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 February 2022.
February 2022 macroeconomic highlights:
- After a long Tet holiday, Vietnam’s economy has returned to its robust recovery, especially in the service sector. Sales of accommodation & food services were up by 12.6% y/y, while travelling services also posted strong growth of 39.4% y/y. People are now more confident to travel thanks to the country’s high vaccination rate and attractive promotion packages from several touristy cities. As a result, passenger transport in February increased by 13.1% m/m, boosted by the encouraging outlook for the service sector. With regard to education, students of all ages are also back to school after a long period of online studying. Infected students can stay home until recovered, while others continue coming to classes.
- Because of the rapid economic reopening and increased travel activities, the number of COVID-19 has risen significantly to over 80,000 cases per day. However, the number of deaths was relatively small, less than 100 cases per day, which indicates a low death ratio of less than 0.13%. Since 78.6% of the population are fully vaccinated – 40% of them are boostered – we believe that normal life will continue despite the currently rising number of cases.
- The February Consumer Price Index (CPI) rose by 1.4% y/y, mainly driven by transportation costs (+15.5% y/y) due to rising global oil prices and due to a temporary capacity reduction of the Nghi Son Refinery Plant. In fact, the domestic retail petroleum price has increased by 47.1% y/y, which put massive pressure on transportation costs (15% of the CPI basket). However, we believe that the high petroleum price is rather short-lived as the Nghi Son Refinery is expected to produce at full capacity from March to May 2022. The government is also planning to reduce taxes on gasoline products to support the economic recovery. The price index of food & food stuff increased by 1.0% y/y, driven by an increase of 3.1% y/y from eating outside, while food product prices were unchanged from February 2021.
- Going forward, pricing pressure is expected to continue in the short-term amid high commodity prices and the global and the domestic economic recovery. However, we think that longer-term, inflation remains under control because: (1) stable food and pork price given the fact that the African Swine Flu is contained; (2) the current high oil price has already priced in rising global political tensions; and (3) the government’s plan to cut some current taxes on gasoline to lower retail prices.
- In Feb 2022, FDI disbursement reached $1.1bn, up by 9.1% y/y. For 2M/2021, total disbursement was $2.7bn, an increase of 7.2% y/y. These outstanding numbers reinforce the positive outlook for FDI in 2022.
- February’s trade balance showed a deficit of $2.3bn, driven by imports of electronic & computer components, which however are raw materials and semi-finished goods for production activities. Hence, we believe that rising in imports are a forward-looking indicator for stronger export growth in the future. Hence February’s trade deficit is no reason for concern.
- Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 54.3 in February, up from 53.7 in January. Business conditions have now improved in each of the past five months following the disruption caused by the Delta wave. The improving growth momentum was again supported by stronger customer demand. Retail sales continued to advance by 3.1% y/y.
- Amid global political tensions and the concern of US FED tightening, the Vietnamese currency (VND) remained resilient year-to-date, with minimal depreciation. We believe that this is thanks to the solid FDI inflow and strong remittances which support the domestic currency.
Stock Market highlights:
- The VN-Index as a gauge for Vietnam’s stock market advanced by 0.1% in February. Retail investors, which have reduced their margin levels and risk exposure before the Lunar New Year Holiday, have returned to the market. Most sectors posted positive returns in February 2022 while Financials (-3.9%) and Real Estate (-6.8%) reported negative performance. These are the two largest sectors in terms of market cap of the VN-Index. Their poor performance show that there was no strong capital inflow, and that retail investors sought investment opportunities on specific stocks rather than on whole sectors.
- The combined average daily trading volume on the three bourses was $1.2bn in February, a decline of 16.0% compared to the previous month, and lower than the average volume of $1.5bn in 2021. Foreign investors remained net sellers of $10.6mn in February, causing a total net outflow of $126.9mn YTD. Domestic individual investors continued to dominate the market as they contributed 87% of the market’s total trading.
- Global markets were shaken by the Russia-Ukraine crisis recently, but the Vietnamese stock market has been relatively resilient so far. The escalation of the crisis has not shown any material impact on Vietnam’s economy as of yet (Russia and Ukraine together account for only 1.0% of the Vietnam’s total exports). However, as global markets are strongly connected nowadays, we will need to monitor the situation carefully. Having said that, market sentiment is still vulnerable and therefore volatility is likely to stay elevated. Taking a longer-term perspective however, we think that any extended weakness will provide a good opportunity to increase exposure in fundamentally sound companies. At present, companies in our Buy list have strong financial positions, focusing on the domestic market with good pricing power. They are trading at a 2022F P/E of 13.2x, at an average P/B of 2.6x, and at an EPS growth of 25.6%.
- Meanwhile, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 16.2x, at a P/B of 2.5x, and at a 2022F EPS growth of 22.4%.
Invest with us:
Please download the February 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.