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 2022.
August 2022 macroeconomic highlights:
• In Aug-2022, consumption continued to rebound: Retail sales grew by 0.6% m/m and by 50.2% y/y. 8M/2022 real retail sales in terms of growth and absolute value after adjusting for the price effect amounted to 15.1% y/y and USD144.1bn, respectively, which is already higher than pre-Covid numbers of 9.5% y/y and of USD139.8bn, respectively. Growth was driven by: (1) a rebound in the service sector, especially of hospitality and tourism and (2) an improvement in household income according to the GSO Aug-2022 survey. Going forward, we expect retail sales to continue to improve in September, also thanks to long holidays.
• The Industrial Production Index (IIP) posted 2.9% m/m and 15.6% y/y growth in August. Manufacturing outpaced with an increase of 16.2% y/y. For 8M/2022, the IIP grew by 9.4% y/y, also driven by manufacturing (+10.4% y/y). Furthermore, business activities are now recovering across the country with 61 out of 63 provinces recording growth in the IIP for 8M/2022. For the rest of the year, we anticipate business activity to grow robustly as new credit quotas will be released in September.
• In 8M/2022, government revenue increased by 19.4% y/y, completing 85.6% of its target value thanks to income from crude oil and export/import activities. On the other hand, 8M/2022 government expenditure only completed 53.6% of the full year plan (+4.6% y/y), mainly because of delayed public investments (only fulfilled 39.1% of the full year plan). Given the government’s large fiscal surplus of approximately $10.9 billion at the end of August 2022, we believe that government spending will rise strongly in coming months, contributing meaningly to GDP growth in H2/2022.
• In August, the CPI rose by 2.9% y/y, mainly driven by transportation costs (+8.9% y/y) and by food & foodstuff (+3.3% y/y) due to higher gasoline and higher eating out price. However, compared with July 2022, the CPI was unchanged thanks to a 5.4% reduction of the local gasoline price (following lower global oil prices) and tax cuts from the government, which offset the rise in pork prices in August. Despite many commodities prices are cooling down, inflation is still higher than last year. It may reach close to 5% in the next two months before gradually moving down close to around 4.0% by year’s end.
• In August 2022, FDI disbursement reached $1.2bn, up by 11.1% y/y, which reinforced the positive outlook of Vietnam despite the global slowdown. For 8M/2022, total disbursement was $12.8bn (+ 10.5% y/y), which is the highest 8M FDI disbursement value in the past 5 years.
• Vietnam recorded a strong trade surplus of $2.4bn in August as both exports and imports posted solid growth of 22.1% y/y and of 12.4% y/y respectively. Overall, the country had a moderate trade surplus of $3.9bn in 8M2022 compared to a $3.5bn deficit in 8M2021. We expect exports to grow stronger in the following months, also thanks to a new product and accessory releases from Samsung in September. Vietnam is expected to receive more international orders thanks to the strict Zero-COVID policy from China.
• Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 52.7 in August which remained well above the positive level and producers’ confidence strengthened for the eleventh successive months. Business environment improved stronger than previous month in which factory output, new orders and employment all rising at faster rates. Notably, delivery times shortened for the first time since Nov-2019 as an improving supply of raw materials enabled vendors to speed up deliveries. On prices, the rate of input cost inflation slowed sharply for the second month in a row and was the weakest increase in 27 months, indicating peaking price pressure from the supply side.
• During the month, the State Bank of Vietnam (SBV) continued to undertake major interventions by issuing T-Bills and withdrawing excess amounts of the Vietnamese currency (VND) from the interbank market. Based on our calculation and as of the end of Aug-2022, the SBV withdraw VND81.3trn or $3.5bn from the interbank market. Thanks to this liquidity adjustment, the USD/VND exchange rate remained relatively stable with only a 0.2% depreciation in August despite a 3.8% increase of the USD Index during the month. As the FED is expected to hike its interest rates for the rest of the year by 100-125 bps, we maintain our view that the SBV may increase policy rates by another 25- 50bps in early Q4. However, given moderate inflation and robust economic growth, we believe this is not the beginning of a new tightening cycle, but rather a healthy adjustment for the economy. The VND has depreciated by 2.6% YTD against the USD so far, but as Vietnam will continue to attract positive foreign inflow from its trade surplus and from remittances and FDI, we expect the VND to appreciate slightly in coming months, finishing the year with a 2% depreciation against the USD. The value of other currencies in region fell much more against
Stock Market highlights:
• Following the positive sentiment in July, the VN-index rose by a solid 5.7% in August, narrowing the year-to-date decline to 16.0%. Most sectors generated positive returns this month. Consumer Discretionary was the best performing sector and rose by 11.6%, driven by the Mobile World Group (MWG +20.1%) as it delivered good earnings in July. Moreover, some information that MWG may potentially IPO its Bach Hoa Xanh division at a $1.5bn valuation, also supported the stock price. Materials (+10.1%) were the second-best performer in August thanks to the rebound of the Hoa Phat Group (HPG +7.2%) as its stock price fell to attractive levels in recent weeks, which triggered demand from both domestic and foreign investors. In addition, some fertilizer and chemical companies also achieved good performance in the month. The energy sector turned in a return of 8.6%, above all thanks to good news regarding a massive gas project named Block B with a $10 bn capital investment, which is expected to get approval at the end of 2022.
• In August, the combined average daily trading volume on the 3 Vietnamese bourses significantly increased by 36.4% compared to the previous month, to a total value of $0.8 bn. Of note, the average daily trading volume in August was the highest since May. The robust liquidity improvement demonstrated a rebound in investors’ confidence thanks to: (1) global inflation showing signs of cooling, and (2) most of VN-index stocks traded at very attractive valuation levels since the market selloff.
• August witnessed a strong return of foreign inflow. Accordingly, foreign investors were net buyers to the tune of $51 mn in August on all 3 bourses together. For all 8M/2022, Vietnam’s stock market has received a total inflow of $181 mn.
• We expect volatility to remain elevated in coming months due to uncertain international developments, including the global economy, inflation, and the war in the Ukraine. The possible rate increase of the SBV may also affect market sentiment here as the Vietnamese stock market is retail driven. However, as stated above, possible policy rate hikes should be seen as a healthy adjustment for the economy rather than the start of a new tightening cycle in our view. The new credit growth quota, which is likely to be announced in September, should support market sentiment in the short-term.
• We maintain our positive view on the Vietnamese stock market in the longer-term: It is well-supported by strong macro data and corporate earnings. Inflation is still moderate here, and most Vietnam’s listed companies has strong financial positions and good growths. Despite the recent rebound, relative valuations remain attractive in many sectors, and any further correction opens opportunities to accumulate good stocks at reasonable prices.
• At the end of August, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 13.3x, at a P/B of 2.1x, and at a 2022F EPS growth of 20.1% (32.2% in 2021). Meanwhile, the stocks on our buy recommendation list are trading at an average 2022F P/E of 11.7x, at an average P/B of 2.0x, and at an EPS growth of 21.3% (33.3% in 2021).
Invest with us:
Please download the August 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.