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 2019.
Key November macroeconomic highlights:
- In the 11M 2019, imports rose by 7.4% y/y, reaching $232bn, while exports went up by 7.8% y/y, hitting $241bn. Hence, Vietnam’s trade surplus reached $9.1bn during this period. Mobile phones, along with textiles and garments as well as electrical products, continued to be the main export drivers, accounting for ~30% of total exports.
- The November Consumer Price Index (CPI) rose by 3.52% y/y. The sharp increase of pork prices as a result of the African swine fever disease was mainly responsible for the general price hike. The strong demand for pork will likely push its price up even further in coming months. Pork contributes about 4% to the CPI. But in general, inflation remains tame: The inflation is still well below the government’s target of 4%.
- Total FDI disbursed reached $17.6bn in the 11M of 2019, up by 6.7% y/y. Processing and manufacturing continued to receive the strongest inflows, attracting an amount of $21.6bn, up by 51% y/y, and accounting for 68% of the total pledged investment capital.
- According to the GSO, the Vietnamese government has disbursed VND299 trillion of investment capital in the 11M of 2019, up by 5.5% y/y. But this is equivalent to only 78.6% of the government’s budget for the whole year.
- In November, the State Bank of Vietnam (SBV) issued two decisions regarding an interest rate cut. The decisions became effective on Nov 19th, 2019. In terms of the deposit rate, the cap for demand deposits and term deposits less than 1-month maturity fell from 1.0% to 0.8% pa, and it declined from 5.5% to 5.0% p.a. for such papers with maturity from 1 to 6 months. For the over 6 months terms, the deposit rate will be without a cap. The main purpose of these measures was to push down the average funding costs for the banking sector. By cutting short-term deposit rates (which account for 70% of total deposits), banks will have more room to lower lending rates to their customers.
- Following the rate cuts, the SBV issued the new circular No. 22, regulating the bank’s operational safety ratios. The circular’s main intention is to tighten loans to the property sector and to the consumer sector (mostly related to mortgages). The new circular is a positive movement in the government’s efforts to strengthen bank operations and reduce their dependence from the property market.
Stock Market highlights:
- The VN-Index, the market cap weighted index of the Ho Chi Minh Stock Exchange (HSX), Vietnam’s main bourse, declined by 2.6% in November. The correction was broad-based as prices of 250 tickers out of a total of 377 tickers fell. The index performance was driven by a handful of stocks: consumer stocks such as Sabeco (SAB, -13.0%), Vinamilk (VNM, -6.5%) and Mobile World (MWG, -12.5%) with a total index weight of 12.7%, contributed 44% to the negative index performance. Vingroup (VIC, -2.7%), which accounted for 11.6% of the VN-Index, made up 12% of the index decline. Banking stocks with a total index weight of 24.3% were also among the main decliners as this sector gave up 2.7% this month, contributing to another 25% of the index performance. Some of the worst performers here were Vietcombank (VCB, index weight of 9.7%) and Vietinbank (CTG, index weight of 2.4%), which were down by 2.7% and by 7.0% respectively.
- The disappointing performance of the stock market was driven by investors’ weak sentiment, originating from the trade dispute between the US and China, and increasing uncertainty about global economy. At the same time, there were no major positive news on corporate fundamentals to support the market. SAB stocks fell after Heineken announced to sell its stake and no longer to remain as a major shareholder. The market fears now that Heineken could sell its remaining SAB shares: It has no plan to become a strategic investor as Thaibev successfully bought a 53.6% stake at SAB in 2017.
- Also in November, the HSX officially announced the weighting and the constituents of the 3 new indices focusing on financial stocks and on stocks with limited foreign available room. The market has waited for such announcement for a while, which has led to some speculation in these stocks in previous months. But operations of these exchange-traded funds (ETFs) were not approved, which further weighed on sentiment.
- The combined average daily trading volume on the three bourses increased by 13.2% m-o-m to $220mn, up by about 15% compared to the average of 11M of 2019. Trading volume went up strongly at the beginning of the month, following the announcement to buy back treasury shares of Vingroup-related companies, namely of Vinhomes (VHM) and of Vincom Retail (VRE). However, liquidity fell notably towards month-end, reflecting the overall worsening market sentiment. For example, the volume of the last trading day of November was 25% lower compared to the volume of the first trading day.
- Foreign investors were net sellers of $44mn in November; about 60% of this amount originated from International Finance Corporation’s (IFC) sale of at CTG shares. November marked the fourth consecutive month of net selling. ETF activities were slow this month. The three largest ETFs with a total NAV of $1.0bn at the end of November witnessed small net inflows of $4.3mn.
- By the end of November, the top 100 stocks were trading at a 2020F P/E of 14.7x and at a P/B of 2.2x. In comparison, the names on our Buy recommendation list were trading at an average 2020F P/E of 9.2x and at an average P/B of 1.2x.
Invest with us:
Please download the November 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.
Featured image credit: kenh14.vn