Monthly Market Outlook

Monthly Market Outlook
Vietnam Monthly Strategy & Outlook April 2024: Correction & Consolidation time

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.   

09/04/2024

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Vietnam Monthly Strategy & Outlook March 2024: At the crossroads

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 2nd   largest group, after South Koreans (~28% of total arrivals).  

11/03/2024

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Vietnam Monthly Strategy & Outlook February 2024: Market sentiment improves on supportive news

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.

19/02/2024

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Vietnam Monthly Strategy & Outlook January 2024: Supportive government measures helped market to recover despite strong volatility

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.

13/01/2024

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Vietnam Monthly Strategy & Outlook December 2023: Market sentiment continued to improve

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 9th 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).

11/12/2023

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Monthly Market Review & Outlook – November 2023: Patience goes a long way

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. 

13/11/2023

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Monthly Market Review & Outlook – October 2023: A market correction is an opportunity

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.

11/10/2023

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Monthly Market Review & Outlook – September 2023: Retail investors accumulate in August for next leg up

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.

13/09/2023

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Monthly Market Review & Outlook – August 2023: Volatility expected after a long rally

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.

10/08/2023

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Vietnam Market Monthly Review & Outlook July 2023: Return of retail investors

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.

09/07/2023

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Vietnam Market Monthly Review & Outlook June 2023: Go with the flow and Introduction of SSI A-class Portfolio Model

The VNIndex increased by 26 pts in May (equivalent to 2.5% MoM), while liquidity improved significantly towards the end of the month. Average liquidity of the HOSE in the last two weeks of May increased by 32% as compared to the average level in Q1. While foreign investors net sold VND 3.42 tn in May (mostly via ETF funds), interest of retail investors has come back to the fore, and this has been the key driver for the market’s positive performance so far. Weight of foreign investors’ trading have been reduced significantly to 6.5% - similar to that during the Covid years. Within May, there has been a number of positive news items. Firstly, the central bank has continued to embark on rate cuts amongst various policy rates for the third time YTD, the latest by another 0.5%.  Liquidity in the banking system is likely more than sufficient, while weak credit demand explained a lower degree of borrowing. Annual credit growth tracked to the end of May was just 3.17% YTD so far. Secondly, the 8th Power Development Plan was approved by the Prime Minister on 15 May. In essence, the plan involves the reduction of the degree of coal-fired power being relied upon, being replaced by renewable energy.  At the same time, there has been a priority to develop gas-fired power using domestic gas. Accordingly, investors can well expect large investments in power and oil & gas sectors in the coming years.  Last but not least, the National Assembly sessions from May 22nd to June 23rd has been an item on the watchlist for investors, as these meetings have been a source of much discussion on new supporting measure proposals for the economy and financial sectors. According to the Ministry of Finance (MoF), public investment disbursement for the first 5 months grew by 20.7% YoY, which is quite encouraging.

09/06/2023

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Monthly Market Review & Outlook – April 2023: Volatility may offer more opportunities than risks

In the previous cycle, even when the interest rate already peaked and started decreasing, the market remained very volatile and only bottom out several months later.   We keep our view that market is very volatile this year, but the market could find its bottom within the next 3-6 months.  The lagging time between the peak of interest rate and the bottom of the market is because the market need to see whether the supporting policies are strong enough to get the economy back to growth momentum.   The SBV released data that shows credit growth having posted at 2.06% YTD as of the end of March, which clearly picked up in the second half of March (figure as of 20 Mar at 1.61% YTD) after a broad-based decline in lending rates in recent weeks. We will need to watch the pace of interest rate reduction, as well as the ability for credit growth to increase stronger in the coming months.

10/04/2023

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Monthly Market Review & Outlook – March 2023: Fundamental resiliency being tested

We await the Federal Reserve Board’s next rate hike decision on March 22, 2023. A milder shift by the Fed of 25 bps in February to a range of between 4.50% to 4.75% following the 50 bps hike in December does not suggest a less hawkish tone, in our view. Fed Chair Jerome Powell emphasized that he anticipates “ongoing (rate) increases” are likely needed to tame inflationDomestically, March is a difficult month for C-bond repayment, based on SSI Research data. Decree 08/2023 - a long awaited revision of Decree 65 and Decree 153 - was surprisingly approved at the beginning of March. This provides a new legal framework for the re-negotiation between bond issuers and bondholders for payment extension of maximum 2 years. As mentioned earlier in our 2023 Vietnam Market Outlook Report, it will take time to see if Decree 08 could be a practical and effective resolution to address current bond market challenges but the new regulation is expected to put a temporary hold on official defaults - especially in the case of NVL. C-bonds need to be closely monitored this month.

10/03/2023

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Monthly Market Review & Outlook – February 2023: Market to consolidate in the short-term

2023 began on a high note across global equities amid hopes that central banks are closer to ending their rate hike cycle and China reopening. However, that high note may need to be seen in company fundamentals. Domestically, the VNIndex gained 10.34% during January, with inflows from foreign investors continuing to be a key support. We think that a set of factors, including higher expectations of a more stable currency and long-term attractive valuations are the main factor spurring foreign inflows. February is normally a month without corporate news in Vietnam, so attention should be paid to macro developments, such as the Decree 65 revision to be proposed, public investment disbursement, and macro data that is released during February. In addition, foreign inflows over the past few years used to be strong in Q1.

10/02/2023

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Monthly Market Review & Outlook – January 2023: A good start signals a better year for the stock market

The Vietnamese equity market finished 2022 with a monthly decline of 3.9% and closed the year down 32.78%, the worst showing since 2008. A decent rebound was witnessed in the first half of December due to aggressive foreign inflow and local bargain hunters. However, investors took profits before the Christmas and New Year’s holiday, causing the market to cool down during the last week of December. The VN30, VN Midcap, and VN Smallcap indices decreased  -35%, -41% and -51%, respectively, during 2022.

10/01/2023

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