We would like to present you our monthly Macreoeconomic & Stock Market Highlights for Vietnam alongside with the monthly performance update of the TIM Vietnam Actively Managed Certificate for August 2019.
Key August macroeconomic highlights:
- Vietnam’s trade surplus reached $3.4bn in 8M/2019, according to an estimate of the General Statistics Office (GSO). In August alone, the surplus amounted to $1.7bn. Year-to-date, exports rose by 4.5%, while imports went up by 7.5% y/y. Vietnam exported $170bn of goods; Foreign Direct Investment (FDI) companies played a major role, contributing to 69.4% of the exports.
- August’s CPI remained moderate at 2.3% yoy, and was up by 0.3% m/m. Ytd, core inflation, which excludes food & foodstuffs, energy as well as government-supported prices such as healthcare and educational services, was up by 1.9% y/y.
- According to the GSO, the Vietnamese government disbursed VND189tn Ytd, up by 3.8% y/y. However, this is only equivalent to 53.1% of the government’s budget for this year. The country’s two largest cities, Hanoi and Hochiminh city, continued to receive the largest shares, which rose by 13.7% in Hanoi and by 6.5% in Hochiminh city).
- Total FDI disbursed since the beginning of this year reached $12bn, up by 6.3% y/y. The manufacturing and processing sector has continued to receive strong inflows as foreign companies have started expanding and moving their production to Vietnam amid escalating US-Chinese trade tensions. In the first 8 months of 2019, newly registered capital for this sector rose by 47% y/y. China is currently the largest FDI investor in Vietnam with $1.8bn newly registered capital ytd, followed by Korean and Japanese investors with $1.7bn and $1.2bn respectively.
- In August, the government issued Resolution No.50-NQ-TW providing guidelines on selecting and managing FDI. Based on this resolution, Vietnam will become more selective when approving FDI: prioritize projects that have advanced and new technology, modern governance, high added value, and extensive links with global production and supply chains. FDI companies are urged to focus on efficiency, technology, and on environmental protection. The government also set a target for the 2021-2025 period to attract $150-200 billion worth of total registered FDI, while foreign companies will have to disburse $30-40bn of capital a year. In the 2026-2030 period, the country targets to receive $200-300 billion of registered FDI.
Stock Market highlights:
- The VN-Index as a gauge for the Vietnamese stock market, declined by 0.4% in August after peaking in late July. Four names accounted for almost the whole index performance: Vietcombank (VCB, -4%), PetroVietnam GAS (GAS, -6%), Masan Group (MSN, -6%) and Vincom Retail (-7%). These stocks have a combined weight of 20% in the VN-Index. Other Vingroup-related companies, namely Vingroup (VIC) and Vinhomes (VHM) (total index weight of 21%) stayed unchanged this month. The domestic sentiment remained negative.
- Large foreign money outflows were most likely the main reason for the lackluster performance of the index. In August foreign investors were net sellers on the three bourses in the amount of USD 75mn. Excluding VIC’s large deal, valued at USD 45mn, foreign net selling would have been USD 120mn. Two companies, namely Vietjet Aviation (VJC) and the Hoa Phat Group (HPG), suffered from foreign net selling in the amount of USD 44mn and of USD 22mn respectively. As for VJC, the reason for the selling was probably due to the company’s dimming growth prospect because of more competition in its main business. HPG’s share price suffered from subdued short-term earnings expectations due to an abnormally strong increase in input material prices. However, the company’s longer-term prospects are still promising as it is continuously expanding its market share, taking advantage of its advantaged technology and of economies of scale. For that reason, we think that the selling was overdone.
- The 3 largest ETFs with a total NAV of 1.0bn at the end of August, had net outflows of USD 39mn. 3 out of 4 stocks mentioned above as index performance draggers were included in these ETF portfolios. The free float of these stocks as well as their trading volumes were very low in August. Thus, any change in ETF flows will cause significant movements in the index. On the back of increasing globally political uncertainties and rising concerns about a global economic recession, we fear that foreign inflows into frontier markets such as Vietnam are likely to suffer.
- The average daily trading volume of the three bourses in Vietnam amounted to USD 227mn in August, which was 19% higher than in the previous month. However, trading volume decreased notably towards month end, reflecting the overall worsening market sentiment. For example, volume of the last trading day in August was 35% lower compared to the volume of the month’s first trading day.
- By the end of August, the top 100 stocks were trading at a 2019F P/E of 16.9x and at a P/B of 2.5x. The names on our Buy recommendation list were trading at an average 2019F P/E of 8.6x and at an average P/B of 1.3x, which are very attractive valuations in our view.
Invest with us:
Please download the August 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: pixabay.com