October 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 October 2019.

Key October macroeconomic highlights:

  • The October Consumer Price Index (CPI) picked up by 0.59% m/m and by 2.24% y/y. Three factors were responsible for the rise. First, the declining supply of pork due to the African swine fever disease caused the Food & Foodstuff CPI to increase by 1.04% m/m and by 2.65% y/y. Second, on the 1st October, the government increased domestic petrol prices to follow the higher international oil prices as a result of tension in Saudi-Arabia in September. This adjustment added 0.1% to the general CPI. Third, some provinces raised education fees, causing this group’s CPI to increase by 0.19% m/m and by 4.25% y/y.
  • Vietnam’s trade surplus reached $7.0bn in the first 10M 2019, according to an estimate of the General Statistics Office (GSO). During this period, exports rose by 7.4% y/y, while imports went up by 7.8% y/y. Mobile phones, along with textiles and garments as well as electrical products, continued to be the main export drivers. In 9M 2019, Vietnam exported $43.5/bn worth of mobile phones and parts (20.0% of the total export value).
  • In the first 10M of 2019, total FDI disbursed reached $16.2bn, up by 7.4% y/y. Processing and manufacturing remained the most attractive sector for foreign investors during the period, drawing in an amount of $18.83bn, 68.1% of the total pledged investment capital.
  • According to the GSO, the Vietnamese government disbursed VND37.0 bn of investment capital in October, up by 10.0% y/y. Year-to-date, the amount disbursed reached VND260tn, up by 5.3%. But this is only equivalent to 69.2% of the government’s budget for the whole year. However, due to different accounting treatment, the relatively low disbursement figure is probably understated and may not properly reflect actual activities. Therefore, the government’s optically rather low investment expenses should not impact GDP growth.
  • The USD-VND exchange rate was stable during the month. Since the beginning of the year, the Dong has depreciated around 0.4% against the USD. According to a recent announcement of the State Bank of Vietnam (SBV), Vietnam’s foreign currency reserves amounted to $71bn by the end of October, up from $60bn at the beginning of the year, thanks to the trade surplus, strong inflows from FDIs and remittances.
  • In October, the National Assembly Standing Committee convened for the 38th meeting with several draft laws reviewed on its agenda. The Committee also gave opinions on reports of socio-economic topics and the state’s budget performance of 2019 as well as the fiscal plans for 2020 till 2022. The government expects that public debt will reach 56.1% of GDP by the end of 2019, and will gradually decline to 52.7% of GDP by 2022. Also, the government forecasted that the state budget deficit will be around 3.4% GDP.

Stock Market highlights:

  • The VN-Index, a market cap weighted index of the Ho Chi Minh Stock Exchange (HSX), Vietnam’s main bourse, slightly rose by 0.3% in October. The uptrend was not at all broad-based as only prices of 167 tickers out of a total of 377 tickers increased. This index traded range-bound in the last two months and general sentiment remained weak. Vietcombank (VCB, an index weight of 9.35%) rose by 6.8% and was the main contributor to the performance of VN-Index. The stock’s good price performance was supported by strong Q3 earnings (+72.0% yoy); net profit went up   by 50.7% yoy in the first 9M. In addition, investors are expecting that the exclusive bancassurance cooperation between VCB and FWD with a total upfront payment of $400mn will continue to support earnings growth. Although we turned to a more positive view on bank stocks, VCB’s valuation is too expensive (2019F P/B of 4.1x), and does not represent a good investment opportunity in our opinion.
  • The average combined daily trading volume on the 3 bourses declined to $194mn, almost unchanged compared to September. Trading volume has declined from the recent peak in August (with a daily average trading volume of $224mn) and has then been staid around the current level. In October, foreign investors were net sellers for the third consecutive month; net sales amounted to $62.8mn. Investors most actively sold Vingroup-related stocks (VIC, VHM and VRE) with a total amount of $22.6mn. The selling activities of foreign investors discouraged domestic investors to participate in the market, leading to lower liquidity. ETF activities slowed down in the last two months amid the current weak domestic market sentiment and unclear future trends of the VN-index. The three largest ETFs with a total NAV of $1.0bn at the end of October suffered from net outflows of $5.3mn.
  • Meanwhile, uncertainties in global equity markets remain high. We are concerned that foreign inflows into frontier markets such as Vietnam will remain limited in coming months. The recent mini trade agreement between US – China, which is not even available in written form yet, only deferred the tariff increases on Chinese goods, and is unlikely to have a meaningful effect on global economic prospects. Furthermore, the U.S. Fed hinted that its most recent rate cut could be the last one for some time.
  • By the end of 31 October, the top 100 stocks were trading at a 2020F P/E of 15.0x 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 10.4x and at an average P/B of 1.3x.

Invest with us:

Please download the October 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: Vietnam Trail Series