In October, the arrest of unlisted real estate (RE) developer Van Thinh Phat (VTP) Chairwoman and unlisted bank SCB’s involvement in its illegal issuance of multi-billion dollar worth of corporate bonds cast a shadow on Vietnam’s stock market. VN-Index tumbled 9.2% MoM and 31.4% YTD, while PYN Elite NAV -10.5% MoM and -36.1% YTD. PYN Elite has also been dragged down by an 8% Dong devaluation YTD. Currently, Vietnam’s C-Bond market is frozen, and the government needs to work hard to bring back the confidence among retail bond investors. Market sentiment improved a bit in late October as the banks released stellar Q3 earnings growth, but the forced selling of assets related to the weakest RE companies is still causing pressure on all prudent RE companies and banks, even though it turned out that none of the listed banks has exposure to VTP corporate bonds/loans.
Macro: Following the rate hike in September, the SBV raised policy interest rates by another 100 bps in October and widened the USD/VND trading band from 3% to 5%. It is important to note that the SBV’s aims were to reduce external pressure on the dong vs. USD rather than taming inflation – which is broadly under control at 4.3% YoY in Oct. Meanwhile, the domestic economy remains in good shape: Oct. retail sales +17.1% YoY, IIP +6.3% YoY, disbursed FDI +8.1% YoY. YTD trade surplus jumped to $9.4 bn vs. $0.6 bn deficit in 10M21. We are anyways expecting Vietnam’s exports to weaken, caused by weakening demand from the EU and US.
PYN Elite Stock of the Month: VRE
Leading mall operator VRE’s 9M22 earnings jumped 63% YoY, as the company no longer has to support its tenants by rental cuts like it did in 9M21 during the Covid lockdown. Q3 footfall +8% QoQ, marking the 4th quarter of improvement in a row, while occupancy rate rose to 84% in Q3 vs. 82.5% in Q2. Big brands accelerated their store expansion plans in VRE’s mall system, while rents at its CBD-area malls saw double-digit growth vs. pre-Covid levels thanks to surging demand. Following the success of 3 mall openings in 2Q22, VRE plans to launch 6 new malls in 2023, increasing total GFA by 10% YoY to 1.9 million sqm.
PYN Elite Monthly Review.pdf