Market Update - It became obvious this month that China is set to embark on a new phase in its growth story. The move to end the Yuans dollar peg indicates the start of global trade rebalancing that the west has been craving. This, combined with wage hikes provoked by labor unrest, marks the beginning of the end of China’s low cost production advantage. As China’s primary growth driver moves towards cultivating domestic demand, Vietnam is ideally positioned to take advantage.
Vietnam’s economic indicators in June were largely in line with expectations suggesting continued stability in Vietnams macro environment. Vietnam experienced 6.1% GDP growth in H12010, with the government’s full year target of 6.5% looking realistic. Inflation for the month was 0.22% bringing year to date inflation to 4.43% or 8.69% year on year. This relatively low trend of inflation facilitated the government’s action to instruct banks to cut lending rates to 12-12.5% from the previous level of 13%-14% to help boost further economic activity. Meanwhile the trade deficit stood at US$1.2bn for June and $6.7bn for H12010, which constitutes 20.9% of export turnover against the government target of 20%. Stable disbursed FDI in H12010 reaching US$5.4bn helped improve the balance of payments for this year and the exchange rate is expected to be stable for the rest of the year.
he VN-Index had a largely uneventful month, opening at 507.14 on June 1st and closing at 508.68 at month end. Stocks with the largest fluctuation belong to the construction materials, transportation, and materials industries. That being said, average daily trading value in June remained high at roughly US$140 million for the HOSE and the HXN combined, compared to US$170 million recorded in May.
Our View – Toward the end of June, Vietnam equity market welcomed several pieces of good news including: increased FDI and FII, improved export to the U.S., increased world coffee prices, and increased agricultural output.
For July, we expect the stock markets to have more action as a result of (1) the release of 2Q2010 financial results, (2) easing of monetary policy, and (3) world stock market sentiment spillover effect. Specifically, at the end of June, as inflationary pressure eased, SBV pushed the state-owned banks to announce a cut of short-term lending rate to 12% and deposit rate to 11%. In addition, U.S and E.U. markets are also expecting 2Q2010 financial results, and Vietnamese investors will watch the global stock indexes closely. We are also monitoring corporate profits closely as we think first half results will be a good indicator for full-year performance. The industries that are of our interest at this point are consumer goods, oil and gas, ports, materials, and pharmaceuticals.
Source:VAM, 09.07.2010
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