The VNIndex has made a significant comeback, increasing nearly 12%, from its July 12th low of 884.75 points. We are now at 8bps away from the 1,000 threshold. For the week, the VNIndex increased 2.32% on relatively strong liquidity to close at 991.34 points.
Foreign activity improved compared to the previous week, as their trading activity increased to 17.2% of total trading compared to only 11% last week. They turned net buyers for the week (worth USD44.6mn).
Vietnam has emerged as China’s third most popular tourist destination, after Thailand and Japan which received 9.8 million and 7.4 million tourists respectively in 2017. Last year, Vietnam welcomed four million Chinese tourists, accounting for 30% of the total arrivals.
As many as 10 airlines operating on 30 routes bring Chinese tourists to Vietnam, with up to 500, mainly chartered, flights per week. In the first half of 2018, 2.5 million Chinese tourists visited Vietnam, representing a 36 per cent year-on-year increase. Top beneficiaries of this trend should be ACV, AST, and VJC.
On a somewhat related note, Vietnamese Deputy Prime Minister, Mr. Vuong Dinh Hue recently instructed the State Bank of Vietnam, the Ministry of Finance and relevant government agencies to crack down on the use of Chinese electronic wallet services, such as WeChat Pay and AliPay by Chinese tourists. The government is concerned that the use of such payment methods, through which the transactions, conducted between Chinese bank accounts of Chinese tourists and business owners, can circumvent Vietnam’s banking system and national regulations, leading to loss of tax revenues and other potential problems.
Uncertainty around the US-China trade continues as the US administration sends mixed signals about holding trade talks. Chinese officials said they have grown wary of the Trump administration’s unpredictable decision-making process and may be hesitant to accept without a clear sign U.S. negotiators have authority to speak for the president.
In his latest tweet, President Trump seems to indicate that he has the Chinese exactly where he wants them, but so far, there is no word on potential high-level talks.
Oil has rallied since the lows of August as concerns over global supplies outweighed growing fears of EM contagion and uncertainties around the effect of Trump’s trade war with China on energy consumption. World spare capacity, including those of OPEC and Russia, is likely to be lower than what the market has historically needed to avoid price volatility. This all could likely support prices for the time being which could make its way into inflation prices in Vietnam.
The World Economic Forum on ASEAN was held this week in Hanoi. At a session on digital markets and global opportunities one of the speakers said that Vietnam’s e-commerce sector is growing at a rate of 35% a year and predicted to be worth USD10 billion by 2020. While the foundations are in place, with communication infrastructure covering almost 90 percent of the country, internet users still only make up around 55% of Vietnam’s population. Once internet penetration is achieved across the region, the next step is for owners of SMEs to learn how to move their business from offline to online. Top beneficiary of this trend should be YEG.
The Hanoi Stock Exchange (HNX) announced it will hold an auction for the shares of Military Commercial Joint Stock Bank (MBB) owned by Vietcombank (VCB). Specifically, 53.4 million shares of MBB will be offered on HNX. The starting price is 19,641 VND/share. At that amount Vietcombank is estimated to earn about VND1,050 billion. MBB shares have fallen 0.66% to VND22,650 today.
Analyst Pinboard
Currencies and contagion
- Sharp weakness in many emerging market currencies in the past few months has brought back the old fear of contagion to smaller equity markets globally.
- Collateral damages to these countries’ stock markets are substantial, not just because of the percentage loss they have suffered, but to the negative sentiment it sends to investors.
- Emerging and Frontier equity markets have done very poorly, in USD terms, in 2018. This is normal.
- The MSCI World is up 3% ytd while the MSCI Emerging Market and the MSCI Frontier Market are down 10% and 16% respectively.
- Contrarians will be glad to say that this is the time to buy some of these currencies and/ or markets.
- We did not mention the Venezuelan Bolivar, which has gone to around 3000 per USD at the beginning of the year to 0.25 million now!
Yeah1 Group Corporation (HoSE: YEG) – New business needs time to be proven feasible
- In 1H18, YEG almost doubled its revenue and tripled its NPAT YoY, fulfilling 42% of revenue and 54% of profit according to the 2018 plan.
- Regarding Media Commerce, YEG has recently made a joint venture with AKS Japan to introduce SGO48 – a “sister” group of AKB48, the famous Japanese idol girl group.
- By doing this, YEG aims to become an artist management company.
- On the other hand, the digital media market lately saw the entering of Facebook – the social network giant who is aggressively looking to compete with Google in digital advertising. As such, YEG will benefit from the competition as it has more place to spend its huge advertisement inventory as well as enjoy a higher CPM (cost per 1000 impressions).
- Digital advertising is still a new market in Vietnam and has a lot of growing potential.
Tile Market – Competition and Competition
- Domestic manufacturers are facing two major difficulties: Smuggled or tax-loophole tiles from China and Product differentiation and marketing to customers
- China has been going through booming decades of development and industrial transfers. Its economy is now entering a new ‘normal state’.
- That is to say, China’s tile market is facing oversupply, putting pressure for companies to export.
- Differentiation between products is another issue. Most of tile products are distributed by retail channels with various patterns and designs. Tile manufacturers are going to face difficulties due to the oversupply and unclear demand from the construction market in the near term.
Asia Commercial Bank (HNX: ACB) – Not Jack of All Trades
- ACB has high quality assets, strong capital adequacy and liquidity
- Expanding sources of incomes while decreasing provision expenses will boosts earnings growth
- ACB has focused on retail banking, with Future Bank project
- After more than five years of solving its legacy issues, ACB almost finished its restructuring plan. For the longer term, ACB will focus on the ‘Future Bank’ project. The pillars which the bank will focus on include:
o Investment in technology, branding, and human resources
o Digitalization: Launching new ACB app, aiming to improve efficiency rather than to increase income
o Focus on Big data to capture more clients.
- By restructuring its loan book toward high interest rate loans, ACB’s NIM will be kept at current level.
- ACB paid a 15% stock dividend for 2017 in 2Q 2018. For 2018, the bank will pay a 30% stock dividend.
The Highest Trade Surplus in the History of Vietnam
- In the first eight months of 2018, the trade surplus reached USD 4.7billion, never seen in the history of Vietnam.
- In August, Vietnam’s trade surplus reached USD 2.2 Billion, as opposed to GSO’s forecast of minus USD 100 Million. While export revenue stood at USD 23.5 Billion, import only rose USD 1.6 Billion.
- There are at least three reasons explaining this: (1) Vietnam has been benefiting from tech giants, specifically Samsung, (2) Vietnam’s agriculture exporters are having a good year as production of key goods and (3) Domestic manufacturing is quietly replacing imported goods.
- Obviously, a possible stronger current account will reinforce Vietnam’s resistance to external risks.
- We expect that the Dong depreciation is limited to 3% this year. Now, it is 2.6% YTD!