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 September 2021.
Key September 2021 macroeconomic highlights:
• The 4th wave of COVID-19 calmed down in September, especially in Ho Chi Minh (HCM) city. The number of daily new cases in Vietnam declined from the peak of over 13,000 to around 9,000 cases per day. The number of daily deaths dropped to below 200 cases, the lowest level since the beginning of the 4th wave. The government decided to reopen HCM city gradually from 1 October by easing lockdown measures. Production and business activities indoors or outdoors are expected to resume with a maximum of 10-15 people and could reach 70 people if all participants are fully vaccinated or recovered from COVID-19. People going out will be checked randomly, using the QR code from one single app developed by the government. In Hanoi, the measures are eased since last week as very few new cases were found. People are allowed to go out if they got at least 1 dose of the vaccine.
• Regarding vaccination, Vietnam received 11.7mn doses of vaccine in September, and the vaccination progress is speeding up nicely. Nearly all people over 18 in Hanoi and in HCM city got at least 1 dose of vaccine, and almost 50% of HCM city people are fully vaccinated. Nationwide, 23.2mn people got 1 dose and 9.0mn people got 2 doses.
• Vietnam’s GDP fell by 6.2% y/y in Q3, but in 9M/2021, it still grew by 1.4% y/y. Among the 3 main sectors of the economy, agriculture grew by 1.0% y/y as agricultural and forestry activities were normal during the lockdown period. On the other hand, the manufacturing sector was down by 5.0% y/y due to disruptions in major Southern manufacturing hubs namely in the Binh Duong and in the Dong Nai provinces. The service sector shrank by 9.3% y/y because tourism and many other services were closed in Q3. With the gradual resumption of business activities from 1 October, we expect a positive GDP growth in Q4. Nevertheless, the degree of recovery will depend on how fast businesses can ramp up to prior-lockdown capacity. Overall, we expect a GDP growth from 3.0% to 4.0% for FY2021.
• The September Consumer Price Index (CPI) rose by 2.1% y/y, mainly driven by transportation as a result of higher petroleum prices due to rising global oil prices and rising logistics costs due to the disruptions during the lockdown period. We think that the transportation price will continue to go up due to higher demand as major cities reopen. On the other hand, prices of accommodation & construction materials dropped by 2.0% m/m due to the temporary close of construction sites. However, prices of this item may rebound in following months as government spending on infrastructure is expected to speed up. Overall, we maintain our view on rising inflation, which is expected to reach 3.0% by December 2021 due to reopening of major cities and increase in government spending
• According to the Ministry of Planning & Investment, FDI disbursement in 9M/2021 slightly declined by 3.5% y/y to $13.3bn. However, disbursement in September was $1.7bn, up by 57.4% m/m, which we believe is very encouraging, especially during a lockdown period. Although some FDI companies moved orders to other places, we think this is just temporary and orders will come back when manufacturing activities resume.
• The USD/VND stood at VND 22,750 by the end of September, unchanged from the August level. Year-to-date, the Vietnam Dong has appreciated by 2.1% YTD, in line with our expectation.
• The trade balance of September was positive for the first time since March 2021, reaching $0.5bn due to a reduction of imports, driven by the drop in commodities import such as coal (-42.3% m/m), crude oil (-43.8% m/m). This is understandable because import of these products rose in previous months. In contrast, exports were stable. Year-to-date, Vietnam recorded a trade deficit of $1.8bn. We believe that the deficit will be narrow in Q4 when manufacturing activities resume
• Vietnam’s Manufacturing Purchasing Managers Index (PMI) recorded 40.2 in September, which is unchanged from August level.
Stock Market highlights:
• The VN-Index as a gauge for Vietnam’s stock market, inched up by 1.1% in September. The stock market was quite muted as the index has moved in a very thin band. The combined average daily trading volume on the three bourses was around $1.2bn in September, very similar to the previous month.
• Most sectors reported positive performances in September except for real estate (- 2.6%), healthcare (-8.1%) and most of bank stocks. Investors were skeptical on the Covid-19 progress in Vietnam, waiting to see whether the country will resume its economic activities by the end of the third quarter. As a result, the liquidity mostly focused on small and mid-cap stocks while diverting from large-cap stocks. That might explain the poor performance of the real estates sector and the banking stocks. In addition, real estate stocks also reflected the negative news from Evergrande, a debt-ridden real estate developer in China. However, the Vietnamese real estate sector is much healthier than the Chinese one. The average debt to equity ratio of the 10 largest property developers in Vietnamese was 63% (as of 31 Dec 2020) versus 126% of the top 10 peers in China. In addition, we observe that housing demand in Vietnam is real, reflecting strong demand from private individuals, while the housing price to income ratio is still reasonable here (about 30% lower than in China).
• Foreign investors continued to be net sellers in the amount of $364mn in September, resulting in a total net outflow of $1.6bn YTD. However, the market continued to be dominated by domestic individual investors, which contributed more than 85% to the market’s total trading volume.
• We observed that market performance and trading volume declined notably towards the end of the month as many brokers restrained margin lending to meet the requirement for central bank reporting by the end of the quarter. However, we expect that this situation will only last for a short period of time, and that market liquidity is expected to increase again next month. Going forward, we expect market sentiment to improve as (i) COVID-19 cases significantly fell in late September, the vaccination rate is increasing rapidly, especially in major economic areas of Vietnam; (ii) The COVID-19’s impact on listed companies’ earnings is already priced in their stock prices, and most companies are currently ramping up their operations. (iii) Vietnam’s economy is expected to grow strongly after the pandemic; (iv) some major brokers will finish raising their capital in coming months, providing markets ample margin lending supply; (v) the low interest rate environment will continue in Vietnam, spurring market participation from local investors.
• At the end of September, Vietnam’s Top 100 stocks are trading at a 2022F P/E of 14.2x, at a P/B of 2.3x, and have a 2022F EPS growth of 20.8%. Meanwhile, the stocks on our buy recommendation list are trading at a 2021F P/E of 12.4x, at an average P/B of 2.5x and have an EPS growth of 16.1%.
Invest with us:
Please download the September 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.
Featured image credit: KPMG