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 2022.
May 2022 macroeconomic highlights:
- Vietnam continued to do well in May thanks to its swift reopening and as people start to consider COVID-19 as common illness. Consumption is rebounding rapidly, and retail sales rose by 8.7% y/y in 5M/2022, respectively. The strong recovery is driven by: (1) a rebound in consumption demand, especially from the hospitality and the tourism sectors, and (2) the successful organization of the SEA Games 31, which gave an additional boost to spending. Regarding business activities, many companies resumed their operations in May, and demand for credit has been rising sharply. According to the State Bank of Vietnam (SBV), credit growth in 5M/2022 was 7.7% YTD, double the growth of 5M/2021, driven by small and medium enterprises and by 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 in 2023, designed for companies that are operating in sectors which were heavily impacted by COVID-19.
- May CPI rose by 2.9% y/y, mainly driven by transportation costs (+18.4% y/y). Continuous tensions between Russia and the Ukraine keeps 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 on inflation is still mild thanks to stable pork prices. However, more pricing pressure is likely in coming months as animal feed prices have been rising and as farmers are reluctant to re-herd. We expect inflation to peak at 4.3% in October, before gradually calming down and close at 4.0% by year-end 2022.
- In May 2022, FDI disbursement reached $1.8bn, up by 8.5% y/y. For the 5M/2022, total disbursement was $7.7bn, increasing by 7.8% y/y. Such outstanding numbers reinforce the positive outlook for FDI in 2022.
- Vietnam recorded a trade deficit of $1.7bn in May, but exports and imports were strong once again, rising by 16.4% y/y and by 14.0% y/y, respectively. Overall, the country had a slight trade surplus of $0.5bn in 5M/2022. The majority of imported products were electronics, machinery equipment, fabrics and plastics, which are used as input materials for final products. As a result, we expect exports to gather strength in coming months given the solid import growth and as Vietnam is expected to receive more international orders thanks to the strict Zero-COVID policy from China.
- Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 54.7 in May, the highest in the last 13 months, indicating robust growth in manufacturing activities. Companies recorded sharp increase in output and new orders. Thanks to sustained growth of new orders, purchasing activity and employment also went up strongly.
- On the back of the US FED rate hikes, the Vietnamese currency (VND) depreciated by nearly 1% in May and by 1.6% YTD. Some peer currencies such as the IDR (-2.0%), the THB (-2.5%) and the MYR (-4.8%) lost considerably more ground. However, towards month-end, the DXY index has been trending down from the peak amid a less aggressive hiking plan from the FED. We maintain our view that USD/VND will roughly stay unchanged in 2022 as we expect Vietnam to continue posting strong trade numbers and as the outlook for FDI and remittance inflow remains bright.
Stock Market highlights:
- The Vietnamese equity market declined by 6.1% in May. Year-to-date, the index is posting a decrease of 14.7%. There was no news that had a material impact on corporations’ business activities and earnings. Beside lower international markets, there were some internal factors with negative impacts. Rumors arresting the chairman of a real estate firm affected sentiment of retail investors, causing panic selling across the stock market. On some days, the sell-off was exacerbated by margin calls from brokers, and the market began to witness floor prices for almost all stocks. The market then began to start bottoming as some related authority officials were dismissed from their position and replaced by new ones. Investors regained confidence amid authority’s efforts to enhance protection for retail and minority investors. The government also speeded up the process to install new trading systems in order to bring the Vietnamese stock market closer to MSCI Emerging Market status.
- In May-2022, the combined average daily trading volume on the three bourses was USD0.8bn, lower than the average daily volume of USD1.2bn in the first five months of 2022. But the market witnessed a strong return of foreign inflow in May as foreign investors were net buyers with a total value of USD151mn, reducing YTD total net outflow to USD52.8mn. Domestic individual investors continued to dominate the market, but their contribution to market’s total trading has declined from 87% to 81%, reflecting their concern after the recent sharp correction.
- We think that the market has been oversold for some time as it has been trading around the lowest P/E level ever seen since 2016 (except for about 1 months during Mar-April 2020). At that time, the market was in panic mode due to the first wave of Covid-19 despite the strong transformation in the Vietnam economy and improving financial positions of many listed companies. Therefore, we think the current general market weakness is a good window of opportunity to build or to increase exposure to solid fundamentally sound growth companies at bargain prices.
- At the end of May, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 13.8x, at a P/B of 2.1x, and at a 2022F EPS growth of 16.7% (33.1% in 2021). Meanwhile, the stocks on our buy recommendation list are trading at an average 2022F P/E of 11.8x, at an average P/B of 2.1x, and at an EPS growth of 27.0% (21.8% in 2021).
Invest with us:
Please download the May 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.