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 October 2024.

Vietnam’s Update – Economy

• After posting robust GDP growth in Q3, Vietnam started the last quarter of 2024 by electing the new President, Mr. Luong Cuong. The election realigned the “four pillars” leadership organization, which promotes a balanced distribution of power among Vietnam’s top leaders. Luong Cuong and the new Party Chief, To Lam, are expected to implement significant and successful strategic reforms thanks to their prudent political approach and well-considered economic strategy. In public speeches, To Lam emphasized a transition from anti-corruption measures to addressing waste and bolstering strong economic growth, signaling the potential for an infrastructural boom. As a result, although public spending only increased by 1.8% y/y in 10M/2024, we expect it to accelerate in 2025 at the latest. Important regulatory changes have been implemented in recent months. 25 laws are in discussion in the National Assembly, 11 of which are economically relevant and anticipated to be approved by the end of the ongoing session on November 30, 2024. All these factors support an ambitious GDP growth target of 7-7.5% for 2025
• From October 27 to November 1, 2024, Prime Minister Pham Minh Chinh visited the United Arab Emirates (UAE), Saudi Arabia, and Qatar, marking a significant diplomatic engagement aimed to strengthen ties with key Middle Eastern nations. During his visit to the UAE, a Comprehensive Economic Partnership Agreement (CEPA) was signed. This agreement is Vietnam’s first free trade pact with an Arab country and is expected to enhance UAE service providers’ access to various sectors in Vietnam, including finance, healthcare, and tourism. In Saudi Arabia, a cooperation framework agreement was signed between Vietnam Oil and Gas Group (Petrovietnam) and Saudi Aramco, paving the way for collaboration in energy storage, supply, and trading. Meanwhile, in Qatar, discussions focused on expanding trade and investment partnerships.
• Retail sales rose by 8.5% y/y, largely propelled by a 41.3% y/y increase in international tourist arrivals, alongside early signs of recovery in domestic consumer demand. In 9M2/2024, vehicle sales returned to growth, up by 7.4% y/y. Commercial banks, with a strong focus on retail lending, reported accelerating loan growth in Q3/2024 over the previous quarter, such as TPB (+7.7%), and VIB (+4.2%).
• Trading activities sustained strong momentum with year-to-October total trading activities increasing by 15.6% y/y, resulting in a trade surplus of $23.4bn. The U.S. and EU were the major export markets, growing by 24.2% y/y and by 16.4% y/y, respectively. On the import side, China was the biggest partner, with imports up by 31.6% y/y.
• October PMI returned to an expansionary level of 52.3, suggesting that the economic recovery from Typhoon Yagi gets underway. The increase was primarily driven by higher output levels, a rise in new orders, including increasing export orders. Some firms are still operating under capacity due to the lingering effects of the typhoon, but further damage is limited, and production is expected to accelerate towards year-end.
• Foreign Direct Investment (FDI) disbursement reached $19.6bn, an 8.8% increase. Registered FDI rose by 1.9% to $27.3bn with the manufacturing industry taking the lead, accounting for 64.2% of the total. Notably, the Hyosung Group plans to double its investment in Vietnam to $8 billion, which is expected to generate about 10,000 new jobs. In addition, Hyosung is inviting the United Arab Emirates’ Abu Dhabi National Oil Company (ADNOC) to become its partner to jointly invest in its projects in Vietnam.
• The Consumer Price Index (CPI) remained low in October at 2.9% y/y, mainly thanks to lower transportation prices (10% CPI basket, -3.3% y/y). Vietnam Electricity (EVN) increased retail electricity prices by 4.8% in mid-October, but this is not yet reflected due to the lagging effect. We keep our view of modestly higher inflation toward year-end. The impact of the Yagi storm on the agriculture industry may start to have an impact on food prices, especially when the Tet holiday 2025 comes early in January 2025. Construction material prices might pick up, following the recovery of commodity prices and the acceleration of infrastructure spending.
• In October 2024, the Vietnamese dong (VND) depreciated by 2.9%, largely due to a stronger US dollar index (DXY) amid expectations of Donald Trump’s return to the White House. The interest rate gap between Vietnam and the US widened to a negative 200 basis points, adding pressure on the VND. In response, the State Bank of Vietnam issued Treasury Bills to narrow the interest rate gap by half to stabilize the market, which helped calm exchange rate woes. Looking ahead, short-term pressures may continue if Trump wins the election. However, several supportive factors for the VND remain, including the Federal Reserve’s easing cycle, a solid performance of FDI disbursement in Vietnam, the trade surplus, and remittance inflows.
• With Donald Trump’s re-election as U.S. President, Vietnam faces a complex yet opportune diplomatic landscape as it seeks to strengthen its bilateral relationship with the U.S. During Trump’s first term, Vietnam effectively navigated his policies, securing notable gains in military cooperation and economic ties. While rising U.S.-China tensions may add challenges to this balancing act, the recent upgrade of U.S.-Vietnam relations to a comprehensive strategic partnership provides a strong foundation for further collaboration. Vietnam’s role in the U.S. Indo Pacific strategy underscores its significance as a key partner, and with strategic diplomacy, Hanoi is well-positioned to reinforce its importance in regional stability and economic growth.

Vietnam’s Update – Stock Market

• In October, the VN-Index fell by 4.5%, despite strong Q3 GDP growth of 7.4%. Positive Q3 earnings were overshadowed by investors’ concerns about high levels of margin lending and ongoing foreign divestment, which triggered some selling. The Vietnamese Dong weakened as the U.S. dollar strengthened across the board, largely due to speculations regarding a potential Trump victory in the U.S. presidential elections, which further added to the negative sentiment in a market heavily influenced by short-term oriented retail investors.
• Trading activity reflected the negative sentiment, with an average daily trading volume of the VN Index of $711 million, consistent with September’s low levels. Elevated pressure on the exchange rate, along with major foreign shareholders’ divestments totaling $250 million from Vietnam International Bank (VIB) and from Masan Group (MSN), drove net foreign outflows to $438 million for the month. The Commonwealth Bank of Australia exited its investment in VIB, concluding the partnership as part of its broader 2018 strategy to streamline its overseas operations. As for MSN, SK Group’s divestment was part of its new focus on AI/tech-related fields, shifting away from businesses that do not align with this strategy. After the divestment, SK acquired shares of a Vietnamese semiconductor company, which further explains its decision. These actions were part of investors’ broader strategic initiatives, that were planned, rather than sudden speculative moves.
• Sector-wise, the financial sector, which holds the largest weight in the VN-Index, declined by 3.9% despite solid fundamentals. The top 15 banks reported an 18% year-over-year increase in net income, driven by credit growth and good asset quality. However, much of this growth was anticipated, prompting many investors to take profits (“sell on good news”). The real estate sector, the second-largest contributor to the VN-Index, declined as major developers—including NLG, KDH, VHM, and DXG—reported an 18.1% drop in aggregate Q3 earnings, primarily due to delays in project handovers. Nevertheless, real estate earnings are expected to recover in Q4 as key projects are near completion, and recent regulatory improvements are likely to further support growth.
• Overall, the companies in the VN-Index reported strong earnings growth in Q3, with the top 30 companies by market cap achieving a 22.0% year-over-year earnings increase. Mid-cap and small cap stocks also posted gains of 14.6% and of 21.0%, respectively. We are currently at a pivotal juncture where economic fundamentals remain solid. The government’s focus on stimulating growth—particularly through public spending initiatives led by General Secretary To Lam— reinforces our positive outlook. In Vietnam, short-term trading still dominates the market, often resulting in market volatility that does not reflect the underlying economic health. However, such an environment presents compelling opportunities for longer-term investors to capitalize on mispriced companies, given their strong fundamentals.
• Earnings for the top 100 stocks are projected to rise by 16.9% in 2024 and by 16.7% in 2025. Importantly, the VN-Index’s 2025 forecasted P/E ratio of 10.2x is attractive compared to regional peers such as Thailand (13.8x) and Indonesia (11.2x) (Source: Bloomberg).

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Please download the October 2024 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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