Samson: Foreign investors will soon return to Việt Nam's stock market: HSBC
10th May, 2021
Việt Nam’s stock market is expected to continue to grow, helped by strong economic growth and increasing local liquidity. The positive outlook will attract foreign investors back to the market, according to HSBC.
In the Asia Frontier Insight - Việt Nam report, the research team from HSBC believe that foreign investors cannot ignore Việt Nam’s market any longer as it offers a favourable risk-reward opportunity in one of the most resilient growth economies and the market’s liquidity is rising.
Foreign ownership limits are the main problem for foreign investors but the bank believes that it is not a deal-breaker. Of 30 biggest companies in the VN30 basket, 24 still have room for foreign investors.
Another supporting factor is stocks that have already reached FOL can be bought by paying the difference in prices. HSBC reports that as these stocks generated strong profit growth but are traded at cheaper prices compared to other Asian peers, the gap between prices is not big. And even though they're slow, policy reforms are underway which has a positive effect on the market.
Lastly, valuations are attractive, the report says. The VN-Index is trading at a 12-month forward price-to-earnings ratio (P/E) of 15.1x, a 5.3 per cent discount on its five-year average, and at a 12-month forward price-to-book ratio (PB) of 2.5x, a discount of 2.9 per cent.
The effective containment of COVID-19 has led to a strong rebound in economic growth and continued strong domestic liquidity, boosted by new individual investors. "While this increases volatility risk, we do not see a major correction risk. With deposit rates falling and gold prices under pressure, there are not many alternatives for this volume of liquidity,” says the report. The bright outlook of the stock market on economic recovery was also confirmed by strong corporate results in the first quarter of 2021, with revenue rising 24.8 per cent year-on-year and net profit up 51.8 per cent.
As of April, the market benchmark VN-Index jumped 12.4 per cent compared to the beginning of the year, outperforming all the major regional benchmarks. The index also broke the psychological barrier of 1,200 for the first time, a level it failed to reach during previous bull markets in 2007 and 2018, the report says. Despite the strong growth, foreign investors kept fleeing from the country's stock market since early 2021. LINK
Samson: US firms interested in Vietnamese supply chain
9th May, 2021
A new report has found 43 per cent of US-based respondent companies cited Việt Nam among their top three buying geographies as of early 2021, doubled from 2019, according to the Q1 2021 report from QIMA, a US provider of supply chain compliance solutions.
The report surveyed more than 700 businesses with international supply chains.
The data shows a 16 per cent year-on-year increase in demand for inspections and audits in Việt Nam in the first quarter of this year, which represents a third consecutive quarter of growth that had initially begun as a post-lockdown rebound in mid-2020, the article cited a report from QIMA, a provider of supply chain compliance solutions.
This growth is more than just a return to pre-pandemic levels, as Q1 2021 inspection demand has, on average, doubled compared to Q1 2019.
The appetite for Việt Nam sourcing is far from satisfied and is poised to redefine the sourcing landscape in 2021: around a third of buyers globally and 38 percent of US-based buyers name it among countries from where they plan to buy more in 2021.
The website says Việt Nam was not the only country in the region to benefit from expanded business volumes, as data on inspection and audits demand in Southeast Asia show double-digit growth across the board, fueled by the renewed interest from American and European brands alike. LINK
Samson: Việt Nam should continue support for vulnerable groups to ensure growth: IMF official
8th May, 2021
Việt Nam will record positive economic growth in 2021, at about 6-7 per cent, if the country continues to support vulnerable groups in the economy and carries on its vaccination campaign, said Jonathan Ostry, Deputy Director of the Asia and Pacific Department of the International Monetary Fund (IMF).
The Southeast Asian country needs to lay a foundation for strong growth in the mid-term, including ensuring sufficient revenue resources for infrastructure development and implementation of public investment, he said. It is necessary for the nation to ensure a resilient financial system, and continue efforts to improve the investment climate, Ostry added.
Regarding a plan being drafted by the Vietnamese Government to assist enterprises during the pandemic, the IMF official said the country’s fiscal policy should be loosened to support economic activities, and limit negative impacts from the pandemic. Policy adjustments depend largely on the speed of economic recovery at the global level, which faces a lot of uncertainties, he said.
Pointing out the weak uptake of tax deferrals in Việt Nam, particularly in the hardest-hit sectors of the economy, the IMF recommended the introduction of temporary corporate income tax (CIT) loss-carry backwards to improve firms’ cash flows, better targeting of temporary CIT reductions to benefit distressed but viable small and medium-sized enterprises, and the introduction of temporary provisions for accelerated depreciation or investment tax credits. He said Việt Nam’s economic growth story in the past three decades is notable since it is sustainable and inclusive growth that helps improve local livelihoods.
Thanks to market-oriented reforms which enable improvements in the business climate, and the attraction of huge amounts of foreign direct investment, Việt Nam has risen from being in the group of the world’s poorest countries to gaining “middle-income” status.
The country should work to improve the business environment and ensure an equal playground, he said, adding this includes reforms geared towards simplifying and reducing the regulatory burden for domestic firms, easing entry costs for enterprises, continued reform of State-owned firms, and enhancing good governance.
Additionally, he suggested Việt Nam enhance human capital and technology access to boost labour productivity, which facilitates investments in more complex products that can gain a better competitive edge in the international market. LINK
Samson: Confidence in Việt Nam’s business environment continues to rebound
May, 06/2021 - 08:30
European business leaders began the year positive and optimistic about Việt Nam’s trade and investment environment, according to new data from the European Chamber of Commerce in Việt Nam (EuroCham).
EuroCham’s Business Climate Index (BCI) hit 73.9 points in the first quarter of 2021. This is the highest score recorded since the third quarter of 2019, before the COVID-19 pandemic hit global trade and investment. This continues a positive upward trend, with the score rising more than 47 points over the last 12 months.
It comes after Việt Nam recorded strong economic growth at the start of 2021, and this is reflected in the optimistic outlook of European enterprises. When asked about the prospects of Việt Nam’s business environment in the next quarter, 67 per cent predicted either ‘excellent’ or ‘good’ – a 12 per cent increase compared to the previous quarter. Business leaders are also more optimistic about their own companies. More than two-thirds (68 per cent) predict that orders and revenue will ‘maintain or increase’ over the next three months. That’s a 25 per cent increase compared to the fourth quarter of 2020.
EuroCham members are also seeing positive effects from the EU-Việt Nam Free Trade Agreement (EVFTA) which came into force on August 1, 2020. Since it was implemented, more than 60 per cent have benefitted from the agreement. However, business leaders continue to report that ‘administrative procedures’ are the biggest hurdle for them to utilise the EVFTA.
The BCI is a regular barometer of EuroCham members and their perceptions of the business environment. Each quarter, it tracks the performance of EuroCham’s member companies and their perceptions of the economic outlook in Việt Nam. The fieldwork and data collection for the BCI is conducted by YouGov Vietnam.
Commenting on the BCI, EuroCham Chairman Alain Cany said: “The Business Climate Index confirms once again that Việt Nam is open for business. While countries continue to struggle with the impact of COVID-19, Việt Nam has ensured that companies here can continue their operations as close to normal as possible. This is helping to drive economic growth and fuel the confidence of European business leaders.
“Therefore, it is no surprise that EuroCham members are positive about the future of their own companies and optimistic about the prospects for Việt Nam’s trade and investment environment. The BCI has now almost climbed back to pre-COVID levels – this is a remarkable achievement and further evidence that Việt Nam is on the right path to achieving its twin goals of protecting health and promoting economic growth.”
Thue Quist Thomasen, CEO of YouGov Vietnam, added: “Beyond the headline figure, the data in our latest BCI tells us a lot about Việt Nam’s business environment. For instance, the fact that more business leaders are anticipating a rise in their headcounts and investment plans is – in itself – a vote of confidence in Việt Nam’s long-term prospects. It shows that companies are investing in their workforces and their businesses now in anticipation of a strong and prosperous 2021.” LINK