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 May 2021.
Key May 2021 macroeconomic highlights:
- The 4th wave of Covid-19 continued to escalate, with the total number of new cases from April 27th at 4,096, bringing the total number of cases in Vietnam to 7,321. The majority of them were located in the manufacturing provinces of Bac Ninh and of Bac Giang, with new hotspots found also in Hanoi and Ho Chi Minh city. However, strong actions were taken by the Vietnamese government, including closures of non-necessary activities in these provinces, and social distancing where needed. Vietnam also confirmed to have secured a total of 110 million doses of vaccines from AstraZeneca and from Pfizer/BioNTech for the year of 2021, while its first domestically developed NanoCovac vaccine entered the third (and final) testing phase. Mass production is expected to start in late Q3/2021. Given the previous track record and the vaccine guidance outlined by the Vietnamese government, we believe that the current Covid-19 wave will soon be contained successfully.
- Foreign trade activities remained dynamic in May as exports rose by 35.6% y/y, while imports advanced by 56.4% y/y. As for 5M/2021, exports grew by 30.7% y/y to $130.9bn (versus a decline of 1.7% y/y in the same period of last year), while imports went up by 30.8% y/y to $131.3bn (versus a decrease of 4.3% in 5M/2020). Some major export products with impressive growth in 5M/2021 included heavy industrial products and materials ($70.7bn, up by 33% y/y, mainly driven by steel), light industrial products ($47.3bn, up by 33% y/y). Major export markets were the US ($37.6bn, up by 49.8% y/y), China ($20.1bn, up by 26% y/y), the EU ($16.1bn, up by 20.8%).
- Retail sales and services slightly declined by 1.0% y/y in May. However cumulative retail and services sales 5M/2021 still enjoyed a healthy growth of 7.6% y/y (versus a decline of 3.9% y/y in the same period of last year).
- The May Consumer Price Index (CPI) rose by 2.9% y/y, mainly driven by transportation, mostly due to the low base of oil prices in the same period of last year, and by the housing and construction materials segments. We forecast the CPI to rise by 3.8% in 2021. Prices may increase even faster in coming months, mainly due to increasing construction material prices such as steel and plastics. We also expect transportation services prices to rise more strongly towards the end of this year as international travel will be re-opened.
- Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 53.1 in May, compared to 54.7 in April, pointing to further improvement in the manufacturing sector. Even though the ratio stayed solidly above 50, it was a bit lower than in April, which was the strongest reading since November 2018.
- FDI disbursement continued to rise strongly by 6.7% y/y to a level of $7.5bn in 5M2021. Meanwhile, total registered FDI reached $14bn, a slight increase of 0.8% y/y.
Stock Market highlights:
- The VN-Index as a gauge for the Vietnamese stock market rose strongly by 7.3% in May, and 160 out of 396 stocks were up. Among regional markets, the VN-Index (+20.9% YTD) outperformed most of its ASEAN peers such as Thailand (+10.5% YTD), the Philippines (-6.0% YTD), Indonesia (-0.5% YTD) and Malaysia (-2.7% YTD).
- In May, the positive performance of the VN-Index was mainly driven by the financial sector (35% weighting in the VN-Index), which increased by 16.1%. Banks reported strong Q1/2021 earnings as the sector’s aggregated net profits were up by 76.2% y/y. By the end of May, banks are trading at an average 2021F P/E of 16.0x and at an average 2021F P/B of 2.3x. Even though the sector approaches fair valuation, we still see good price potential in stocks of selected banks, which have strong competitive advantages and a clear business strategy, allowing them to grow faster than the banking sector. The second contributor to the index’s performance was the materials sector (+12.8% MTD, 9.2% weighting) which was led by steel companies as they are expected to benefit from rising steel prices. Other sectors either had a minimal performance or only a small weighting in the index such as real estates (-1.0% MTD, 25.5% weighting), consumer staples (+1.7% MTD, 10.7% weighting), or industrials (-2.1%, 7.1% weighting).
- Foreign investors turned into net-sellers in the amount of $494mn in May, cumulating to a total net outflow of $1.1bn YTD on Vietnam’s three bourses. The outflows were broad-based across ETFs and open-ended funds except for the VN Diamond ETF and for the Fubon FTSE Vietnam ETF, which received strong inflows of $179mn and of $281mn YTD, respectively. The general trend to outflows was also witnessed in other regional markets such as Thailand (-$2.2bn), the Philippines (-$1.5bn), and Malaysia (-$0.8bn).
- The combined average daily trading volume on the three bourses continued to improve in May, reaching $1.1bn, up 14.0% m/m. Domestic investors remained the main drivers of the market, contributing 87% of the total trading volume on average. Low deposit rates continued to force domestic investors to allocate their assets to other alternative investment channels such as stocks. Strong earnings of listed companies in Q1/2021 also supported the stock market, which established a fresh all-time high in May. The aggregated first quarter earnings of all listed companies on the Ho Chi Minh Stock Exchange grew by 81.7% y/y, driven by banks (+76.2% y/y), real estate (+81.7% y/y), and materials (+207.3% y/y). Utilities were the only sector with declining profits.
- We maintain our positive view on the Vietnamese stock market, which seems to be well-supported by strong macro and corporate data. However, in the short-term we think the market is quite overbought as a result of overwhelming trading activities of local individuals. Thus we expect to see more volatility in the coming months. We recommend taking advantage of possible excessive price increases to re-allocate investment portfolios.
- At the end of May, Vietnam’s Top 100 stocks are trading at a 2021F P/E of 17.4x, at a P/B of 2.6x, and have a 2021F EPS growth of 32.9% (-3.8% in 2020). Meanwhile, the stocks on our buy and hold recommendation list are trading at an average 2021F P/E of 13.3x, at an average P/B of 2.6x and have an EPS growth of 21.2% (+16.4% in 2020).
Invest with us:
Please download the May 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.
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Featured image credit: Internet