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 February 2018.
- February was a quiet month as the country had a week-long public holiday, the Lunar New Year. Macroeconomic indicators continued to point to positive developments:
- Retail sales and services remained solid as they grew by 12.2% yoy, equivalent to an estimated VND 797 trillion (~$ 34bn). Retail goods (+14.4% yoy) continued to be the main component, accounting for 77% of the total value of retail sales and services.
- The country’s exports of goods increased by 5.9% yoy in the first two months of 2019. Domestic companies remained the main growth driver as their exports rose by 9.9% yoy, while FDI companies reported a smaller advance of 4.3% yoy. Traditional items such as machinery (+19.3% yoy), garment & textiles (+19.0%) and shoes (+18.4%) were mainly responsible for the solid export growth. Meanwhile, mobiles & parts, which is the single largest export item, posted a decline of 7.3%.
- The Nikkei Vietnam Purchasing Managers’ Index for the manufacturing sector stayed at a solid 51.2 points in February, indicating a continued strong expansion of manufacturing activities.
- FDI disbursement once again performed well, reaching $ 2.9bn, up 9.8% yoy. As we mentioned before, 2019 should be a bright year for FDI inflows to Vietnam as the country should benefit from the trade dispute between the US and China.
- The summit meeting between US president Trump and North Korean leader Kim was held in Hanoi towards the end of February. As a positive side effect of the summit, U.S. officials and their Vietnamese counterparts strengthened corporate ties: Two Vietnamese airlines, namely Vietjet Air and Bamboo Airlines, signed deals worth a combined $ 15.7bn to purchase airplanes from Boeing. In addition, Vietjet also inked a deal with a contract value of $ 5.3bn with General Electric for engine servicing.
Stock Market highlights:
- The VN-Index as a gauge for the Vietnamese stock market, rallied by 6.0% in February, driven by large-cap stocks thanks to strong inflows of foreign investors. This group of investors was very active in February with net purchases of $ 123mn. More than half of this amount, $86mn to be exact, went into the country’s three largest ETF funds. Also, the purchase of $ 75mn worth of shares at Masan Group (MSN) contributed to the strong foreign inflows.
- In February, the performance of the VN-Index was driven by shares of Vingroup (VIC, 11.1% weight in the VN-Index, up by 9.7% in February), and of its subsidiaries Vinhomes (VHM, 9.1% weight, up by 9.4%) and Vinamilk (VNM, 7.9% weight, up by 4.5%). These three companies are in the indices that are tracked by the three largest ETFs on the Vietnamese stock market. The strong inflows into ETF’s in Feb have driven up prices of these stocks. In our view, however, they are strongly overvalued, on a fundamental basis. VIC and VHM are currently trading at unusually high multiples: VIC (2019F P/E of 65.3x and P/B of 8.6x), VHM (2019F P/E of 14.8x and P/B of 4.7x), and VNM (2019F P/E of 25.6x and P/B of 8.5x).
- The Vietnamese equity market is increasingly correlated to global market developments as Vietnam’s economy becomes more and more integrated into the global economy. Thus, the inflow of foreign passive money into Vietnam may not be sustainable, for example in case of increasing political or economic turmoil. Therefore, in such volatile times, we continue to focus on value investing.
- Trading volume, as measured by the 3-bourses combined daily average, was $ 236mn, down by 36% yoy in February, but improved significantly by 52% compared to previous month. The 2018 earnings of listed stocks were completely released and reflected in their stock prices. 2018 earnings growth was concentrated in real estate companies (as they booked many projects, which they sold in the past) and in banking (thanks to strong credit growth and the reversion of past provisions). But in 2019, we expect generally softer and more diverse earnings among sectors and companies. We estimate 2019 EPS growth of the top 100 market cap stocks to advance by 7.0% yoy, down from 20.1% in 2018. The average stock’s EPS growth of our BUY recommendation list was 21.3% in 2018 and is 18.4% in 2019 (there are not many real estate and banking stocks on our list).
- By the end February 2019, the top 100 market cap stocks are trading at a 2019F P/E of 17.0x and at a P/B of 2.4x, while the stocks in our Buy recommendation list are trading at an average 2019F P/E of 9.8x and at an average P/B of 1.4x.
Invest with us:
Please download the February 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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