November 2020 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 November 2020.

The portfolio increased by 12.9% in November vs. an increase of 5.9% of the reference index, the FTSE Vietnam Index. Year to date, the portfolio is up by 42.7%, strongly outperforming the benchmark, which is up by 7.8%.

Key November 2020 macroeconomic highlights:

  • On 30 November, Vietnam reported two Covid-19 cases related to a crew member of Vietnam Airlines. These community-transmitted cases were recorded after almost 3 months of no cases. The government was prompt in taking necessary precaution measures, with contact-tracing and testing already being carried out. We believe that the situation will be under control, as Vietnam’s government has already established a strong record of effectively containing the spread of Covid-19. The stability is vital for the country’s economic recovery and we still expect Vietnam’s 2020 GDP growth to reach 2.7% y/y, outperforming many peer countries such as Thailand, Singapore, Indonesia, etc.
  • The November consumer price index (CPI) increased by 1.5% y/y. Food & foodstuffs prices, which account for 33.6% of the total CPI basket, rose by 6.6% y/y. Thanks to the gradual rebuilding of pig herds across the country (+7.9% y/y) and thanks to an increase in imported pork (both fresh and frozen), we expect food and foodstuffs prices to further ease in the coming months. Prices of the transportation group (10% weighting in the CPI) were still significantly lower than that of the same period of last year (-13.3% y/y) as demand for traveling and transportation activities remained weak due to the tropical storm in Vietnam’s Central area, and as gasoline prices (Ron 92) fell in November. We expect that gasoline prices will recover slightly in December, following global developments. Overall, we revise our full-year inflation forecast to 1.1% from 3.0% in our previous estimates.
  • According to the General Statistics Office (GSO), the Vietnamese government has disbursed VND407 trillion ($17.5bn) of investment capital in 11M/2020, up by 30.4% y/y. Although this amount is equivalent to only 79.3% of the government’s budget for 2020, it still shows the government’s effort to increase investment to support the economy against weak consumer demand, which was affected by the pandemic and by tropical storms in Vietnam’s Central region.
  • In 11M/2020, FDI disbursement reached $17.2bn, down by 2.4% y/y, due to COVID-19 travel restrictions that significantly slowed the disbursement process. As it becomes clear that Vietnam will be an important destination for foreign companies that restructure their supply chains, we expect FDI money inflow to accelerate in coming months.
  • Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 49.9 in November, compared to 51.8 in October, as series of storms and associated flooding in Vietnam’s central area caused output to dip slightly. On the other hand, new orders increased in November, pointing to global demand recovery.
  • In November, exports amounted to $24.8bn, +8.8% y/y, driven by electronic products, which were up by 16.3% y/y. As for imports, they rose strongly by 13.4% y/y and reached $24.2bn as the Vietnamese economy continued to recover. Especially noteworthy is the robust recovery of new orders, which is pointing to increasing global demand in coming months. Also, we believe that Samsung’s preparation for the launch of its new flagship product (S21) in January 2021 contributed to the surge in imports. For 11M/2020, Vietnam’s exports amounted to $254.6bn, up by 5.3% y/y, while imports increased to $234.5bn (+1.5% y/y). Therefore, the trade surplus reached $20.1bn during this period.
  • The Vietnamese currency (VND) continued to stay strong and nearly unchanged against the USD year-to-date. We expect this pattern to continue until the end of the year, supported by (i) robust Foreign Direct Investment (FDI) inflow and (ii) an increasing trade surplus as key business partners are re-opening their economies.
  • On 15 November 2020, the Regional Comprehensive Economic Partnership (RCEP) was finally signed at the ASEAN summit (hosted by Vietnam), covering ten countries of ASEAN and another five countries with whom ASEAN has pre-existing free trade agreements: Australia, China, Japan, Korea, and New Zealand. The RCEP can only become effective within 60 days after at least six ASEAN countries, and three nonASEAN countries ratify the Partnership. Although the ratification process will take some time, the signing marked a significant milestone for regional trade. The RCEP covers a market of 2.3 billion people and $26.2 trillion in global output. The treaty covers accounts for about 30 percent of the population worldwide and over a quarter of total world exports.

Stock Market highlights:

  • The VN-Index as a gauge for Vietnam’s stock market rose by 8.7% in November. Looking beneath the headline index, 305 out of 388 stocks rose. The index posted a positive YTD performance of 6.2% as it recovered the losses since the outbreak of Covid-19. Overall, VCB (+12.2%), GAS (+18.8%), VHM (+8.9%), GVR (+31.7%), and HPG (+16.4%) were the largest contributors to the VN-Index’s gain in November.
  • The combined average daily trading volume on the three bourses was $432.2mn in November, which was about 50.9% higher than the YTD average of $286.3mn. In November, foreign investors were net sellers, with a net outflow of $137.5mn (YTD net outflow $702.2mn). Notably, since November 18, 2020, foreign investors have bought stocks in the net amount of $32.7mn across all three bourses, reflecting renewed foreign interest in Vietnam’s market. Top foreign stock picks between 18-30 November were VN Diamond (+13.2%), VRE (+11.6%), VIC (-2.3%), VJC (+16.3%), and VCB (+12.2%).
  • Going forward, we expect the market to continue rising as (1) Vietnam’s domestic economy continues to stabilize thanks to the government’s effective control of Covid-19, (2) signs of returning interest in Vietnam’s market from foreign investors, and (3) inflows from investment funds tracking the MSCI Frontier Markets 100 Index as Vietnam’s weight in this index will increase in steps, given Kuwait’s upgrade to the Emerging Market Index. We reiterate our view that apart from fundamentally strong stocks on our recommendation list, which should benefit from Vietnam’s solid economic data, certain selected large-cap stocks, including VHM, SAB, HPG, VNM, and VIC might benefit from further foreign inflows. It is noteworthy that in the short-term, the market might experience some volatility because 1) Vietnam’s market has been on a bull run since August, signaling that there might be a period of consolidation before the market could rise to new heights, 2) recent Covid-19 community-transmitted cases in Vietnam, and 3) signs of consolidation in trading volume across the 3 bourses.
  • At the end of November, Vietnam’s Top 100 stocks were trading at a 2020F P/E of 18.1x, at a P/B of 2.3x, and at a 2020 EPS decline of 7.2%. Meanwhile, the stocks on our buy recommendation list are trading at a 2020F P/E of 12.6x and on an average P/B of 2.2x; In sharp contrast to the Top 100 stocks, 2020 EPS growth of our recommendations is expected to amount to 25.5%.

Invest with us:

Please download the November 2020 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.

 

Featured image credit: Internet