October 2018

— 01.11.2018

In October, the global stock markets continued to face with turbulence and strong sell-offs in the Chinese and US exchanges. Vietnam’s stock market was not immune to volatility, VNIndex lost 10.1% MoM, a bit less than its sharp drop of 10.6% in April after reaching this year’s YTD high. Investor sentiment was hurt by fear over the escalation of the trade war, oil price fluctuations, interest rate hike and the withdrawals of foreign capital flows from frontier and emerging markets. PYN Elite NAV retreated 8.1%, mainly due to the correction of HBC, HDB and MWG.

However, positive quarterly earnings helped ease the tension although the impact was less than usual as VNIndex has recently become more correlated with the global events. As of November 2, 622 companies on HOSE and HNX have released their numbers. Overall 9M net profit growth was robust at 28% YoY.

Our top holding, MWG, reported excellent 9M results with revenue up 37% YoY and net profit up 34% YoY, in line with our expectation. The stock has corrected in October, amid a fairly strong rally since mid-August, but its valuation looks very attractive at this moment with 2019 P/E of 11x.

Vietnam’s macro picture remains positive. 10-month disbursed FDI was reported at USD 15.1 bn, up 6.3% YoY. The October’s Nikkei PMI strongly rebounded to 53.9 after hitting 51.5 in September. Real retail sales growth was healthy at 9.3% YoY. The USD/VND exchange rate moved calmly compared to regional currencies despite higher volatility. Moody’s continued to upgrade the credit ratings for 12 Vietnamese banks.

Vietnam has witnessed an increase in export orders in certain industries including wooden furniture, garment and textile. There is also a slight threat that Vietnam could become President Trump’s next target after China deal is done, which must be kept in mind, to dampen the benefits from China – US trade war for additional export orders. However, in medium-term, the country is likely to be a beneficiary of the trade war as manufacturers continue to shift its facilities to Vietnam. Good also to note, that Vietnam is one of the most open economies in the world by trade tariffs. Together with controlled inflation and strong foreign reserves, we believe that Vietnam will maintain its advantages compared with other emerging countries.

The government is circulating the draft of a new Securities Law for comments. Market attention has been drawn toward the change in foreign ownership limit, which would loosen the limit and allow 100% for all listed companies, except those in restricted sectors. This law is likely to be passed by the National Assembly in 2019 and will become effective from January 2020.

PYN_Elite_Review_Oct_2018.pdf