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 August 2021.
Key August 2021 macroeconomic highlights:
- The 4th wave of COVID-19 escalated in August and added 303,414 cases, bringing the total number of cases to over 433,000. The majority of them were found in the Southern area, especially in Ho Chi Minh (HCM) city and in the Binh Duong province. In response, the lockdown measures in HCM city have been raised to a new level, in which people are asked to stay home all the time for 2 weeks until 5 September 2021. All of the necessary goods will be delivered by military and shippers, who all got at least 1 dose of the vaccine. Mass tests will be conducted for all HCM citizens during the social distancing period. Nevertheless, the number of new cases rose strongly in the last week of August to nearly 6,000 cases/day. HCM’s Chairman aims to lower the number of daily cases to below 2,000 cases before 15 September, which is very ambitious though. In a medium-case scenario, such target will take one month to achieve in our view. This means that the social distancing measures could be eased by late September only.
- In August, Vietnam received 9.4mn doses of vaccine from AstraZeneca and from Pfizer. The vaccination progress is speeding up, especially in Ho Chi Minh city, where 85.7% of people above 18 have been vaccinated with 1 dose. Nationwide, 19.7mn people have received at least one dose of vaccine, equivalent to 20.1% of Vietnam’s population. In total, Vietnam will import 170 million doses of vaccines, and most of them will be delivered in late Q3 and in Q4/2021.
- The coronavirus situation weighed on foreign trade activities in August as exports declined by 5.4% y/y to $26.2bn because manufacturing was temporarily disrupted in major economic hubs such as in Binh Duong, in Dong Nai, and in the Long An province. Imports also declined by 5.5% m/m, reflecting slower import of raw materials from manufacturing companies. However, imports rose several consecutive months before August, and they are still up by 21.2% y/y to $27.5bn. Overall, Vietnam recorded a trade deficit of $1.3bn in August and of $3.7bn in 8M/2021. We think that the trade deficit will narrow in coming months due to the resumption of manufacturing activities and due to slower import growth.
- The July Consumer Price Index (CPI) rose by 2.8% y/y, mainly driven by food & foodstuff, by accommodation & construction materials and by transportation. Food prices increased due to rising demand, while logistics activities were disrupted during the lockdown period. The accommodation & construction materials index rose by 4.3% y/y due to globally rising commodity prices, but it was unchanged compared to the previous month. As for transportation, its index surged by 13.6% y/y because of the low base in 2020, but it softened from the July level by 0.4% as petroleum prices were revised down in areas applying social distancing. Overall, the rise in inflation is in line with our expectation.
- According to the Ministry of Plan & Investment, FDI disbursement grew by 2.0% y/y to $11.6bn in 8M/2021. Meanwhile, registered FDI reached $19.1bn, down by 2.1% y/y.
- The USD/VND stood at VND 22,780 by end of August. The Vietnamese Dong has appreciated by 0.7% MTD and by 1.3% YTD, in line with our expectation. Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 40.2 in August, compared to 45.1 in July. Although it was a decline, it is still better than April 2020, which was 32.7 because the lockdown in April 2020 was nationwide while the current one is mostly in southern provinces. We think the PMI will improve in coming months because two manufacturing hubs in the north namely Bac Giang and Bac Ninh reopened, and we expect social distancing measures to be eased by late of September.
- The current prolonged lockdown period in the South of Vietnam will likely affect the country’s GDP growth in 2021. However, it is difficult to make a judgement now. We expect to have a clearer picture on the state of the current virus outbreak and on the effect of the social distancing measures in the next few weeks. At that time, we also might have more giving information about affected sectors and companies. Hence, we should have a reasonable forecast for GDP growth and company earnings in the next monthly report.
Stock Market highlights:
- The VN-Index as a gauge for Vietnam’s stock market inched up by 2.4% in August. The stock market has experienced a very volatile month, reflecting the COVID-19 situation in Vietnam amid a period of lacking economic and company earnings information. The increase of stock market was broad-based as 305 out of 394 stocks gained during the month. Financials sector, which weighting accounted for 36% of the index, was the only sector to report negative return of 1.5% in August as 14 out of 16 bank stocks suffered losses in the month. On the other hand, all remaining sectors achieved positive returns. Healthcare (+17.5), Materials (+11.9%), Industrials (+11.8%), Communication (+9.1%) and Utilities (+4.2%) strongly outperformed, while other sectors such as Consumer Staples (+1.6%), Real Estate (+1.1%), Energy (+0.9%) underperformed the index.
- The combined average daily trading volume on the three bourses rose strongly by 18% m/m to $1.2bn in August, coming close its record of $1.3mn in June 2021 when the VN-Index reached its all-time high. Foreign investors were net seller in the amount of $286mn in August, resulting in a total net outflow of $1.3bn YTD. The market continued to be dominated by domestic individual investors, who contributed more than 80% to the market’s total trading volume.
- Going forward, a period of little corporate information is ahead. Q3 earnings season will only start in October. Meanwhile, investors will be focused on the COVID-19 situation, which might be the main driver of the stock market in the coming months. As a result, we expect the market to remain highly volatile.
- However, we think that any market weakness is providing a good opportunity to buy stocks with solid fundamentals. We appreciate the long-term potential of Vietnam’s economy, especially after the current COVID-19 outbreak. Given the speed of vaccination together with strict social distancing policies, we think the current situation will become under control either in late September or in October. On another positive note, Vietnam has a high vaccination acceptance as most or even all people are willing to get the vaccine as soon as possible. Besides, we expect some major cities including economic hubs to be prioritized for the vaccination.
- At the end of August, Vietnam’s Top 100 stocks are trading at a 2021F P/E of 17.3x, at a P/B of 2.6x, and have a 2021F EPS growth of 28.1% (+2.0% in 2020). Meanwhile, the stocks on our buy and hold recommendation list are trading at a 2021F P/E of 14.2x, at an average P/B of 2.7x and have an EPS growth of 12.7% (+19.4% in 2020).
Invest with us:
Please download the August 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.