March 2022 Macroeconomic & Stock Market Highlights for Vietnam

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 March 2022.

March 2022 macroeconomic highlights:

• As Q1/2022 ended, Vietnam has been showing strong determination in reopening and stimulating the economy. Specifically, the country started to welcome international tourists from 15 March 2022 after being closed for 2 years. The government can afford such a proactive move as Vietnam’s vaccination rate is very high (nearly 100% of adults is fully vaccinated). What’s more, Vietnam is one of the very first countries in the region that reopens international tourism. The number of reported new COVID-19 cases is also declining from a peak of approximately 350,000 cases per day to 140,000 currently, and normal life keeps going because people are less afraid of COVID-19. The Prime Minister is asking the Ministry of Health to continuously update the COVID-19 situation as it may consider it as common illness.

• Vietnam’s GDP growth in Q1 was 5.0%, outpacing the growth of 4.7% in the same period of last year despite significantly higher commodity prices. Among the three major sectors, industry & construction (35.8% of GDP) was the main driver, growing by 6.5% y/y, thereby reflecting the rapid rebound in manufacturing activities. Factories returned to normal operations, which also drove up the usage of electricity and gas at the same time. Growth in the services sector, which accounts for nearly 43% of GDP, increased by 4.6% y/y, driven by strong performance of financial services and healthcare. We expect GDP to steadily improve in coming quarters thanks to the strong rebound of the manufacturing and services sector, which will also benefit from the lower base of 2021.

• The March CPI rose by 2.4% y/y, mainly driven by transportation costs (+18.3% y/y). Due to rising global oil prices and temporary capacity reductions of the Nghi Son Refinery Plant, the domestic retail petroleum price has reached an all time high, which put significant pressure on transportation costs (nearly 10% of the CPI basket). But the government is once again proactive by temporarily reducing the environmental tax on petroleum by 50% from 1 April 2022 to support the domestic economy. This measure helps the retail oil price to decline by 7% from the current level. The government is also considering to reduce the special consumption tax if needed. Going forward, inflation pressure will continue to exist amid high commodity prices and the strong economic recovery. However, assuming commodity prices remain at current levels, the CPI should not increase above the government’s target of 4%.

• In March 2022, FDI disbursement reached $1.7bn, up by 8.7% y/y. For the 3M/2022, total disbursement was $4.4bn, increasing by 7.8% y/y. Such outstanding numbers reinforce the positive outlook for FDI in 2022.

• Vietnam’s exports and imports continued to to be strong in Q1/2022, growing by 12.7% y/y to $88.3bn and by 15.8% y/y to $87.5bn, respectively. Hence, Vietnam recorded a trade surplus of $0.8bn. Regarding the country’s exposure to Russia and the Ukraine, we see minimal impact given both countries’ total trade account for less than 1% of Vietnam’s exports. The US was the biggest export market with $25.2bn in Q1/2022, accounting for 25.6% of the total export value, up by 15% y/y. On the import side, China was the largest partner with total imports of $14.3bn, up by 21% y/y.

• Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 51.7 in March, down from 54.3 in Feb. Although still pointing to an overall strengthening of business conditions, the lasted improvement was less marked than that of previous months because of the shortage in labor caused by the widespread COVID-19 infections among workers. Other countries in the region recorded a similar trend in PMI scores in March. Vietnam retail sales in March posted a growth of 9.4% y/y, the strongest since May 2021.

• Amid global geopolitical tensions and concerns of further FED rate hikes, the Vietnamese currency (VND) remained resilient year-to-date, with a minimal depreciation (0.3% YTD). Going forward, we think that there will be minimal pressure for the VND to depreciate because of its lower inflation compared to US. In addition, the VND currency will be supported by the solid FDI inflow and strong remittances. The government has built up the foreign reserve of nearly $110bn by the end of 2021, which can be used to support the domestic currency if needed.

Stock Market highlights:

• In March, the VN-Index, a gauge of the Vietnamese stock market, was up slightly by 0.1%. Year-to-date, the index is posting a small decrease of 0.3%, which is a solid performance in the international context and amid global uncertainties and rising inflation. The two key lagging sectors were: (1) real estate (-6.5% YTD) and consumer staples (-5.7% YTD). The consumer staples sector was led down by MSN (-16.8% YTD) and by VNM (-4.8% YTD). Investors were concerned that rising commodity prices will erode their earnings. On the other hand, the real estate sector was dragged down by Vingroup and by Vinhomes (50% market cap of the sector), which declined by 14.6% YTD and by 7.6% YTD, respectively. However, consumer discretionary and utilities increased impressively by 10.5% YTD and by 7.1% YTD, respectively as the market expect that the discretionary consumer sector will benefit from strong economic activity after the reopening.

• In Q1/2022, domestic individual investors continued to dominate the market as they contributed 87% to the market’s total trading. The combined average daily trading volume on the three bourses was $1.4bn in Q1/2022, significantly higher than the average daily volume of $1.2bn in 2021. Foreign investors remained net sellers with a total value of $158.3mn in March (total net outflow of $285.3mn YTD). However, the selling did not happen across the board, it was concentrated on large-cap stocks such as MSN ($248.2mn) and VIC ($160.2mn).

• At the end of March, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 16.6x, a P/B of 2.5x, and an EPS growth of 17.4% (33.3% in 2021). Meanwhile, the stocks on our buy recommendation list are trading at a 2022F P/E of 12.0x, a P/B of 2.2x, and an EPS growth of 24.1% (41.2% in 2021).

Invest with us:

Please download the March 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.

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