Monthly Market Outlook

Globally, investor sentiment towards equities has become more positive following the Fed's decision to cut interest rates, accompanied by economic data leaning towards a "soft landing" scenario. Additionally, strong stimulus measures from China have attracted capital flows into the stock market, which was a highlight in September. In Vietnam, September also marked a significant improvement in foreign capital flows. While the scale of ETFs’ net selling continued to narrow, active funds showed signs of net buying again through matching orders, with the most focus on the brokerage sector, thanks largely to the positive impact of the roadmap for stock market upgrade. The proportion of foreign investor trading value also increased to ~14% on HOSE, the highest since April 2023.

The 7.4% GDP growth figure for 3Q2024 demonstrates the strong resilience of the economy in its recovery process. Accordingly, achieving the growth scenario of 6.5% - 7.0% for 2024 is feasible, and the Vietnamese government has also set an ambitious growth plan for 2025, expecting a recovery in consumption and public investment.

Moving into October, the Vietnamese stock market is likely to continue its positive momentum. By market capitalization, the proportion of trading value allocated to the VN30 is at 50% - the highest YTD, largely thanks to the performance of banking sector and some key real estate stocks. In the short term, a period of accumulation is necessary, though stronger earnings growth of listed companies towards the end of 2024 and 2025 will drive the stock market back to its upward trend.

Short-term trading ideas for October 2024 include KDH, VCI, HPG, VPB, HAH, & CTG.

SSI A-class portfolio rebalancing in October 2024: VHC, VCB, PNJ, ACB, and MSN.

The 1,300 mark continues to be a tough climb for the VNIndex, as the market declined just 2 days after hitting the milestone for the 6^th time. Overall, the VNIndex declined -1.3% MoM within the span of June. The 1,300 mark certainly looks like the next base-camp spot, a moment for investors to catch their breath and acclimate before continuing further on the ascent to the peak above. Looking back on the climb so far, the VNIndex performance was not bad at all for the first half of the year, with a steady 10.2% increase YTD. As predicted, overall market liquidity improved significantly in 1H2024, an impressive 84% increase YoY even on last year’s low base. Foreign investors continued to offload Vietnamese stocks (especially with the announcement of the liquidation of the iShares Frontier and Select EM ETF on June 7), citing that several frontier market countries have been upgraded to EM status, while the remainder of frontier markets experienced persistent liquidity challenges. The fund sold off most of its positions in Vietnam within June, and was one of major sources of the overall heavy net selling from foreign investors in June, totaling VND 16.6 tn on HOSE (652mil USD).   

Despite all the noise - the fluctuation of interest rates and exchange rates in May and heavy net selling from foreign investors –  stock market performance notched a win in May, with a 4.32% increase. Retail flow was strong, with a focus on certain sectors such as retail, oil & gas, technology, power and aviation sectors but seemed to neglect the two largest sectors: banking and residential property. 

During the month, some important measures of monetary policy were made. The USD/VND was under huge pressure in May due to FDI profit repatriation and a large degree of imports, and the SBV actively utilized the USD spot contract sales ($3.8 bil in total) to cover for rising FX demand. The VND ended up with a modest depreciation of 0.5% within May, totaling 4.9% YTD. Though, it still remained elevated as the interbank USD/VND is around the SBV-ask price for USD spot contracts (VND 25,450), whereas the VCB-quoted rate wandered around the ceiling (+5% over the reference rate, i.e. ‘central rate’).   SBV also requested SoCBs to sell gold since 3 June, which helped to stabilize the gold market and eased pressure on the exchange rate.

As anticipated in our monthly April report, the Vietnam stock market corrected in April and the VNIndex declined by 5.8%, marking down its YTD gain to 7%.  Besides concerns over currency depreciation (given stronger greenback strength (DXY +4.8% YTD as of April) and monetary divergence theme (VN doves in charge vs. Fed hawks), USD/VND surged to historical highs, with a 4.8% YTD depreciation on average), the interest rate also bottomed out and started picking up.  Although we maintain our 2024 year-end 12 mo. deposit rate forecast at 5.5% (vs. 5.0% in 2023 and 4.8% at the bottom), the pick-up in deposit rates is sooner than we expected. We see monetary policy to be unchanged in terms of direction, but interest rate is just moving from “super low” to “low” zone. Inflation is still within manageable range. On average, Jan-April ‘24 CPI was still 3.93% YoY, similar to the same period last year (3.84%, and lower than the targeted range of 4-4.5%), while core inflation was just 2.81% YoY on average, about 2% lower than this time last year.

After a 5 month rally netting a total return of 25% since the end of October 2023, the VNIndex is entering a correction and consolidation period in April.  March witnessed the heavy selling from foreign investors, with higher pressure from Vietnam-focused ETFs which withdrew a historical high monthly level of VND 4.81 tn, equivalent to 5.9% of assets.  Total net sell value by foreign investors amounted to VND 11.3 tn in March, the most since June 2021.  This is just slightly lower than the total net sell value in the entirety of 1Q24, with VND 11.5tn. As a result, average liquidity improved significantly to VND 26.7 tn in March and VND 21.4 tn in 1Q24, equivalent to YoY growth of 115%.  New account openings by the retail investors in the first 2 months of the year were 239,000 accounts, more than double the same time last year.  This explains why retail investors were becoming much more active, and were able to absorb heavy net selling from foreign investors within March, as illustrated by the fact that the VNIndex still inched up by 2.5% MoM and 13.64% YTD.  Besides the stock market, retail flow also heated up the property market and brought a notable rise in the price of condos in Hanoi – a key market where there is an acute undersupply of units in the primary market -  to increase by 10-20% YoY.   

The Vietnamese stock market continued to have a positive showing in Feb, increasing 7.6% MoM and 10.9% YTD.  Market liquidity also improved by 25% MoM to VND 20.8 tn on the HOSE (a significant change from the stable liquidity seen in the previous 4 months). This reflects the return of retail flow, driven mainly by low interest rates, while foreign investors continued rotation with a net-sell position, with total net sell from ETFs at VND 2.7 tn, and over VND 3 tn from active funds at in Jan-Feb ’24. On the macro front, FDI and public investment displayed onward momentum. FDI disbursement achieved $2.8 bn USD YTD (+10% YoY) while public investment increased 22% YoY within the first 2 months of the year, and completed 9.13% of the yearly plan.  Domestic consumption demand remains weak, however, while tourist arrivals noted the significant increase of Chinese (~18% of total arrivals), which ranked as 2^nd   largest group, after South Koreans (~28% of total arrivals).  

January marked a month buzzing with activity. Not only was the Land Law approved by the National Assembly right before the Lunar New Year (which provides multiple acceptable methods to conduct land valuation - effective come 2025) the Law on Credit Institutions (which lowers the risk of cross ownership & tightens lending to related entities) was also passed on 18 Jan.   There has been a lot of discussion on the 2024 economic plan, among which credit growth is set to grow by 15% (vs. 13.71% recorded in 2023) by the SBV.  Supporting news helped to stabilize and improve investor sentiment, and the VN Index gained 3.04% within the month.  ADTV on the HOSE was VND 16.7 tn, having increased 3% MoM and 56% YoY.  Notably, daily liquidity was almost stable in the last 4 months and only improved slightly recently, reflecting the fact that retail investors are still more or less conservative.

Stock market performance turned out quite well in 2023, as the VN-Index increased 12.2% YoY vs. a sharp decline in 2022. Following the painful lesson that 2022 brought, 2023 in general was approached with a very conservative manner: liquidity significantly squeezed amid high inflation and a tightening monetary policy, weak demand as concern about a hard landing lingered, and foreign outflows occurred as Vietnam’s dovish monetary policy started to diverged from that of increasingly tightened markets in OECD countries. The most noticeable driver for a good performance this year was attributed to the proactive and timely supporting measures from the Vietnamese government in an attempt to tackle difficulties in the real estate sector and the corporate bond market, and lower interest rates to better incentivize consumer confidence. This included four instances of policy rate cuts, a 2% VAT reduction, and new measures to support the credit market. The VN-Index once reached 1,245.5 (a recovery of 36.6% from the trough of November 2022), but ended the year pulling back to 1,129.9 (26.1% below the peak created in April 2022). Liquidity were low at approx. $500 USD million/day during 1H 2023, then became more vigorous in 2H 2022 at ~900 USD million/day, energized by lower interest rates. For 2023, average trading value recorded at $720 mn USD/day, -17% YoY.

Vietnam stock market reacted positively to the stabilization of the VND after months of volatility, with the VNIndex increasing 6.4% in November.  As the Fed did not hike rates further during its last FOMC meeting, the VND appreciated by 1.2% in November, pulling back YTD depreciation of the VND to 2.7%.  The SBV has also stopped withdrawing liquidity from the system via bill instruments since the 9^th of November. Brokerage has emerged as the best performing sector for the month of November (+24.3%), as the KRX system finally going live approaches ever closer. This catalyst might well be repeated in the next several months until the KRX is finally operational.  Mid and small caps outperformed significantly large caps, with the VNMidcap and VNSmallcap Index having increased 15.3% MoM and 13.4% MoM respectively (compared to 4.1% of the VN30 flagship index).

The correction continued in October, sliding 126 pts or -10.9% lower MoM, and -17.4% lower than the short-term peak in September. As of October, the VNIndex had only increased by 2.7% YTD. During the month, retail investors fret over a number of variables: currency depreciation, hedging activities by some foreign investors - which impacted VHM (the aftermath of which saw an explanation by the company to clarify and calm the market), and weak economic data in 3Q. Consumption remains weak (normal retail sales growth slowed down to 7% YoY in October), and tourist arrivals only equated to 70% of pre-Covid arrival data by the end of 3Q. On the other hand, export data is showing some improvement in October, mainly driven by ICT products and rice. FDI continues to be on the brighter side (FDI disbursement increased by 2.4% for Jan-Oct) while inflation displayed less of an increase, with CPI increasing 3.59% YoY by end of October.  Even with an anticipated electricity price hike, upside for CPI is limited due to weak consumption. All in all, Vietnam can easily by the end of 2023 achieve inflation below its 4.5% target, while lagging behind its GDP growth target. 

We’re probably speaking to the choir when we say September was one tough month for investors. Before we go into what to expect for October, let’s flashback to September in which we see the VNIndex declined by -5.7%, while the market still hung on to a 14.6% YTD gain. Liquidity continued to improve and set a new record in 2023 with VND 23.4 tn, translating to a 5.4% MoM improvement.  Sell pressure from foreign investors was loud and clear, with the highest intra-month aggregate net sell by valu-e since 2022, mostly from ETFs.

As expected in our August Market Outlook, the Vietnamese stock market faced strong volatility during August, and almost went flat during the month under the impact of profit taking and a fluctuating VND.   The key word of the month was clearly evident: liquidity, liquidity, liquidity, as retail investors came back to the market in a big way. Average Daily Trading Value (ADTV) during August increased 21% as compared with the month prior, reaching 22.2 tn VND, and marked a significant increase as compared with the 14 tn VND of ADTV tracked in the first 8 months of 2023. Looping in the element of rising new account openings in recent months, as a whole we see clear indicators that the interest of retail investors in the stock market has increased significantly - and could be a persistent trend as we move into the Fall season.

Strong momentum was maintained in July, with the VNIndex closing the month at 1,222.9, equivalent to a +9.2% MoM increase.  The VNIndex achieved 21.4% YTD as of July.  Liquidity also increased 8% MoM, to $800 mil USD/day.  Property, consumer staples, and consumer discretionary sectors were leading the market during the month (all 3 sectors staging a reversal from being the most laggards in 1H23). The market has been cheering Vietnam’s dovish monetary policy, and as the fruits of that we are seeing the deposit rate being reduced to be lower than pre-Covid levels, and approaching the Covid-year low: After 4 policy rate cuts, a new 1Y deposit earns 6-7% p.a. (as compared with the peak of 10-11% in the beginning of the year), while the lending rate dropped to 9%-10% p.a. for new non-mortgage loans.  Mortgages have been repriced accordingly, from 14-15% to around 12% p.a.  The overnight rate has been reduced to a low, tight range of 0.2-0.5%, reflecting abundant liquidity in the system. Retail investors found putting money in the banks is no longer as attractive a proposition, while both the property market and corporate market could attract only a slim number of new buyers. Retail investors again flocking to the equity market is the apparent choice du jour nowadays.

GDP for 1H23 posted at 3.72% YoY, which has turned the government’s annual GDP target 6.5% to mission impossible, as it might require at least 9% GDP growth for 2H23. 1H23 also marked the lowest six-month span growth period since 2011 (that is, if we exclude 2020). In terms of expenditures, much of the growth in GDP came from net exports despite the fact that official data for both export and import growth declined by double digits. Meanwhile, both the final consumption print (+2.68%) and gross capital formation (+1.15%) were below overall GDP growth, more datapoints confirming that the country is struggling to ignite key growth drivers. Accordingly, we maintain our FY2023 GDP growth forecast range unchanged at 4.5% to 5% and remain cautious in terms of near term outlook, as too many supporting measures lean too much on Vietnam’s dovish monetary policy, while fiscal policies are showing to be challenging when it comes to execution.