November 2018

— 03.12.2018

By end Nov, VN Index has lost -23% from its peak in April, while PYN Elite has declined -16%. Bank Sector has lost on average -35% from its peak. The underperformance was mainly due to the credit growth had been capped for this year by SBV.

I just paid a visit to 10+ banks and consumer finance companies in Vietnam. Since earlier prudent measurements, in November inflation took some pressure off and SBV granted additional 1-6% credit growth quota to many banks after consideration of each bank’s capital strength, loan size, and merger history. State banks and weak banks didn’t get quota top-up. Most banks consider macro environment favorable. Banks are optimistic on fee income in the following years, guiding a 20-40% YoY growth. Banks are also on track of adopting Basel II and meeting other requirements by SBV.

Consumer finance (CF): after a sloppy 2018, companies estimate the sector growth will be revived to 20%-25% in 2019. While some companies got into trouble by venturing into risky cash loan aggressively, the risk is contained at a product level. HD Bank holds a strong position in the safe traditional CF lending (loan for electronic products and motorbikes). Leading sell-side analysts recently changed their view and consider HD Saison’s business model superior than its peers. TP Bank has strong and solid position in car leasing.

Vinaconex – VCG – achieved a milestone in November. The long-awaited state divestment was very successful: SCIC sold their whole 58% stake via auction with winning bidding price 28,900/share (56% higher than then market price). The sales proceeds had been paid in full. Viettel divested their 21% stake in VCG at price 21,300/share. The auction drew wide media coverage to VCG’s hidden assets and growth potential. Our fund has 7.5% stake in VCG and is the only sizeable foreign shareholder in VCG currently. Therefore, our stake has attracted interests from local investors.

Macro: Vietnam PMI marks strongest growth to 56.5 in November. Retail sales +12.2%, IIP +10.1%, foreign tourists +21.3%. PM estimates full year GDP growth to be 7%, exceeding government target of 6.8%.

PYN_Elite_Review_Nov_2018.pdf