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 April 2022.
April 2022 macroeconomic highlights:
- Despite rising global concerns, Vietnam enjoys robust recovery momentum thanks to its swift reopening. COVID-19 is no longer a concern because nearly all adults got the vaccines and children from 5 to 12 started to be vaccinated from April. The Ministry of Health also waived the health declaration requirement for people coming to Vietnam at all border gates, which is an encouraging signal for tourism and the transportation sector. There were some holidays in April, where we saw many people travelling and the airports were very crowded. According to the General Statistics Office (GSO), the number of domestic tourists were responsible for 10.5mn arrivals, an increase of 16.7% y/y. Business activities were also very robust as nearly 31,000 companies came back to operation in April (+60.6% y/y). At the same time, the State Bank of Vietnam (SBV) asked commercial banks to focus on lending to manufacturing, tourism, and the hospitality sectors to support economic growth. Overall, Vietnam economy is recovering very strongly.
- The April CPI rose by 2.6% y/y, mainly driven by transportation costs (+16.6% y/y). Due to rising global oil prices and temporary capacity reductions at the Nghi Son Refinery Plant, the domestic retail petroleum price reached an all-time high, which put significant pressure on transportation costs (nearly 10% of the CPI basket). Although inflation is a worry in many countries, we think it is manageable in Vietnam as the country does not rely on food imports. In fact, food & foodstuff prices (one third of the CPI basket), only increased by 1.1% y/y. Going forward, we expect inflation to continue to rise amid high commodity prices and the strong economic recovery. However, assuming that commodity prices remain at current levels, the CPI should not increase above the government’s target of 4.0%.
- In April 2022, FDI disbursement reached $1.5bn, up by 7.1% y/y. For the 4M/2022, total disbursement was $5.9bn, increasing by 7.6% y/y. If China continues to maintain its zero COVID policy, we expect the FDI flow to Vietnam to become even stronger.
- Vietnam’s exports and imports continued to be robust in April 2022, growing by 25.0% y/y to $33.3bn and by 15.5% y/y to $32.2bn, respectively. Hence, Vietnam recorded a trade surplus of $1.1bn in April and nearly $2mn for 4M/2022. The U.S. remained to be the most important export market in 4M/2022 with a total value of $35.7bn, up by 17.8% y/y, while China is the largest import market with a value of $37.1bn, up by 12.1% y/y. Similar to FDI, we think that Vietnam can benefit from the China’s zero COVID policy by receiving more orders, supporting exports.
- Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 51.7 in April, unchanged from March level, business operation is reported to continue improving thanks to less COVID-19 cases. Retail sales continued to improve, posting growth of 12.1% y/y in April (March +9.4%).
- On the back of controlled inflation in Vietnam on the one hand and the impact of FED rate hikes on the other hand, the Vietnamese currency (VND) depreciated by a mere 0.5% in April and by 0.8% YTD. We expect the Vietnamese currency to remain quite strong as the VND should be backed by the solid FDI inflow, strong remittances, and sufficient foreign currency reserves (~$110bn by 2021).
Stock Market highlights:
- The VN-Index as a gauge for Vietnam’s stock market fell by 8.9% in April, 340 out of 408 stocks declined while all sectors reported negative returns. During the month, the Vietnamese government has undertaken some investigations of corporate bond issuance, the stock and the real estate market. Investors were concerned during this time, causing weak sentiment, which dragged the stock market down. Subsequently, retail investors, which made up about 90% of the total transaction volume, faced margin calls, exacerbating the panic for the market. We understand that the government aims to enhance regulatory enforcement against fraudulent and manipulative activities and wants to improve the transparency of Vietnam’s capital market, a further step to bring the country closer to the Emerging Markets inclusion road map.
- The combined average daily trading volume on the three bourses was just $1.1.bn in April, which is lower than the average volume of $1.5bn in 2021. However, during this consolidation period, foreign investors have returned to purchase stocks aggressively as they were net buyers in the amount of USD186mn in April, reducing the net selling value by half to USD98.9mn YTD. This important group of investors considered April as a good time to purchase fundamentally strong stocks.
- During the month listed companies have gradually released Q1/2022’s earnings. In general, there were not many surprises. Most banks released impressive results as Q1’s net profit increased double digits at TCB (+25.2% y/y), HDB (+22.7% y/y), MBB (+28.0% y/y), ACB (+32.4% y/y). Banks are expected to report solid earnings growth this year thanks to strong credit growth as a result of the rapid economy recovery. Materials, industrials and retailers are other sectors that reported positive earnings growth in the first quarter. Meanwhile, earnings of real estate companies were mixed as Q1 is usually the weakest period of the year.
- Looking forward, we expect the market to remain highly volatile for the time being even though positive long-term trends persist. Retail investors may be more reluctant to return to the market. However, we believe that their level of confidence will gradually improve as companies with strong fundamental and good valuation should attract more interest and inflows. If history is any guide, buying in a market panic has proved to be profitable. The VN-INDEX is trading at a trailing P/E of 14.9x, which is below the 5-year average of 16.5x. Since 2014, the market’s P/E has been three times below the 5-year average trailing P/E: Two times it took 1-3 months to recover the decline, while the recent decline in Jan 2020 (Covid related) took 8 months to make up for the losses.
- Given Vietnam’s solid economy, FDI disbursement is expected to increase dramatically. International tourism is completely open, and the continued recovery of domestic retail sales should help to accelerate economic growth. Many companies on our covered list and in the Top 100 are projected to enjoy strong earnings growths this year. The current market correction has created a good buying opportunity as many stocks are trading at undemanding valuations. Compared to the regional peers, The VN-Index’s valuation is reasonable with a 2022F P/E of 13.0x, compared to the valuations in Thailand (P/E of 17.2x), in Indonesia (19.5x), in Malaysia (15.4x), and in the Philippines (16.2x).
Invest with us:
Please download the April 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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