Vietnam Market Outlook | Sep 2022

Credit room extension benefit banking and market in general

The VNIndex rebounded well in August to post one of the regions strongest monthly gains, increasing 6.2% on improving liquidity. The market rally was fairly broad based with most sectors finishing in the month in the green, with the retailing, brokers and materials sectors leading the way. The Vietnamese markets were able with withstand the hawkish comments at the end of the month from the US Fed meetings on Aug 26th, in which Jerome Powell’s comments following the meeting promised policy ‘pain’ in order to contain inflation, in which hopes for a more dovish Fed contributing to the rally in global equities were squashed. Fundamentally, the Vietnamese equity markets continue to be attractive with 2022 earnings estimates to reach 19% resulting in a 2022 year end P/E of 12.4x, the lowest in the region. Further contributing to the positive sentiment in the market was the application of the T+1.5 settlement time from T+2 on August 29th. We appreciate the move to shorten the settlement time on the market, although we do not expect a long term material uptick in liquidity from the change. 

Vietnam’s economic performance continued to impress with the release of the August data. With inflationary pressures on the top of investors’ minds, Vietnam’s CPI posted just 0.005% m/m increase, with the average CPI increase sitting at 2.58% for 8M2022; with the decrease in the transportation basket being the biggest driver keeping the CPI figures down as global oil prices – and resulting domestic gasoline prices – decreasing significantly. Other macro data continued to impress with IIP increasing 15.6% y/y in August and 9.4% y/y in the cumulative 8 months to date in 2022. Trade figures had a strong month with exports posting a 22.1% y/y increase leading to a monthly trade surplus of USD2.4bn, the highest monthly surplus this year, and bringing the annual surplus to just under USD4bn. Incoming foreign investment experienced another month of growth with disbursed capital hitting USD1.2bn (+13.9% y/y) in August, resulting in the YTD disbursed figure reaching USD12.8bn, up 10.5% y/y.

September is expected to bring about some more positive news which can be supportive of the equity markets. Firstly, we’re expecting that the SBV will increase the credit growth quotas at banks sometime in the middle of September, a move that’s been highly anticipated by the market and should supportive of the banking sector and markets in general. Secondly, as inflation figures have appeared to peak domestically (August CPI up just 0.005% m/m) and in other key economies (US inflation in decreased to 8.5% y/y from 9.1% in July). It appears that the worst might be over as commodities prices have been cooling down recently, particularly gasoline prices domestically (down 25% since their peak earlier in the year), which bodes well for improved investor sentiment. Lastly, towards the end of the month we’re expecting an eye-catching number for 3Q GDP growth in the range of 10.4-14.7% given the continued recovery of the economy and low base from 3Q 2021 when many economic activities were hindered due to COVID-19 restrictions that should provide positive sentiment to end out the quarter.