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 2021.
Key October 2021 macroeconomic highlights:
• After some months of strict lockdown, the COVID-19 situation in Vietnam calmed down significantly in October. The number of daily new cases fell sharply from around 9,000 in September to below 4,000 cases per day. From 1 October, Ho Chi Minh (HCM) city reopened by gradually easing the lockdown measures. Recreational places such as shopping malls, gyms, cinemas, were allowed to resume activities with less than 50% capacity however. Restaurants reopened dine-in services from late October. Manufacturers were also permitted to resume production, workers must however be vaccinated and conduct COVID-19 tests frequently. Overall, Vietnam has changed its strategy from “zero-COVID” to “new normal”.
• With regard to vaccination, Vietnam received 10.4mn doses of vaccine in October. In Hanoi and in HCM city, all people over 18 got at least 1 dose of vaccine and almost 80% of HCM city people are fully vaccinated by now. Nationwide, 31.9mn people got 1 dose and 22.6mn people got 2 doses. HCM city also started to vaccinate children from 12 to 17 years old.
• The October Consumer Price Index (CPI) rose by 1.8% y/y, but was down by 0.2% m/m. The main driver was transportation prices, which went up by 16.5% y/y due to: (1) rising global oil and petroleum prices; (2) increasing domestic petroleum consumption. At end of October, Vietnamese petroleum prices increased by 63% y/y and by 11% m/m. Since the economy just started to reopen, we think that transportation prices will continue to increase for some time. On the other hand, prices of food & foodstuff (36.6% of CPI basket) fell by 1.3% m/m thanks to the resumption of logistics activity and thanks to lower hog prices. However, hog prices may not stay low for long as demand in the last 2 months of the year is usually high. As a result, we maintain our view of rising inflation, which should however remain in a range of some 3%.
• According to the Ministry of Plan & Investment, FDI disbursement declined by 4.1% y/y to $15.2n in 10M/2021. However, FDI is still on recovery mode given October’s disbursement amount of $1.87bn, up by 10% m/m. Similarly, the trade balance recovered strongly to record a surplus of $1.1bn in October (three times as much as in September ). Thanks to the resumption of manufacturing activities, which will drive exports, Vietnam should be able to achieve a FY2021 trade surplus of $1.4bn.
• Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 52.1 in October. Retail sales rose strongly by 18.2% m/m.
• The USD/VND exchange rate stood at VND 22,750 by the end of October, unchanged from the September level. Year-to-date, the Vietnam Dong has appreciated by 1.7% YTD, in line with our expectation.
• The Ministry of Plan & Investment submitted a proposal to the government, asking for a stimulus package of $34.8bn (nearly 10% of 2021 GDP) to support the economy, including a tax reduction, public investments, public housing, etc. Financing sources are government savings, government bonds, and international loans. Given Vietnam’s relatively low public debt level (the public debt / GDP ratio is 48%, far below the ceiling of 65%) and the moderate inflationary environment, we think that Vietnam could afford such a package. Also, low international interest rates and the firm Vietnamese Dong are favorable factors. This plan, if being approved, will be the biggest stimulus package ever, boding well for above average growth in 2022.
Stock Market highlights:
• The VN-Index as a gauge for Vietnam’s stock market, advanced strongly by 7.7% in October, reaching an all-time-high of 1,444 points by the end of the month. Investors turned positive on the future course of the economy as many provinces in the South of Vietnam removed their social distancing policies.
• The market’s increase was broad-based as 336 out of 405 stocks gained, while all sectors reported positive performance. The Utilities sector led the upturn with a gain of 21.8% as some of these companies reflected positively on the higher oil price while others are expected to benefit from higher electricity demand when the economy re-opens. Industrials (+12.9%) did well thanks to some specific companies in logistics segment and in infrastructure development business. Real estate (+11.1%) also outperformed the market as investors expect the sector to re-launch its project pipeline after a period of delay due to Covid-19. Materials advanced by 10.0% as many steel and fertilizer companies released upbeat third quarter earnings thanks to higher product prices.
• The combined average daily trading volume on the three bourses was $1.1bn in October, similar to September. Foreign investors were still net sellers in the amount of $367mn, resulting in a total net outflow of $1.9bn YTD. The market however observed some heavy buying from foreign investors towards the end of the month. But it is too early to tell if this trend is lasting for a longer period of time. The market continued to be dominated by domestic individual investors, which contributed more than 85% to the market’s total trading volume.
• During the month, 305 companies, which are listed on the Ho Chi Minh Stock Exchange, released their Q3 earnings. Among them, 144 companies reported positive quarterly earnings, indicating that the renewed Covid-19 outbreak displayed a mixed picture on their business during the implementation of the lockdown policy.
• Going forward, we think the Vietnamese economy has passed the worst time caused by the Covid-19 pandemic. Despite the fact that the virus may continue to spread, the vaccination rate in Vietnam is improving rapidly, thus domestic economic activities are expected to fully resume shortly. We think this should be a good time to position in stocks with the re-opening theme. We like stocks in real estate sector, in the construction materials segment and selected equities of companies that will benefit from the increasing investment in infrastructure and from the increasing FDI inflows to Vietnam.
• At the end of October, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 15.7x, at a P/B of 2.5x, and have a 2022F EPS growth of 20.9%. Meanwhile, the stocks on our buy and hold recommendation list are trading at a 2021F P/E of 12.5x, at an average P/B of 2.4x and have an EPS growth of 27.9%.
Invest with us:
Please download the October 2021 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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Featured image credit: Internet