May Macroeconomic & Stock Market Highlights for Vietnam

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 May 2019.


Key May macroeconomic highlights:

  • The country’s trade balance showed a deficit of $1.3bn in May, turning the 5M trade balance into a deficit of $0.5bn. Exports increased by 6.7% yoy to $100.7bn, and imports rose by 10.3% yoy to $101.2bn. The lower export growth rate was driven by rather disappointing exports of mobiles & parts, which only increased by 3% and which account for 19.7% of total exports. Furthermore, exports of some agricultural products such as coffee, cashew nuts and rice fell by 19% yoy. These items account for 3.7% of total exports. With regard to export destinations, exports to the U.S. surged by 28% yoy, contributing to 22.4% of total exports. The strongest growth was in mobiles, electronics, and in parts. Exports to the EU increased by 1.9%, making up 17.2% of total exports. The third largest export destination was China with $13.4bn, where exports experienced a decline of 2.6% yoy; the largest declines were in mobiles and parts, rice, and seafood. The strong increase of mobiles and parts exports to the U.S., coupled with the export decline of these items to China may reflect Samsung’s decision to scale down its manufacturing in China and to focus on Vietnam, citing lower sales in China.
  • FDI disbursement was USD 7.3bn, +7.8% yoy, while FDI new registrations surged to USD 6.5bn, up by 38% yoy. The manufacturing sector was still the main destination of FDI registrations, accounting for 74% of the total amount in the first four months of 2019. China, Korea, and Singapore were the three largest FDI investors, making up 24%, 16%, and 13%, respectively, of total new registration.
  • Inflation remained moderate at 2.9% yoy and at 0.5% mom. With regard to the CPI basket, transportation increased the most (+2.64% mom) because of petrol price increases in May; food prices declined by 0.37% mom because of lower live pig prices due to the outbreak of the African swine flu. The risk of a strong inflation rise is still minimal in our view. International oil prices have cooled down in the past weeks, and core inflation, which is also impacted by the government’ s monetary policies, is stable at +1.9% yoy and at +0.13% mom. The Vietnamese dong (VND) weakened against the USD by 0.5% in May, and is down by 0.9% ytd. Our estimate of the full year depreciation remains at 3.0%. In April, the State Bank of Vietnam (SBV) reported that it has further increased the country’s foreign reserves by $8 bn in 4M/2019 to an estimated $64bn now.
  • In May, the U.S. Treasury put Vietnam on the watch list for currency manipulation, along with China and 7 other countries. According to the Treasury, Vietnam meets 2 out of 3 conditions, namely a trade surplus with the U.S. of more than $20bn and a current account surplus of more than 2% of GDP. (the last condition is a FX intervention of more than 2% of GDP). However, it was also highlighted that Vietnam purchased USD to buffer up its foreign reserves, which are still below the standard adequacy metrics as defined by the IMF. During the month, there were some meetings between Vietnamese and the U.S. diplomats to discuss these issues.


Stock Market highlights:

  • The VN-Index as a gauge for the Vietnamese stock market, declined by 2.9% in May. The correction was broad-based as prices of 220 tickers out of a total 376 tickers fell. Vinhomes (VHM), which accounts for 9.0% of the VN-Index, declined by 10.9%, contributing for about 40% of the index decline. Bank stocks were also among the main losers as the banking sector gave up 4.2% in May, contributing to another 35% of the VN-Index performance. There were no significant developments relating to corporate fundamentals in May. The stock market was mainly driven by the weak sentiment of international investors due to the trade dispute and increasing economic uncertainties.
  • Foreign investment flows were the main performance driver of the Vietnamese market. In May, foreign investors were net buyers with purchases of $163 mn on all three bourses. But this amount included the transaction of $250 mn of the SK Group, which bought 51.4 million shares of Vingroup (VIC) (SK Group also bought another 154.3 million shares for about $750 mn through a private placement. The whole deal had a value of $1 billion). By excluding this amount, foreign investors would have turned into net sellers of $88 mn in May. Trading volume, as measured by the sum of the average daily volumes on all three bourses, was $198 mn, up by about 9% compared to April. But the average daily trading volume in the first five months of the year was $204 mn, only about half of the trading volume in the same period of last year.
  • Though the market may continue to be weak in the coming months, stock prices of some companies with solid business models have approached very attractive valuation levels. In particular, we prefer leading companies in the construction sector, industrials, industrial park business developers and banks, which we think will benefit from the strong developments in the construction sector, in the industry and in financial services in Vietnam. By the end May, the top 100 stocks were trading at a 2019F P/E of 17.2x and at a P/B of 2.3x, while the names on our Buy recommendation list are trading at an average 2019F P/E of 9.6x and at an average P/B of 1.4x.

Invest with us:

Please download the May 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.

Please find more information about our products and feel free to get in touch with us at your convenience.


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