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 January 2020.
Key January 2020 macroeconomic highlights:
- The January Consumer Price Index (CPI) rose by 6.4% y/y. The sharp increase was mainly due to the increase in Food & Foodstuffs, whose consumption rose by 10.9% y/y during the Lunar New Year. Additionally, the development of the African Swine Fever (ASF) disease, which caused higher pork prices in the last 12 months, put upward pressure on this month CPI. But pork prices remained stable during the holiday period. Therefore, we expect inflation pressure to ease in coming months.
- In the first month of 2020, total FDI disbursed reached $1.6bn, +3.2% y/y. The total FDI registered continued to increase significantly in January, amounting to $5.3bn, +179.5% y/y. The sharp increase was due to the $4b LNG-fired thermal power plant project in the Bac Lieu province, which was recently granted an investment certificate.
- According to an estimate of the General Statistics Office (GSO), January imports fell by 14.4% y/y, reaching $19.1bn, while exports declined by 14.3% y/y, hitting $19.0bn. As for exports, the major products such as textiles and mobile phones, which together accounted for 27.4% of the total export value, declined by 21.0% and by 22.4% respectively. Vietnam’s trade deficit amounted to $0.1bn in January, which stands in sharp contrast to the $0.8bn surplus during the same period of last year. However, the slower trading activities was due to the different timing of the Lunar New Year holiday period, which this year happened in January, while the Holiday took place in February last year. As a result, trading activities should start normalizing only in March.
- On January 21st, the European Parliament’s International Trade (INTA) Committee passed recommendations to adopt the Viet Nam-European Union (EU) Free Trade Agreement (EVFTA) and the Viet Nam-EU Investment Protection Agreement (EVIPA). In February, the Parliament’s plenary session will vote on these recommendations. If consent is given, the EVFTA will come into force one month after Viet Nam and the EU have notified each other that legal procedures have been completed. According to EVFTA, the EU will remove nearly 86% of the tariff lines now and it is planned that almost all (99.2%) of the tariff lines will be eliminated after seven years.
- As the Novel Coronavirus is spreading to Vietnam, the government is stopping to receive tourists from areas with confirmed outbreaks, and is restricting the movement of Chinese visitors already in the country to prevent the virus from spreading. By the end of January, there are five confirmed cases in Vietnam, two are Chinese tourists from Wuhan and three are Vietnamese workers who returned from a training course in Wuhan. There were 97 suspects, of which 65 already got a negative test result, while the remaining people are still waiting for the test result. The outbreak of the disease will mainly affect the Vietnamese tourism industry, which accounts for about 12% of the country’s GDP. In 2019, Vietnam received 18 million foreign visitors, which represented 17.5% of the country’s total tourists. Chinese visitors accounted for 32.2% of the total foreign visitors.
Stock Market highlights:
- The VN-Index as a gauge for Vietnam’s stock market decreased by 2.7% in January. Two major global events impacted Vietnamese markets: 1) In early January, U.S. drones killed Iran’s major general; stocks initially tanked, but the tensions eased rather quickly and markets rebounded. 2) The coronavirus outbreak at the end of the month weighed heavily on investment sentiment, causing the VN-Index to fall dramatically (-5.5% in the last two trading days of January).
- Even though foreign investors were net buyers of $85mn on the three Vietnamese bourses in January, they could not help improving investors’ sentiment. From the total amount of $85mn, $44mn came from net foreign purchases of PV Gas D shares (PGD – a subsidiary of GAS) from Saibu Gas Co. Ltd., a Japanese gas company. In January, ETF activities were modest: The three largest ETFs in Vietnam with the total NAV value of $1bn, witnessed small inflows of $10mn.
- In January, the combined average daily trading volume on the three bourses amounted to $175mn, up by 22.0% y/y, but still 12.9% lower than the 2019 average daily volume. January is usually the month with the lowest liquidity as investors get distracted in preparation for the Tet holiday.
- By the end of January, the top 100 stocks were trading at a 2020F P/E of 13.6x and at a P/B of 2.1x. In sharp contrast, our BUY recommendations have a rather undemanding valuation with a 2020F P/E and a P/B of 8.9x and of 1.6x respectively. The expected average 2020F EPS growth rate for our BUY-rated stocks is 29.8%.
Invest with us:
Please download the January 2020 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: internet