April 2019

VN Index moved sideways in April – utility stocks surged on rising oil price, banks weakened as investors are yet to fully digest SBV’s new policies. PYN Elite slid -2.8%, due to no energy stock while overweight of financials.

S&P raised Vietnam’s country rating for the first time after nine years. Our bank stocks TPB, HDB and STB aim to grow net profit by 42%, 27% and 18% YoY.

However, good news was overshadowed by central bank policies. Previously, the consumer finance (CF) companies had been given relatively free reign to operate their business as they see fit. Lately, SBV proposed a draft circular which sets a ceiling of CF companies’ exposure to riskier cash loans and strict qualifications of borrowers. Market considers the draft negative for CF sector. We see the draft disproportionally affect lenders with large cash loan portfolio and loose underwriting policy. HDB’s CF subsidiary runs the most conservative business and no need to change its model.

In another draft, SBV seeks to modify calculation of credit limit and mortgage risk weighting, and lower ratio of short-term funds for long-term loans. Some investors consider the draft tightening. In reality, banks that meet SBV requirements (Basel II, ST funding ratio, etc) can get much higher credit growth quota. TPB expect credit growth quota of 20-30% as it adopted Basel II in April and is on track of meeting other ratios early, while many other banks credit growth are capped at 13-14%.

Daily trading value dropped by half during 4M2019. It is unusually low and we expect it to rebound. For the past 2 years, the whole Vietnam’s market cap grew from $100 billion to $190 billion, driven by more listings; but in the meantime trading value is only up 13%.

Macro: in April, Vietnam PMI accelerated to 52.5, export +7.5%, IIP +9.3%; Passenger car sales surged 43.3% in 1Q2019; Retail sales +12% in 4M2019. Foreign reserve reached record high of $66 billion (3.1 months of imports). Registered FDI + 29%, and China jumped to the biggest FDI investor in the context of US-China trade war tension.

PYN Elite Monthly Review_Apr 2019_EN.pdf