Vietnam Market Outlook | August 2022

H1 market earnings up 18.8% and continued strong macro backdrop pave the way for promising second half of 2022 

Almost all first half earnings have been reported with market wide 1H 2022 revenues increasing 16.6% y/y and earnings increasing 18.8% y/y. Banks were the leading contributor in terms of earnings for the first half with H1 earnings increasing 35% y/y due primarily to the decrease in provisioning that occurred in 2021 as banks grappled with COVID related loan restructuring, while also posting 16% y/y and 17.5% y/y growth in interest income and non-interest income respectively. While on the other hand, the Real Estate sector was the largest contributor on the down side with earnings decreasing 29% y/y. The first half saw a few issues facing the real estate market including many banks hitting their credit growth quotas towards the end of H1, which restricted access to bank credit for both buyers and developers and the slowdown in the corporate bond market due to tightening regulations as a result of recent anti-corruption measures.

Amid growing global concerns of soaring inflation and recessionary pressures as central banks try to rein in spiraling cost of living rises, Vietnam’s economic performance continues to be in an envious position. Vietnam’s industrial production continued its expansion with IIP increasing 11.2% y/y and Markit PMI decreased to 51.2, but remains in expansionary territory. July’s disbursed FDI kept increasing by 20% y/y to US$1.5bn and FDI pledges increased 4% y/y at US$1.5bn. Total import-export turnover in July was estimated at US$60.6bn, up 6.4% y/y and has posted a cumulative trade surplus of US$0.76bn for seven months. Retail sales continued to elevate with growth of 42.6% y/y (coming from a low base as COVID-19 restrictions severely impacted retail activities in Q3 2021). The inflation rate remained under control, with the CPI up 0.4% over last month and increased 3.14% over the same period last year. The USD/VND rate increased for most of July, but cooled late in month, with the average rate of banks up to 23,343 (+0.26% m/m), while the free market rate surged to 24,410 (+1.96% m/m) as the growing pressure from the strengthening USD after the Fed hiked interest rates in recent meetings. 

The VNIndex recovered slightly in July after dropped to lowest point in year at 1,143 and closed month over 1,200 level, up 0.7% over last month. Overall liquidity on the markets continued the downtrend, with the average daily trading value decreasing 20.7% over last month. Foreign investors returned to be net sellers with a value of US$17.2m after three consecutive months of net buying, with the YTD foreign flow figures positive at a net buy of US$64.7m. Most listed companies have released business results of 2Q-2022, posting an overall earnings growth of 18.8% for H1 2022. On the market development side, on July 28th, Deputy Minister of Finance Nguyen Duc Chi said Vietnam’s Ministry of Finance (MoF) and relevant agencies are accelerating the implementation of KRX trading system on schedule which expected to improve market trading ability and provide more functions for investors. 

The recovery of many global markets coincided with general commodities prices cooling down and expectations of inflation reaching or nearing their peak following the monetary tightening of central banks. Domestically, Vietnam’s macro fundamentals remain strong and corporates continue to post strong earnings, contributing to the VNIndex surpassing 1,200 points, however, market sentiment remains on the weaker side as global headwinds weigh on investor confidence. With the recent corrections in the markets, strong 1H earnings (+18.8% y/y) and inflation pressures seeming to easing thanks to decrease of commodities prices, the VNIndex is trading at an attractive valuation for both long-term and short term investors. We remain confident that economic activities will continue to show improvement in the second half of 2022 as the boost from the reopening of Vietnam‘s borders to international travel from March 15th is expected to pick up in the second half of the year as tourists have had time to plan trips and COVID related travel procedures are becoming less cumbersome and the easing of COVID restrictions in China will be positive for Vietnamese manufacturing and trading activities