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 March 2021.
The portfolio increased by 1.5% in March vs a decline of 0.2% of the reference, the FTSE Vietnam Index
Key March 2021 macroeconomic highlights:
- Since the resurgence of Covid-19 on January 28 in the Hai Duong province, the outbreak was completely contained. There were no more community transmission cases, so all social distancing policies will be removed in this area from April. In late March, Vietnam reported two Covid-19 cases in the cities of Hai Phong and of Ho Chi Minh. These people immigrated illegally from Cambodia. However, the situation is under control at present, all related people, who had contact with these two patients, were tested negatively.
- Vietnam’s GDP growth in Q1 was 4.5%, outpacing the 3.7% expansion in the same period of last year. The primary sector (agriculture, forestry and fishery), which contributed 10.6% to total GDP, grew by 3.2%, mainly thanks to increasing crop yields and as the African Swine Fever was well controlled. The secondary sector (industrial and construction) posted strong growth of 6.3% y/y, which is the strongest expansion quarter since Q4/2019. The sector contributed 36.6% to total GDP. Regarding the tertiary sector (services), which is the largest sector of the economy with a 42.8% GDP contribution, it registered moderate growth of 3.3% y/y, which was similar to the same period of last year. Overall, Q1 GDP did not differ much from our projection. We expect GDP growth to gather steam during this year to come up with an overall growth rate of 5.9% y/y in 2021.
- Vietnam’s exports and imports developed strongly in Q1. Exports amounted to $77.3bn, up by 22.0% y/y, while imports came to $75.3bn, up by 26.3% y/y, resulting in a trade surplus of $2.0bn. With regard to exports, there was strong growth in major products such as electronic and computers devices (+31.3% y/y), machines and equipment (+77.2% y/y), mobile phones & accessories (+9.3% y/y). These product categories also posted strong import expansion in the reporting quarter, indicating that the country’s export activities will remain strong in coming quarters.
- The March Consumer Price Index (CPI) rose by 1.2% y/y. Food and food stuffs, which make up the largest contribution of around 33% in the CPI basket, posted an increase of 1.3% y/y. Though food prices rose by 6.5% y/y due to the overall increase of the agriculture crop prices, foodstuffs prices were nearly flat mostly thanks to the stable pork price. The transportation price index inched up slightly by 0.5% y/y. Although domestic gasoline prices were up by 50% compared to Q1/2020, transportation service prices have softened due to weak demand. We expect the current rise in gasoline and other commodity prices to cause some pressure on the country’s overall CPI in the remaining of the year. However the CPI will be stabilized thanks to the softening pork prices and other services such as transportation and accommodation services due to weak demand. Thus, we maintain our forecast for the CPI of 3.2% for 2021.
- Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 53.6 in March, compared to 51.6 in February, pointing to an overall improvement in the health of the Vietnamese manufacturing sector. Business conditions strengthened to the greatest extent in 27 months, according to IHS Markit.
- FDI disbursement has achieved a strong growth of 14.3% y/y in March, leading to an increase of 6.5% y/y to $4.1bn in Q1/2021. Total registered FDI reached $10.13bn, up by 18.5% y/y. Some big projects were granted investment licenses in Q1/2021, the largest one being the LNG power plant in the Long An province with s total investment value of $3.1bn from Singapore investors. The second largest project is the O Mon 2 thermal power plant, which was initiated by Japanese investors with a total value of $1.3bn. Some other major projects include the LG Display expansion of $750mn, and the Radian Tire expansion of $312mn.
Stock Market highlights:
- The VN-Index as a gauge for the Vietnamese stock market slightly rose by 1.8% in March with 307 out of 403 stock rising. Financials (+3.0% MTD), Real-estate (+2.0% MTD), and Materials (+2.3% MTD) were the key drivers of the index performance. On the other hand, Energy (-4.7% MTD) and Consumer Staples (-2.2% MTD) were the laggards. Year-to-date, the index is up by 8.2%, clearly outperforming most of its regional peers such as the Philippines (-8.2% YTD), Malaysia ( -3.3% YTD), and Indonesia (+0.1% YTD).
- Foreign investors remained net sellers in the amount of $487.4mn in March, cumulating to a total net outflow of $607.4mn YTD. On the other hand, the market welcomed strong foreign inflow from ETF funds, mostly into the VN Diamond fund with a net inflow of $36.1mn MTD and $149.2mn YTD. However, there was considerable outflow in most open-ended funds that we track. Blue-chip stocks such as VNM, HPG, and CTG faced strong selling pressures as investors sold these shares in the amount of $256.8mn in March. The stronger US dollar, which was supported by higher U.S treasury yields and increasing confidence in the American economy, might have been the main reasons for the capital outflow in frontier markets such as Vietnam. Moreover, the slower-than-expected vaccination progress around the world causes investors to remain cautious about frontier markets. Last but not least, Vietnam’s stock market (HOSE) is in a technical congestion situation, that might hinder foreign investors to inject more capital into the market.
- Despite the foreign outflow and the instability of the HOSE system, the combined average daily trading volume on the three bourses surged to $830mn in March, up by 15.9% m/m. The rally continued to be driven mainly by domestic individuals who accounted for around 80% of the total trading volume. Besides, the trading volume should increase thanks to new money from the Fubon FTSE Vietnam ETF – the first ETF fund from Taiwan. The fund was reported to have already raised around $352mn via IPO on 24 March 2021. The fund’s inception is on April 9, 2021. The ETF tracks the FTSE Vietnam 30 Index, which focuses on the 30 most liquid large-cap stocks in Vietnam such as Hoa Phat Group, Vietcombank, Masan Group, Vingroup.
- Going forward, we expect the market to maintain its upward momentum: (i) We expect the inflow from domestic investors to remain solid on the back of low deposit rates. (ii) Net foreign outflow should ease thanks to increasing vaccination world-wide, bringing the pandemic gradually under control. We also think that large stimulus packages in the U.S and its excessive budget deficit will eventually weaken the dollar. (iii) The valuation of Vietnam’s stock market is still attractive. As of 31 March 2021, the TTM P/E of the VN-Index was 18.5x, which is significantly lower than the valuation of other regional peers such as Thailand (39.7x), Indonesia (22.8x), and Malaysia (20.4x).
- At the end of March, Vietnam’s Top 100 stocks are trading at a 2021F P/E of 16.3x and a P/B of 2.3x. 2021F EPS growth is expected to be 31.9% (-8.2% in 2020). Meanwhile, the stocks on our buy recommendation list are trading at a 2021F P/E of 12.3x and an average P/B of 2.4x, with an EPS growth of 16.5% (+14.5% in 2020).
Invest with us:
Please download the March 2021 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