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 Jun 2019.
Key June macroeconomic highlights:
- The Q2/2019 GDP grew by 6.71%, leading to a growth rate of 6.76% in H1/2019. Though H1/2019 growth was lower than in the same period of last year, it was still the second highest since 2011. Regarding sectors, industrials (36% GDP-weight) and services (38% weight) continued to post strong growth of 8.9% and of 6.7% respectively. In the industrial sector, manufacturing expanded by 11.2%, while construction advanced by 7.9%. But the agriculture sector (14.5% weight) rose by a mere 2.4%, being the main factor to cause H1/2019 GDP growth to be lower than one year ago.
- The country’s trade balance showed a surplus of $0.4bn in June, reducing its deficit to $34mn in H1/2019. Exports achieved a solid growth of 8.5% yoy in June (+7.3% in H1/2019). Import growth was 10.0% in June (+ 10.5% in H1/2019).
- The Nikkei Vietnam Manufacturing Purchasing Managers’ Index rose to 52.5 points in June, up from 52.0 in May, indicating a consistent expansion of manufacturing activities.
- The Council of the Ministers of the European Union has approved the EU-Vietnam trade and investment agreement. The agreement was signed on 30 June 2019 in Hanoi and will be presented to the European Parliament for approval. Once approved, the trade agreement can immediately enter into force. The agreements are set to bring unprecedented benefits for European and Vietnamese companies, consumers and workers. It is noted that Europe is Vietnam’s second largest export destination. In H1/2019 Vietnam achieved a net export surplus of $13.7bn with EU countries.
- Inflation remained moderate at 2.2% yoy. The core inflation, which excludes food & foodstuffs, energy as well as government-supported prices such as healthcare and educational services, was up by 2.0%. So far, the inflation is still well controlled.
- The government’s fiscal balance showed a surplus at about $2.1bn by the end H1/2019. Public investment expenditure continued to be slow and only met 26.1% of the target for the whole FY2019.
Stock Market highlights:
- The VN-Index as a gauge for the Vietnamese stock market increased by 0.3% in June, ending the first half of 2019 with an increase of 6.8% ytd. The performance of the index was mainly driven by a handful of stocks: the three Vingroup-related companies, namely Vingroup (VIC), Vinhomes (VHM) and Vincom Retails (VRE) (total index weight of 22.9%) were responsible for about half of the index performance in the first half of the year. Banks also contributed to the positive performance of the VN-Index; the main driver here was Vietcombank (VCB, index weight of 7.5%), which was up by 31.8% ytd, contributing about 30% to the index’s performance. Without the contribution of VCB, the banking sector would have been lower by 4.1% ytd.
- The strong money inflows into ETFs may have been the main reason for the good performance of the above-mentioned single stocks. In H1/2019, foreign investors were net buyers of $413mn on three bourses. However, $325mn of that amount was an investment of strategic investors in Vingroup (VIC) and in Masan Group (MSN). If this amount was excluded, foreign investors would have been net buyers of $88mn only. Most of this amount went into ETFs, as the three major ETFs investing in Vietnam got a net foreign inflow of $221mn in H1/2019. The three Vingroup-related companies have a high weight in ETFs (more than 40% and 20% in the FTSE Vietnam and in the MVIS Vietnam index respectively). These companies are trading at unusually high P/Es (VIC of 66.3x, VHM of 13.4x, VRE of 26.5x) and P/B’s (VIC of 6.2x, VHM of 4.2x, VRE of 2.5x). Vietcombank, has the highest weight for banks in the above ETFs although its multiples (P/E of 18.5x, P/B of 3.2x) are much higher than the average multiple of banking sector (P/E of 11.4x and P/B of 1.3x).
- The average daily trading volume of the three bourses in Vietnam continued to ease in June, and reached $182mn, down by 7% m-o-m and by 28% yoy. Domestic investors’ sentiment continued to be weak, which may be related to the uncertainty of the global economy and to trade dispute between the US and China. Domestic investors, which made up about 80% of trading volume, are likely to copy the trading activities from foreign investors. Foreign investors are likely to continue to be driven by ETFs flows. Hence the market’s volatility is expected to stay at elevated levels. By the end June, the top 100 stocks were trading at a 2019F P/E of 17.6x and at a P/B of 2.3x, while our Buy recommendation list are trading at an average 2019F P/E of 10.8x and at an P/B of 1.4x.
- On 28 June 2019, the covered warrants (CWs) exchange started to operate. At present, there are 10 CWs traded, covering 6 stock tickers, of which 4 stocks are running out of room for foreign ownership. As the CWs period is still short (maximum 6 months) and as the settlement is in cash only, the interest of foreign investors is still rather low. Liquidity is still low with an average daily trading value (premium value) of about $241K.
Invest with us:
Please download the Jun 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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