Vietnam Market Outlook | Dec 2022

VNIndex pivots strongly mid-month to close up 2% as foreign investors deploy the largest monthly net portfolio inflows in over four years

Despite the VNIndex ending the month up 2%, November was another volatile month as the market grapples with the tight credit situation, particularly affecting the real estate sector. On the macro side, figures are starting to show a divergence between primarily domestic vs more global indicators. Domestic consumption remained strong with retail sales increasing 17.5% y/y and inflation continues to be on track to be within the governments 4% annual target, posting a 3.02% average increase in the first 11 months of the year. As noted in last month’s report, we’re closely monitoring the manufacturing and export sectors as a sustained downturn in global demand could affect the country’s overall growth prospects for 2023 and we’re starting too see some initial signs of deterioration. Exports saw a contraction of 8.4% y/y as manufacturing orders decreased on the back of a depressed economic outlook in key export markets including the US and EU. In November, Vietnam’s PMI ended a 13-month expansionary streak and fell to 47.4 from 50.6 in October indicating growing weakness in the manufacturing sector. IIP maintained its positive trajectory, posting growth of 5.3% y/y, however, this figure is lower than the 8.6% y/y growth in the cumulative 11m YTD. 

Difficulties in the bond market have continued making headlines throughout the month as there have yet to be any concrete solutions to ease the constraints which have been stifling capital flows to the real estate sector. There have been a series of meetings with key stakeholders to try to ease liquidity constraints with several proposals being offered, however there is yet to be a resolution to the stalled bond market. While there are still questions around how the stalled corporate bond market will be revitalized, sentiment on the market picked up considerably towards the end of the month as the seriousness in which these issues are being addressed has brought about confidence that there will be solutions to revive the stagnant credit conditions in the real estate market. 

November was a tale of two halves for the VNIndex. The first half of the month was dominated by negative sentiment and saw the index drop by 11.3% from the start of the month until Nov 16th when the index pivoted and saw sentiment pick up on belief that solutions to the credit issues plaguing the market will come sooner than later. Two of the most visible real estate companies on the market that have been caught up in the credit crunch, NVL and PDR showed signs of resuscitation in the closing days of the month; after long stretches of hitting the limit down (-7%) for NVL (16 consecutive days) and PDR (17 days), both closed the month with 2 consecutive days hitting the daily limit up. Contributing to the rally was the torrent of inflows from foreign investors who had a net buy of c. 650m USD during the month as the VNIndex hit valuation lows not seen in over a decade. Looking forward to the final month of 2022, we’re cautiously optimistic that the markets will be able maintain their positive momentum from the second half of November. The recent recovery of the market shows initial signs that investors are optimistic that there will a resolution to the credit crunch