Vietnam Market Outlook | Jan 2023
19/01/2023 - 10:40:02 SAHighest annual GDP growth rate since 1997 sets the stage for a favourable new year
The Vietnamese macroeconomic picture continued to achieve stable growth with GDP increasing 5.92% in the 4th quarter and 8.02% for the whole year 2022, the highest growth since 1997. Inflation is maintained under control, with CPI for 2022 increasing by 3.15%, below the government’s 4% target for the year. Disbursed FDI capital remained strong with an increase of 13.5% for 2022. Although the trade turnover slowed down in the recent two months, the balance recorded surplus on the whole year of US$11.2bn. As trade figures have slipped in the recent two months, we’re also keeping a close eye on the slowdown of industrial production, as IIP was up just 0.2% y/y and decreased slightly by 1% m/m and the PMI fell to 46.4 in December and it in contractionary territory for the second consecutive month.
The VNIndex is in the same direction with global stocks markets when get falling by 3.9% m/m in December. After rebounding strongly from the 2-year low in November, the VNIndex fell under 1,000 points once again in December before a late rally saw the index close the year at 1,007.1 points. The overall VNIndex liquidity improved significantly by 22.3% m/m in December with 176 stocks gaining while 233 stocks recorded price decrease over last month. Foreign investors continued aggressively accumulate Vietnamese shares with a net buy value of US$535m in December, bringing the whole year net buying to US$1.13bn, the highest net value since 2018. The P/E of VNIndex at the end of 2022 is at 10.5x, lower than the average of 13.5x of ASEAN markets.
In the short term, we’re seeing encouraging signs that the market has pivoted after falling to the 2-year low in mid-November. Although the market dropped in December, some macro pressures have been easing with the VND strengthening by 4.3% in the month vs the USD and interest rates starting to ease with the overnight interbank interest rate decreasing by 251bps in December, other terms of less than 6-months also saw interbank interest rates decrease. Foreign inflows remained strong and have yet to show any signal of reversal. Recently, the Ministry has submitted the draft of new decree amending Decree 65 and Decree 153 on private offering and trading of corporate bonds is still in approval process which bring supports for the market as we show in slides 35-37. Although the economic outlooks has some signs of deterioration as industrial production and exports are weakening, the overall conditions of the economy are stable and expected to be more active if the speed of public investment disbursement is pushed. Market valuations ticked up from the low of 9.5x P/E seen at the close on Nov 15th, but remain at a deep discount to historical averages (the P/E as of 10 Jan was 11.04x, 27% lower than the 3 yr avg) and could provide longer term investors an opportunity to accumulate positions at attractive valuations.
View details in full report below.