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 December 2018.
Macroeconomic highlights:
2018 ended with a set of encouraging economic figures:
- 2018’s GDP grew by 7.08%, the strongest increase in the last ten years. The improvement was driven by the industrial and construction sector (+8.85% yoy). Services came in second, expanding by 7.03% yoy. Meanwhile, the agriculture, forestry and fishery sector grew by 3.76% yoy.
- Retail sales and service revenue continued to perform strongly, increasing by 11.7% yoy (2017: +11.0%) to VND 4,396 trillion ($197bn).
- Import and export activities also showed solid growth in 2018: Total exports amounted to USD 244.7bn, up by 13.8% yoy, while imports reached USD 237.5bn, up by 11.5% yoy. As a result, Vietnam’s trade balance has achieved a surplus of USD 7.2bn. Regarding export activities, domestic enterprises posted higher export growth than FDI companies (15.9% vs 12.9%). Vietnam’s main export goods in 2018 were mobiles and parts (+10.5%), garment and textiles (+16.6%), as well as electronic devices (+13.4%).
- The Nikkei Vietnam Manufacturing Purchasing Managers’ Index stayed at a solid 53.8 points in December, indicating a continued expansion of manufacturing activities.
- FDI disbursement continued its strong performance, amounting to USD 19.1bn, up by 9.1% yoy.
- Inflation inched up moderately by 2.98% yoy, driven by price increases of foods and food services (+5.1%), education services (+6.5%) and healthcare services (+3.6%), while transportation posted an increase of only 0.2% thanks to petrol price cuts towards the end of the year.
- The pressure on the USD has eased towards the end of 2018. At the end of December, the USD/VND exchange rate stood at 23,175, up 2.1% ytd, and compared to the peak of 23,356 in October (according to Bloomberg’s data).
Macroeconomic highlights:
- In 2018, global equity markets were very volatile and performed poorly. The Vietnamese market also went through a period of extended swings: The VN-Index, the gauge of all stocks listed on the Ho Chi Minh Stock Exchange (HSX), carried on the momentum of 2017 (+52.7%) and increased by 24.0% in the first 4M of 2018. Thereafter, it steadily retreated, ending the year down 9.5%. The drivers of the 2017 rally performed worst in 2018: The financial sector (-9%, contributing -2.7% to the index performance); Vinamilk (VNM, -29%, contribution -2.8%); Faros Construction (ROS, -74%, contribution -2.0%).
- 2018’s trading volume, as measured by the combined daily average of the three bourses, was USD 297mn, +30% yoy. The amount of daily trading volumes moved in synch with the performance of the general market. The December daily average was USD 230mn, which was only 78% of the full year daily average. Domestic investors continued to make up close to 90% of the trading volume. Margin loans, which are only available to domestic investors, surged to a historical high in April; then they started to decline steadily and are currently even below the long-term trend line since 2011. To estimate margin loans, we take data of a leading broker as a proxy for the whole market.
- In all 2018, foreign investors were net buyers, and their purchases amounted to USD 1.9bn. However, this amount was distorted by a couple of large deals, in which this group of investors participated: Vinhome (VHM, USD 1,253mn) and Masan Group (MSN, USD 565mn). But foreign interest got weaker towards the end of the year. Excluding the above-mentioned two deals, net foreign purchases in Q1, in Q2, in Q3, and in Q4 amounted to +USD 516mn, to -USD 192mn, to -USD 152mn, and to -USD 95mn respectively.
- After the correction, at the end of 2018, Vietnam’s equity valuations have come down to reasonable levels: The Bloomberg’s forward P/E of 13.6x has just touched its 5-year average, which has been a strong support level in the last 3 years.
- Going into 2019, there are several supporting factors for Vietnamese stocks: 1) solid macro conditions, which are likely to fuel both consumption and development; 2) government’s efforts to further improve corporate governance, brining it in line with international standards, and to further develop the capital markets: The government still has a large pipeline of company stakes to divest, in order to get financing for infrastructure development. For some of these projects, international money may be needed. 3) quite reasonable valuations. On the other hand, the Vietnamese equity market has become more dependable on international developments in recent years as reflected by the rising correlation between Vietnamese and emerging market stocks. Furthermore, the performance of the US dollar has also a major impact on Vietnam as a rising US currency usually negatively affects the emerging markets.
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Please download the December 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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