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 June 2022.
June 2022 macroeconomic highlights:
- In Q2/2022, Vietnam’s GDP grew by 7.7%, the highest Q2 GDP growth in the past 10 years from 2011 to 2021. The number is higher than our expectation of 5.8% y/y and compares to 5.0% in Q1/2022. The strongest driver was the service sector (41.5% of GDP), growing by 8.6% y/y, thanks to the robust rebound of the wholesale and retail industry (+8.3% y/y) and of accommodation and food services (+25.9% y/y). The success in organizing the SEA Games 31 in Vietnam from 13-May to 23-May and government aid packages helped to propel the strong rebound of consumption demand. The industrial and construction sector grew by 8.9% y/y, where the manufacturing sub-sector outpaced with a 11.5% y/y growth rate. Business activities have resumed robustly to pre-COVID levels, illustrated by 5M2022 electricity consumption equaling the 5M2019 number of 95bn kWh, and 5M2022 construction steel recorded 4.8mn tons, +4.7% compared to 5M2019. The final sector, agriculture, grew by 3.0% y/y thanks stable supply in pig herds and in rice sowing.All in all, H1/2022 GDP was very strong, growing by 6.4% y/y. As a consequence, we revise our GDP forecast for 2022 up to 6.7% from our last estimate of 6.4%, reflecting the solid fundamentals of Vietnam despite the slowdown of the world economy.
- According to the State Bank of Vietnam (SBV), credit growth in 6M/2022 was 8.5% YTD, much higher than in 6M/2021, driven by small and medium-sized enterprises and household businesses. At the National Assembly meeting, the SBV issued guidance for its interest subsidy program. This program will use VND 40,000bn from the state budget to subsidize a 2% lending interest rate in 2022 and 2023, designed for companies that are operating in sectors that were heavily impacted by COVID-19. According to the Ministry of Finance (MOF), the outstanding credit balance that will benefit from this program is estimated to reach VND1,000trn, equivalent to 8.8% of the current outstanding credit balance of the system.
- The June CPI rose by 3.4% y/y, slightly higher than our forecast of 3.2% y/y, driven by higher transportation costs (+21.4% y/y) and by the recovery of the tourism industry. Continuous tensions between Russia and the Ukraine kept the oil price at a high level, causing the domestic retail petroleum price to reach an all-time high. Regarding food & foodstuff prices (one third of the CPI basket), the impact of higher global food prices on inflation here is rather low thanks to Vietnam’s ability to be a self-supporter for main food items such as grains (rice), and proteins (pork, chicken, seafood). In the remaining time of the year, we think that inflation will be mainly driven by energy and food prices, but will be partly mitigated by lower prices for other commodities such as fertilizers, metals including construction materials, which have declined from their peak in Jun-2022 (but prices still higher than one year ago). Thus, we expect inflation to peak toward end of Q3, closing to 5.0% before gradually calming down to close to the government target of around 4.0% by year-end 2022.
- In June 2022, FDI disbursement reached $2.4bn, up by 14.8% y/y. Total disbursement for H1/2022 was $10.1bn, up by 8.9% y/y. The economy has been fully open, and due diligence processes for M&A activities resumed, strongly supporting FDI disbursement and reinforcing the positive outlook for FDI in 2022.
- Vietnam’s exports ($185.9bn) and imports ($185.2bn) were strong in H1/2022, rising by 17.3% y/y and by 15.5% y/y, respectively, leading to a slight trade surplus of $0.3bn in June and of $0.7bn for H1/2022. We expect Vietnam’s exports and imports to continue gathering strength in coming months as the country is expected to seize more international orders thanks to the strict Zero-COVID policy in China.
- Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 54.0 in June, down slightly from 54.7 in May, ending the first half of 2022 in good health. Companies witnessed the fastest increase in employment over the last three and a half years, indicating the shortage of labor has eased. Although input costs continued to rise, producers were able to pass the cost given new orders kept increasing.
- On the back of US FED rate hikes, the Vietnamese currency (VND) depreciated by 0.3% in June and by 1.9% YTD. Some peer currencies, such as the IDR (-4.2%), the THB (-5.6%), and the MYR (-5.7%) lost considerably more ground YTD. However, towards month-end, the DXY index seemed to be in the process of forming a peak as markets have likely priced in the current and future aggressive rate hikes. We believe that the VND will start appreciating from now and will end the year with a 1.0% depreciation to the USD only as we expect Vietnam to continue posting good trade numbers and as the outlook for FDI and remittance inflow remains positive.
Stock Market highlights:
- The VN-Index as a gauge for Vietnam’s stock market declined by 7.6% in June, resulting in a decline of 21.2% Ytd. After bouncing back somewhat during the month, the index has corrected once again, staying close to the one-year bottom of around 1,200. Almost all sectors retreated during the month except for consumer discretionary. Year-to-date, information technology (+6.8%), utilities (+3.9%), and consumer discretionary (+3.8%) are the only three sectors posting positive performances. Utilities companies were thought to be beneficiaries from current high oil prices and the elevated inflation outlook. Consumer discretionary companies’ earnings are supported by generally strong retail sales while information technology companies, they have continued to benefit from the ongoing digitalization trend. Notably, the key outperformers of these two later sectors have no room for foreign investors, but they received strong foreign inflows via ETFs over the period.
- In June, the combined average daily trading volume on the three bourses was $0.8bn, similar to the previous month, but only about 60% of the average daily volume of $1.3bn in the first three months of this year before the correction set in. On the other hand, the stock market has welcomed 476,332 new account openings in May, a new all-time record. Accordingly, there were 1.4 million account openings in the first five months of 2022, about 2.5 times as many compared to same of period last year. Although more investors are joining the market, the current correction might cause many retails investors, especially new ones who have only recently participated in the market, to sell stocks or to take a more conservative approach. However, such reassessment paves the way for a healthier development of the stock market in the longer-term.
- The Vietnam stock market continued to witness a strong return of foreign inflow in June as foreign investors were net buyers in the amount of $145.7mn. Year-to-date, the stock market received a total of $198.5mn inflows, which could be a signal that foreign investors have returned to Vietnam after two years of outflows during the pandemic (-$2.7bn in 2021 and ($0.8bn in 2020). We observed that the majority of the foreign inflow this year came from ETFs, while most open-ended funds still suffered outflow Ytd.
Invest with us:
Please download the June 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.