Vietnam Market Outlook | February 2022

January in Brief

Most macro indicators slowed in the month ahead of the Lunar New Year festival. Industrial production index declined by 3.1% compared with December but grew 2.4% over last year, while the Markit PMI remained in expansionary territory for the forth consecutive month, increasing to 53.7 from 52.5 in last month. Disbursed capital decreased while FDI pledges went up by 4.2% y/y. Total import-export turnover reached US$58.5bn, 11.7% lower compared with last month, but showed growth over last year and posted a trade deficit of US$0.5bn. Total retail sales of consumer goods and services in January continued to increase and the CPI increased 1.94%. Resolution 43 issued on Jan 11 2022 with the details in slides 37 to 40 specifying some fiscal and monetary policies to support the socio-economic recovery and development.

The VNIndex had a volatile first month of the year, ending January with a 1.3% decline to 1,478.96 points on positive momentum from a trough of 1,425.35. Contributing to the volatility was the revelation of large sales of FLC by its Chairman without providing sufficient information disclosures, leading to the decision of authorities to cancel the  sale of 74.8 million FLC shares, freeze the chairman’s trading accounts for five months and enact the largest financial penalty available under the laws following his trading violations. Brokerages’ proprietary books reversed to net buying while foreigners were net sellers (approx. 130m USD), although the figures are skewed by a large put-through trade of MSN (foreign sold approx. 230m USD block to domestic) by an organization managed by the Government of Singapore.

The Omicron variant of COVID-19 is spreading in EU and US and some Asian countries, but has not yet impacted Vietnam’s economy, although some community spread cases have appeared recently. The more immediate issue the market is keeping an eye on at this time is the decision of Fed to rise the interest rates and tightening of monetary policies across the world to cope with rising inflation. Vietnam’s manufacturing and retail sales are recovering in recent months, combined with low CPI, a strengthening local currency, increasing market liquidity and the growing role of local investors, we believe that VNIndex can appreciate in the face of global market volatility and expected central bank rate hikes. We’re monitoring potential spikes in COVID-19 rates across the country as the Lunar New Year festivals wind up, which may result in social distancing restrictions, although high vaccination rates make it unlikely that new harsh restrictions would be put in place. 

See details in the attachment below.