Market Update – Economically, Vietnam continued to show it is in the midst of a v-shaped recovery in October. Through the first 10 months of 2009 compared to the same period last year, industrial production is up 7%, retail sales are up 18%, and exports are showing some signs of improvement now down only 13.8%. Inflation remains in check at 3% YoY in October. Furthermore, foreign direct investment commitments were roughly US$6 billion in October, the best month this year and bringing total commitments for 2009 up to roughly US$19 billion. VAM_Monthly_Newsletter_Oct_2009
Credit growth year to date in Vietnam stands at 33% through the end of October, well over the full year target of 30%. The National Assembly has been deliberating during the month on, among other things, whether to extend a second stimulus package. Concerns that excessive credit growth may re-stoke inflation and also lead to deteriorating bank balance sheets are delaying the announcement of the potential second stimulus package. However, continuing the interest rate subsidy portion of the original stimulus package has been approved, albeit with theoretically more stringent restrictions to avoid improper usage.
During October, the official USD/VND exchange rate reached over VND 17,000 for the first time. The State Bank of Vietnam announced the USD/VND average exchange rate on the interbank market on 10th October 2009 was VND 17,001. This is the record high, resulting from continuous slight increases of VND 2 3 from the beginning of September. At the end of the month, the black market VND/USD exchange rate spiked up to as much as 18,600 VND/USD by some accounts.
The stock market had an up-and-down month, finishing up just 1.1% at 587.12 after having dropped to as low as 549 and increased to as high as 624.1 at some points during the month. However, the month end sentiment was bearish. Potential reasons for the month end correction include, i) Vietnams financial markets aligning with poor global sentiment, ii) perceived drained liquidity through tougher application of the interest rate subsidy program.
Third quarter results have come out for most listed companies by end of October. Generally the results are good and many companies have achieved 80% of their earning targets for the year. Sectors which have done well are real estate, construction materials (including plastics, steel, cement) and ports. The property market has warmed up after a lack-luster 1H09 and transactions are being busily reported, especially in Northern Vietnam market. This has got some real estate companies revise up their earning targets for the year quite significantly. The port operators are still enjoying good earnings, with port fees increasing 10-15% this year, due to lack of supply.
The Food & Beverage sector continued to be steady with most companies on track to achieve their full-year earnings targets; some will also have extraordinary income from sources such as asset revaluation and financial investments. However, some may face slower sales in 4Q due to cold weather in the North (e.g. beverage), while some others may benefit from Vietnamese habbit of stocking up food for Lunar New Year (e.g. confectionery). Seafood exporters reported mixed results, with the industry leaders performing well and smaller players suffering from high cost inventory and lost markets. Pharmaceutical sector is inline although no breakthrough is expected. Auto components also did well but next quarters may be more difficult due to higher material costs.
Banks had a tough quarter as NIM dropped around 20% QoQ amidst increasing competition for funding. Insurance companies are still making losses from core business and furthermore hit by losses from bond investments in the rising yield environment. Shipping companies have done slightly better in 3Q09 compared to 1H09 but the outlook is still rather bleak as shipping rates are expected to improve only toward end 2010.
Our View – We think that the market has passed its initial recovery stage where most stocks enjoyed price appreciation. Going forward, the market will be more selective and biased toward companies with good earnings potential based on the current and near-term economic outlook. In the medium and long term, we continue to be bullish on the markets recovery and certain stocks with strong fundamentals will continue to outperform.
Source: Vietnam Asset Management, 06.11.2009
Filed under: Asia, News, Vietnam , Currency, FOREX, FX Foreign Exchange, HaSTC Hanoi Stock Exchange, HOSE Ho Chi Ming Stock Exchange, Market Analysis, Performance Report, PetroVietnam, VAM Vietnam Asset Management, Vietnam
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