December 2019

— 09.01.2020

VN Index declined 1% in December, while PYN Elite stayed rather flat -0.1%. Some observations on market:

Banks deliver strong results: Following September review in which we described banks’ strong bargaining power on bancassurance contract, TPB in November announced a bancassurance contract with upfront fee of $100m. The contract value per customer exceeded previous deals in Vietnam. TPB reported 71% YoY growth in profit before tax, driven by strong business performance and partial recognition of the upfront fee. We expect HDB to grow at least 25% YoY in PBT this year, on strong credit growth in parent bank and consumer finance. HDB is among the very few banks in Vietnam that have not signed a bancassurance contract yet, it is very likely to enter a good deal this year.

Insiders buy shares amid market weakness: in the past two months, many company insiders took advantage of weak stock market to increase ownership of their holdings. Companies’ founders, major individual owners, or strategic partners bought more shares, public companies bought back shares, and public companies did M&A or increased stake in their associates/subsidiaries. The insider buyers outnumbered insider sellers by a significant degree. Within our portfolio, CEO Group and CII’s Chairmen bought more shares and HDB and BSI did share buyback.

Temporary lack of correlation between Government Bond Yield and Index: The correlation was strong in the past. In the last bull market during May 2017 – April 2018, the 10 year Government Bond yield dropped from 6.0% to 4.2% (-30%), while VN Index rose almost 50% from 720 to 1100+; subsequently a bounce back of Government Bond yield coincided with a drop of VN Index. Since beginning 2019, the 10 year Government Bond yield again dropped 30% from 5.1% to 3.56%, but the index gained only 8%.

Solid Macro: Vietnam GDP grew 7.02% in 2019 – although the delayed approval of numerous construction projects lowered the potential of even higher GDP growth. Retail sales + 11.8% YoY, a four-year high. Full year export +8.1% YoY. Forex Reserve hit a new high $79 billion, 3.7 months of imports. Dec PMI appeared to have softened to 50.8 – but it should be temporary. The softness was caused only by production lines hiccups. The new orders expand very fast on strong customer demand.

PYN Elite Monthly Review_Dec 2019_EN.pdf


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