November was dominated by the State Bank of Vietnam announcing a slew of new measures in a proactive attempt to put a halt to feared emerging macroeconomic imbalances. The measures include:
- A one off VND devaluation of roughly 5.4% in the VND/USD reference rate effective on 26 November 2009, combined with a reduction in the official forex trading band over the reference rate from ±5% to ±3;
- A 1% base rate hike from 7% to 8% effective on 1 December 2009;
- Potential mandatory purchases of USD from State-Owned Enterprises (SOEs) and other exporters.
The VND devaluation signals that the SBV is moving towards a more free floating currency regime as the new rate should theoretically allow the official forex traders to come in line with rates in the black market easing USD demand concerns. It will also help ease potential balance of payment issues as the trade deficit in the first 11 months of this year is estimated to have reached USD10.3 bn. The interest rate hike is an effort to ease credit growth, which stood at 33% YTD through October, 3% higher than the Governments full year 30% target. High credit growth, increasing commodities prices, and base effects led to an increase in the YoY inflation rate from 3% in October to 4.4% in November, and the Government does not intend to make the mistake of allowing runaway inflation again. The third measure will help to improve USD liquidity and hopefully alleviate forex concerns. VAM Monthly News Letter November 2009
On a positive note, Novembers macroeconomic indicators demonstrate Vietnam is still in a strong recovery phase. YTD retail sales and industrial production growth rates when compared to the same period last year are 7.3% and 18.5% respectively. Exports improved slightly from -13.8% YTD growth in October to -11.6% in November, although the trade deficit for November is once again estimated high at nearly US$2bn.
The market was expectedly down for the month finishing at 504.12, or -14.1% MoM. Main reasons for the market negative reactions during the month were the Governments announcement at the beginning of the month of cracking down on improper usage of the interest rate subsidy program that was entering into the equity market; the SBVs announcement of the new measures toward month end; and the looming debt crisis in Dubai which has spooked global investors.
Our View – In the current environment, we expect companies with hard currency revenues and local cost base, such as aquaculture exporters, to do well. On the contrary, importers and manufacturers with imported inputs serving the local market will have difficulties maintaining their margin in the face of the VND depreciation. Also, the recent interest rate hike is sparking some fear about further tightening, especially when inflation has been creeping up. The 30% credit growth cap is another concern not only for banks performance, but also for the private sector, which often faces funding road blocks when tightening occurs. We are cautious about companies with high leverage as they would be the first casualties in a rising interest rate environment. These include companies in the high-capex industries, namely Cement, Shipping, Rubber tyres, Real estate, and Oil & gas. We much prefer companies that have little or no debt
Sector Valuation Table
|
Industry group
|
Weight %
|
1M %
|
3M %
|
YTD %
|
2009PE
|
2010PE
|
2011PE
|
2014PE
|
P/B
|
Dvd Yield
|
ROE
|
Gross Margin
|
Op Margin
|
Net Margin
|
Net D/E
|
|
Vietnam Market
|
100.0%
|
-24.1%
|
-23.4%
|
15.0%
|
15.6
|
14.6
|
12.3
|
8.1
|
3.2
|
2.2
|
20.5
|
34.4
|
24.8
|
26.3
|
1.9
|
|
Automobiles & Components
|
1.4%
|
-17.0%
|
16.3%
|
283.8%
|
10.6
|
11.4
|
8.7
|
3.5
|
4.9
|
0.4
|
38.1
|
18.5
|
11.0
|
8.5
|
1.1
|
|
Banks
|
24.4%
|
-25.4%
|
-29.0%
|
26.5%
|
12.7
|
11.7
|
10.2
|
6.8
|
2.1
|
1.8
|
13.4
|
41.1
|
30.6
|
22.6
|
6.6
|
|
Capital Goods
|
4.1%
|
-19.1%
|
2.6%
|
116.0%
|
11.6
|
11.4
|
10.4
|
7.6
|
3.4
|
2.9
|
28.8
|
30.5
|
20.5
|
18.3
|
0.4
|
|
Commercial Services & Supplies
|
0.2%
|
-29.2%
|
4.9%
|
51.6%
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Consumer Durables & Apparel
|
1.1%
|
-13.5%
|
-16.6%
|
43.7%
|
13.2
|
14.0
|
12.2
|
9.3
|
2.6
|
1.7
|
17.6
|
5.5
|
3.0
|
2.0
|
-0.2
|
|
Consumer Services
|
2.1%
|
-14.3%
|
-36.0%
|
-15.8%
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Diversified Financials
|
5.4%
|
-29.1%
|
-11.2%
|
119.2%
|
18.8
|
19.9
|
18.3
|
13.5
|
2.3
|
-
|
13.6
|
32.5
|
24.8
|
119.7
|
-0.3
|
|
Energy
|
5.6%
|
-12.4%
|
-12.7%
|
2.2%
|
12.7
|
10.8
|
11.1
|
7.4
|
4.1
|
3.1
|
31.1
|
25.7
|
20.7
|
16.0
|
1.6
|
|
Food, Beverage & Tobacco
|
10.3%
|
-11.0%
|
-36.4%
|
17.4%
|
12.1
|
11.6
|
10.3
|
7.0
|
4.8
|
3.2
|
33.9
|
32.6
|
18.4
|
19.9
|
-
|
|
Household & Personal Products
|
0.2%
|
-19.4%
|
24.8%
|
67.1%
|
37.8
|
23.1
|
19.2
|
7.8
|
0.8
|
1.1
|
3.6
|
23.8
|
7.1
|
3.0
|
1.0
|
|
Insurance
|
6.6%
|
-25.5%
|
-31.0%
|
-36.0%
|
20.1
|
16.8
|
14.8
|
10.0
|
1.7
|
3.6
|
8.7
|
24.5
|
2.0
|
9.5
|
-0.9
|
|
Materials
|
9.6%
|
-20.7%
|
-17.9%
|
35.0%
|
10.7
|
10.8
|
9.6
|
7.8
|
3.5
|
2.8
|
26.1
|
28.1
|
22.6
|
21.5
|
-0.2
|
|
Pharmaceuticals & Biotechnology
|
1.5%
|
-18.2%
|
-8.3%
|
10.3%
|
18.9
|
10.7
|
9.1
|
4.9
|
3.6
|
2.1
|
17.4
|
44.4
|
10.7
|
8.7
|
-0.2
|
|
Real Estate
|
17.8%
|
-28.5%
|
-1.7%
|
8.3%
|
28.0
|
26.5
|
19.0
|
11.3
|
4.5
|
0.8
|
21.7
|
48.3
|
41.1
|
33.5
|
1.3
|
|
Retailing
|
3.8%
|
-15.1%
|
-12.1%
|
41.7%
|
12.3
|
11.3
|
10.4
|
6.1
|
3.7
|
2.6
|
26.8
|
11.3
|
6.8
|
4.8
|
-
|
|
Transportation
|
2.2%
|
-21.8%
|
-1.4%
|
120.9%
|
13.6
|
16.4
|
17.8
|
7.2
|
1.8
|
1.0
|
13.4
|
21.0
|
16.2
|
12.7
|
0.5
|
|
Utilities
|
3.7%
|
-28.7%
|
8.9%
|
70.5%
|
7.9
|
7.1
|
6.1
|
6.3
|
1.6
|
5.9
|
19.9
|
40.6
|
38.7
|
39.8
|
0.5
|
* The Sector valuation table is calculated by VAM in-house Company Analysis System VCAS.
** Vietnam Market comprises of both the Ho Chi Minh Stock Exchange (HoSE) and the Hanoi Stock Exchange (HNX).
Source: VAM, 07.12.2009
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Filed under: Exchanges, News, Risk Management, Vietnam, Exchanges, HaSTC Hanoi Stock Exchange, HOSE Ho Chi Ming Stock Exchange, Index, Market Analysis, VAM Vietnam Asset Management, Vietnam
