at all time low level of 0.77%.
Stock Market highlights:
• The VN-Index as a gauge for Vietnam’s stock market, advanced by 2.5% in November. The index closed the month at a level of 1,478, retreating from its all-time-high of 1,500 amid negative news about the new coronavirus variant – Omicron.
• In the reporting month, the market’s increase was broad-based as 250 out of 405 stocks gained on the Ho Chi Minh Stock Exchange. The sector performance was quite mixed as financials (+6.4%), real estate (+3.7%), healthcare (+4.1%) were the strongest performers, while utilities (- 14.3%), materials (-6.4%), and energy (-0.8%) underperformed. The real estate sector led the upturn as investors expect a strong industrial recovery next year. Meanwhile, the financial sector was mainly driven by brokerage stocks as investors expect them to benefit from strong domestic inflows. On the other hand, utilities and energy’s performances were affected by the current fluctuation in general oil price, while the underperformance of the material sector was driven by declining in steel prices.
• The combined average daily trading volume on the three bourses reached $1.7bn in November, which is the highest volume ever of the Vietnamese stock market. Foreign investors were still net sellers in the amount of $387mn, resulting in a total net outflow of $2.5bn YTD. The market continued to be dominated by domestic individual investors, which contributed 90% to the market’s total trading volume in November. Notably, retail investors are heavily invested in small and mid-cap stocks to avoid the impact of continuous selling from foreign investors with their focus on large cap stocks. Consequently, the money inflow was concentrated in small and mid-cap stocks, with which retail investors expect to achieve faster gains than with large-cap stocks. The total trading value of small and mid-cap stocks accounted for 50% of the total trading value in November versus around 40% at the beginning of the year.
• At the end of November, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 16.0x, at a P/B of 2.5x, and have a 2022F EPS growth of 21.0%. Meanwhile, the stocks on our buy and hold recommendation list are trading at a 2022F P/E of 13.1x, at an average P/B of 2.5x and have an EPS growth of 36.1%.
Invest with us:
Please download the November 2021 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.
Featured image credit: Internet