Vietnam Investments : Monthly Report

ECONOMY REVIEW AND OUTLOOK

Comprehensive strategic profits as exports surge

Easing the leash: monetary policy supports growth

Local heroes outshine FDI counterparts

While the Tet holiday continued to add a seasonal skew in February, the aggregated data for the first two months of the year showed promising economic indicators. Total exports rose 19.2% YoY to $59.3bn in 2M24 (Fig. 2), while imports increased 18.0% YoY to $54.5bn. Major markets where Vietnam has upgraded diplomatic relations have seen significant growth. Exports to the US and Japan surged 34% YoY and to China by 17.3%. The sustained recovery is further underscored by the PMI remaining above 50 for two consecutive months (50.3 and 50.4 in January and February, respectively), as companies received new export orders and increased hiring efforts. After Tet, many businesses announced they have orders until June 2024, especially in the textile and timber industries. This resurgence in activity extends to Vietnam's seaports, which handled nearly 112m tons of cargo, marking an 8% YoY increase in 2M24, alongside a 27% YoY increase in container cargo transports.

The growth in exports further demonstrates the effects of easing monetary policy. Fixed lending rates for new two-year loans have nearly halved from 12-14% a year ago to just 6-8% p.a. Preferential interest rate packages have also been introduced by a group of commercial and state banks. A notable example is a $20bn loan program offering preferential rates to retail and corporate clients of 4.0% p.a for short-term loans and 9% p.a for medium-to-long-term loans. A targeted $1.2bn package also aims to bolster the agricultural, fishery, and timber sectors. Additionally, the recovery of South Korea's semiconductor exports in recent months was mirrored by Vietnam's increase in exports of phones, computers and other electronic products, up 33.9% YoY (Fig. 3).

Another encouraging trend is export growth of 33.3% from domestic enterprises outpacing 14.7% from FDI companies (including crude oil). After recent upgrades to infrastructure, production processes, and ESG standards, a robust domestic supply chain is emerging, enabling more local firms to comply with stringent rules of origin and gain access to more markets. Exports to Africa, West Asia, Eastern Europe, and North America grew by single digits in the first two months of the year. The solid growth of domestic businesses helps reduce Vietnam's reliance on FDI. Furthermore, domestic retail sales grew 5.0% YoY in 2M 2024, driven by holiday demand and tourism, indicating a recovery in domestic consumption. FDI showed continued strength, however, with registrations in 2M 2024 up 38.6% YoY to $4.3bn. Among the countries investing in Vietnam in the first 2 months of 2024, Singapore accounted for nearly 50% of registrations. Disbursement over the same period reached $2.8bn, up 9.8%, while February alone saw a record $1.3bn disbursed.

Fig. 1

ECONOMIC FORECASTS

Fig. 2

EXPORTS REBOUNDED IN 2M 2024

70

60

50

40

30

20

10

0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Jan-18

LENDING RATES DROPPED SHARPLY

Nov-18

Sep-19

Jul-20

May-21

Mar-22

Jan-23

Nov-23

Sources: Bloomberg, GSO

UCITS HAVE NO GUARANTEED RETURN AND PAST PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE

1

MARKET REVIEW AND OUTLOOK

VNI rides liquidity wave to climb 6.6%

Low rates and government initiatives drive market returns

Foreign outflows shift down a gear

FTSE EM upgrade could be a small slice of a large pie

The VNI concluded February on a positive note, climbing 6.6% MoM (TR$) to 1,252 and surpassing last year's high of 1,245. Activity was muted leading up to the Tet holiday in early February, but average daily turnover increased significantly from 15 February when the market reopened. This led to a 24.8% MoM increase in liquidity, reaching $848mn/day.

Equities continue to offer an appealing alternative to fixed-term deposits, with current 12-month deposit rates averaging 4.7% vs. the 2023 peak of over 11%. Sector inflows were seen in IT (+13.1%), exports (+10.9%), materials (+9.6%), and banks (+9.1%). Export companies such as garment producer TNG Investment and Trading reported they were starting to rehire with an order backlog into 3Q24, and fishery exporter Vinh Hoan Corporation was propelled by news of rising average sales prices, with the Red Sea shipping crisis so far having limited impact. The materials sector was led by Hoa Phat Group after the Ministry of Finance reported a 21.8% YoY increase in domestic investment and development spending to $2.4bn in 2M 2024. This push is set to invigorate the materials sector, spurred by increased demand from infrastructure initiatives.

While February's performance paints an optimistic picture, the continued net outflows from foreign investors, totalling $1.1bn since January 2023, underscores the broader global economic uncertainties impacting investor sentiment and market stability. However, recent trends in foreign flow show potential signs of improvement, dropping to ~100m YTD after net outflows peaked in December 2023 at over $400mn. The VNI's valuation remains attractive with a 2024F PE of 11.4x, compared to its ASEAN peers Thailand (16.0x), Malaysia (14.1x), Indonesia (13.0x), and the Philippines (12.6x).

Prime Minister Chinh chaired a conference for developing the stock market alongside the MoF, SBV, major state and commercial banks, and listed companies. It laid out a strategy to elevate Vietnam to FTSE's secondary emerging market status by 2025. Our analysis suggests around $700-$800bn is currently benchmarked against this index. Should Vietnam secure inclusion, its share of this investment pool could represent 0.2%, equivalent to an inflow of approximately $1.4bn. Such efforts are complemented by initiatives such as the new Korean trading system, which HOSE began testing at the beginning of March and is targeting for implementation in 2024.

Sources: Bloomberg, Credit Suisse / Refinitiv - all adjusted for free float

VIETNAM ENTERPRISE INVESTMENTS LIMITED - VEIL

VEIL increased by 6.2% in February with all of the portfolio's top ten holdings ending the month positively. Standout contributions continued to come from the banking sector, IT, and a strong performance from top holding Hoa Phat Group.

VEIL's strategic 5x overweight position (2.5% vs 0.5% of the Vietnam Index) in real estate developer Khang Dien House ("KDH"), up +12.1% MoM, aligns with our projection of a sector recovery. KDH's performance was in part due to the recent amendments to the Land Law, which prioritises developers with ready land banks for project approvals. With one of the largest land banks in HCMC, KDH is well-positioned to lead the sector revival. These comprise five short-to-medium-term projects totalling ~1,400 apartments, a 110ha industrial park extension starting in 2025, and a major 329ha mixed-use project starting in 2026.

The banking sector's performance has maintained its momentum following a robust showing in January. ACB has increased 17.2% YTD, bolstered by growing investor sentiment after recording the highest 2023 ROE among its peers of 24.8% and 4Q23 credit growth of 17.2%, well above the 13.7% industry average. ACB's strategic pivot towards more sustainable SME and household lending is set to catalyse a projected 18% growth in NPAT and EPS for 2024.

Sentiment improved for HPG after announcing investor visits to its new hot rolled coil (HRC) plant set for launch by early 2025. HRC is the company's most profitable line, and this expansion is set to increase HRC production from 3.4mn to 8.0mn tons over the next 12-24 months. In 2M 2024, HRC volume grew by 99% YoY to 542k tons due to rising demand, helping total sales rise 26.9% YoY to 1.3m tons. Exports surged to 181k tons, an increase of 112% YoY due to a low base effect in early 2023.

The Government's tech drive includes a programme for IT enrolment and it is yielding tangible benefits, particularly for IT services company FPT. Management reported recruitment is becoming easier and plans to hire up to 6,000 engineers this year, doubling the 2023 figure of approximately 3,000. This is underpinned by an anticipated 22-25% growth in global IT revenue for 2024, with Japan projected as the fastest-growing market at 35%. FPT's recent acquisition of Next Advance Communications, a Japanese IT services firm, is a strategic move that establishes a solid foothold in Japan and sets a clear path towards achieving its $1bn revenue target in Japan by 2027 from the 2023 figure of $388mn, approximately 38% of its global IT revenue.

PRICE AND NAV DATA

NAV PERFORMANCE (in $ terms)

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

-20.0

1M

3M

YTD

1Y

3Y

5Y

10Y

TOP TEN HOLDINGS (60.0% of NAV)

DISCOUNT TO NAV

20 % 10 0

(10)

(20)

(30)

(40)

(50)

Jan-05 Jun-07 Nov-09 Mar-12 Aug-14 Dec-16 May-19 Sep-21 Feb-24 3

APPENDIX 1: MACRO

Key Indicators

Item

Unit

2017

2018

2021	2022E	2023E	2024F
366.1	408.8	430.0	463.0
2.6	8.0	5.1	6.0
1.2	10.0	6.9	8.0
2.9	3.4	2.6	2.8
4.1	7.8	3.5	5.0
-3.8	10.2	8.3	8.5
1.8	3.2	3.3	4.0
14.8	14.5	8.9	6.2	10.0	11.5
9.7	8.6	8.5	13.7	8.7	8.2
1.9	1.1	0.9	4.7	1.6	1.4
23,150	23,085	22,800	23,550	24,250	25,000
3.3	12.4	28.0	29.3
-7.8	-1.5	17.4	20.7
-2.1	-0.4	4.0	4.5
38.5	27.7	36.6	38.0
19.8	22.4	23.2	24.2
106.5	85.0	89.0	100.0
138.8	141.2	138.0	140.3
47.9	48.8	44.4	44.5
90.9	92.4	93.6	95.8
37.9	34.5	32.1	30.3
-4.0	-3.6	-4.0	-3.6

2019

2020

GDP

Real GDP Growth

Services Growth

Agriculture Growth

Ind'l and Const'n Growth

Retail Sales Growth

$bn % % % % %

281.4

310.1

334.4 346.6

6.9

7.5

7.4 2.9

7.4

7.0

7.3 2.5

2.9

3.8

2.0 2.8

8.0

8.9

8.9 3.3

10.9

11.7

11.8 2.6

Prices

CPI (Average YoY)

%

3.5

3.5

2.8

3.2

Money, FX & Interest RatesMoney Supply M2

Average Lending Rate

% % % $1

15.0 12.4

9.3 9.5

5-yr VGB

4.3 4.5

VND : $

22,750 23,235

External SectorTrade Balance

Current Account

Current Account / GDP

FDI Registered

FDI Disbursement

FX Reserves

$bn $bn % $bn $bn $bn

2.1

6.8

10.8 19.9

-1.6

5.8

12.2 15.1

-0.6

1.9

3.6 4.3

35.9

35.5

36.0 28.5

17.5

19.1

20.4 20.0

52.0

61.0

80.0 98.0

Public Debt & Fiscal BalanceExternal Debt

Government

Enterprises (incl. FDI)

External Debt (% GDP)

Fiscal Balance (% GDP)

$bn $bn $bn % %

109.2

112.1

122.8 130.1

46.3

47.0

47.7 49.0

62.9

65.1

75.0 81.1

38.8

36.2

36.7 37.5

-2.6

-2.9

-2.6 -3.4

APPENDIX 2: MARKET

Key Stock Market Data

HSX	HNX	UPCoM	Total
28-Feb-23	29-Feb-24	28-Feb-23	29-Feb-24	28-Feb-23	29-Feb-24	28-Feb-23	29-Feb-24
Market Cap ($mn) Number of Stocks Number of Large Cap Stocks (>$400mn) Stocks with No Room for Foreigners Market Cap of Stocks with No Room ($mn) Share of Market Cap with No Room (%)	171,799 402 59 57 27,305 15.9	205,622 396 71 65 29,262 14.2	10,789 342 6 80 2,056 19.1	12,893 322 11 94 1,865 14.5	41,027 857 15 204 10,346 25.2	47,029 870 17 253 14,827 31.5	223,616 1,601 80 341 39,707 17.8	265,544 1,588 99 412 45,954 17.3

1,588 99 412

Top 25 Companies

29-Feb

Price	Mkt	Wt	PER	PBV	Yield
No	Company	Price	YTD	Cap	in VNI	2022	2023	2024F	2022	2023	2024F	2022	2023	2024F
(VND)	(%)	($mn)	(%)	(x)	(x)	(x)	(x)	(x)	(x)	(%)	(%)	(%)
1	Vietcombank	97,300	21.2	22,062	10.80	14.4	15.6	16.6	2.8	2.7	2.7	-	-
0.9
2	BIDV	53,000	22.1	12,257	6.00	14.1	15.2	15.3	2.0	2.1	2.3	-
0.2	0.1
3	Vietinbank	35,550	31.2	7,745	3.80	9.2	8.4	10.5	1.2	1.1	1.3	-	-
2.9
4	Vinhomes	43,400	0.5	7,667	3.70	7.2	5.7	5.4	1.4	1.1	0.9	-	-
4.5
5	Airports Corporation VN	83,200	26.1	7,348	-	29.0	18.9	19.0	4.2	2.8	2.8	-	-	-
6	Hoa Phat Group	31,000	10.9	7,313	3.60	12.6	24.3	15.0	1.1	1.6	1.6	2.2	-	1.3
7	PV Gas	77,400	2.5	7,212	3.50	12.9	15.3	16.5	3.1	2.7	2.6	3.0
4.1	3.9
8	Vingroup	45,000	0.9	6,980	3.40	23.4	82.7	57.1	1.9	1.4	1.5	1.7	-	-
9	VP Bank	19,900	3.6	6,405	3.10	6.3	15.2	10.5	1.2	1.1	1.1	-	5.2	2.8
10	Vinamilk	72,000	6.5	6,105	3.00	20.1	17.8	18.1	5.1	4.5	4.7	5.8
5.1	5.4
11	Techcombank	42,200	32.7	6,030	2.90	4.7	6.4	6.8	0.8	0.9	1.0	-
0.1	3.6
12	FPT	109,000	13.4	5,616	2.70	17.0	20.7	19.4	3.9	4.9	4.6	2.4	2.8
2.6
13	Military Bank	24,150	29.5	5,108	2.50	4.5	4.8	5.3	1.0	1.0	1.1	-	2.3	-
14	ACB	28,000	17.2	4,412	2.20	5.3	5.9	5.8	1.2	1.3	1.2	-	1.7
3.6
15	Masan Group	70,400	5.1	4,087	2.00	37.1	229.0	71.2	5.1	3.6	3.4	0.3	1.2
1.0
16	Sabeco	58,500	-4.9	3,044	1.50	20.1	19.6	17.8	4.5	3.3	3.0	2.3	4.2
4.8
17	Mobile World	46,200	7.9	2,741	1.30	15.2	373.3	23.4	2.6	2.7	2.6	1.2	1.2
1.1
18	HD Bank	23,300	14.8	2,734	1.30	4.9	5.8	5.5	1.0	1.3	1.1	-	4.3	-
19	Becamex IDC	63,300	0.6	2,658	1.30	48.8	26.7	30.9	4.9	3.6	3.3
0.9	1.6	1.1
20	Binh Son Refining	19,900	7.0	2,503	-	2.7	6.8	10.7	0.8	1.0	1.0	3.8
3.3	5.0
21	Vincom Retail	26,500	13.7	2,443	1.20	21.5	12.0	12.9	1.8	1.4	1.4	-	-	-
22	Sacombank	31,550	12.9	2,413	1.20	8.4	6.8	5.8	1.1	1.2	1.0	-	-	-
23	Vietjet Air	103,100	-4.5	2,265	1.10	0.0	170.5	110.5	4.0	3.7	3.3	-	-	-
24	VIB	21,900	15.0	2,254	1.10	4.4	5.8	5.4	1.1	1.3	1.2	-
6.4	6.5
25	SSI	37,000	12.8	2,250	1.10	15.4	21.9	20.4	1.1	2.1	2.2	3.8	3.0	-

Price Providers

Funds

Bloomberg

ReutersContact

Jefferies International

VEIL

JCEF

n/a

Michele White / Trevor Hunt [phone]

SEI Investments

VEF

-

-

Transfer Agency [e-mail]

Operational VEIL

Trading Clearing Settlement Shares trade as depositary interests on the London Stock Exchange CREST Participant ID 393 (UK Equity) Legal Entity Identifier (LEI) BIC Code: JEFFGB2X 213800SYT3T4AGEVW864

VEF

Subscription & Withdrawals Daily

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VDeF
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UCITS HAVE NO GUARANTEED RETURN AND PAST PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE