Forbes Vietnam: 2020 Investors Guide (06/2020)

Covid-19 has impacted the development of many areas, completely changing business environment in short and mid term. In lieu of this situation, what do experts have to say with respects to the overview of macro, industries, asset allocation and stocks? Let’s find out.

Forbes Việt Nam: Hướng dẫn đầu tư 2020

MACRO OUTLOOK: Although Vietnam has taken the first steps to flatten the Covid-19 curve, we still need to be cautious of the pandemics complications locally and globally. Every nation is currently on alert for a second Covid-19 outbreak now that public health solutions are getting loosened. We are not sure when the post-Covid-19 era might begin. However, we believe in Vietnam’s continued growth for these reasons:

Firstly, FDI is still flowing in. US-China trade war is expected to go on, bringing along new taxes and unstability which will breed the demand for diversification of manufacturing locations. Even before the pandemics, Vietnam has been where big electronics corporations such as Samsung, LG, Intel… choose to set up factories. In our opinion, this trend in demand will continue over time.

Secondly, supply chain will be more diversified, now that corporations have realized the risks that come with putting manufacturer in the same place as raw materials. Foxconn and some other suppliers have made moves in relocating parts of manufacturing process from China to Vietnam.

Similarly, a few corporations from Japan, EU and the US are looking to moving manufacturing activities away from China to avoid taxes from the US without losing cost benefits. Vietnam is a highly potential place to go in their regards. We hope that this would be the catalyst to building supply chain in Vietnam.

Lastly, investors would have a new view towards frontier and emerging markets like Vietnam. Newly released cash in developed economics as well as Federal Reserve (FED)’s forecast of low yield in the US’ stock market in near future will make Vietnam’s market appear more attractive.

Forbes Việt Nam: Hướng dẫn đầu tư 2020

DON LAM –CEO of VinaCapital

INDUSTRIES OUTLOOK: Although Covid-19 is causing severe impacts on the whole economy, some industries are still expected to recover and reach sustainable growth soon. Consumption has been a strong growing sector. As income rises, people will spend more on food, household appliances, jewelry,… We expect this sector to recover even despite short term influence from pandemic outbreak.

Healthcare is a sector noteworthy. Vietnam public healthcare has been expanded considerably but still overwhelmed. Private healthcare sector is growing strong and is qualified to provide on-site service for high-end customer segment, which often seek and use international healthcare service.

Energy is another potential sector where the Government is making prioritized investment into. Since domestic demand is rising, Vietnam has to import electricity from neighbor countries. The more factories open the higher the demand for energy will rise. Electricity generated from renewable energy and liquefied natural gas (LNG) is the future of Vietnam energy sector, where there are many present open investment opportunities.

Consumer goods and construction materials, infrastructure development and real estates are showing potential as well. Increase of infrastructure development will stimulate economic growth, of which domestic supply plays an important role.

We do not recommend investing on export businesses due to high risk.

Finally, technology is a very promising sector. In recent years, we have seen exponential growth of technology in Vietnam, with many new startups in fintech, artificial intelligence, tech, real estate and logistics.

ASSET ALLOCATION: The crisis is causing emerging and frontier markets to fall out of favor, which is a disadvantage for Vietnam stock market. Market corrections will open opportunities to buy potential stocks, usually of companies that are market leaders, strong brands that benefit from growing industries   or from industry structure, having strong balance sheets with high profit margin at a cheap price.

For long term investors who have firm belief in companies’ business models, stocks price drop is simply chance to buy at more attractive price. For the stock market, areas that can benefit from low interest rate as well as growth within the middle class, population structure and modern retail includes: real estate, essential goods and banking.

Government’s plan for disbursements in infrastructure development can also support construction, material, energy, airport / seaport / logistics / industrial zone stocks. We also hold optimistic view toward corporate bonds.

The outburst has had positive effects on prices of bonds from high quality companies (defined as companies with good credit line, cash flow strong enough to pay for both principal and interest of credit loans in the coming 1-2 years when the global economy is still weak).

The pandemics also has had positive effects on government bond price. However, we are conservative on investment in Vietnam Government bonds (VGB) as their yields are rather low (about 3% for a 10-year bond).

In contrast, high quality corp bonds are paying 9% interest for a two-year duration. Decreasing inflation rate will result in policies that decrease interest rate, which will cause banks to lower saving interest rate – and this is why we remain “neutral” towards the option of bank savings.

Most economists predict that inflation would rise once the pandemic is over –. Possibly at the beginning of 2021, and gold, real estates are usually good investment during high inflation.

Last, like gold, real estates are considered a good option for investors during high inflation. Vietnam real estate long term prospects are favourable thanks to human factor, also to Vietnam being one in a handful of countries benefiting from FDI movement away from China after the pandemics.

5 FAVORITE STOCKS:  No recommendation.

Forbes Việt Nam: Hướng dẫn đầu tư 2020

TRAN THANH TAN –CEO of VFM

MACRO OUTLOOK:  Covid-19 has heavily affected global economic and geopolitical scene, even the discovery of a vaccine would not stop the ongoing changes in economic relations in the world. In an interview with Forbes Vietnam early in the year, I said that Vietnam should stay on alert and have suitable reactions to macro economic fluctuations and political changes from outside.

I now reiterate the point again. Vietnam’s economy has handled well the impacts from the epidemic worsening situation in the last months, in which the governments timely and decisive responses play a key role. However, I don’t think we can adequately assess Covid-19’s full impact on Vietnam economy until It’s over and the economy has reopened.

Yet, I also recognize Vietnam’s chance to further our advantages made in recent years in drawing in foreign investment, which will cause great change to the economy if utilized.

In the remaining months of 2020, if there are no unusual events that worsen economic activity, I believe that domestic macroeconomic stability will continue to be maintained, however the negative effects to import and export activities from major markets of Vietnam will be revealed over time.

INDUSTRIES PROSPECTS: I hold a different view than do the other experts. This epidemic does not change my industry outlook as well as perception of the market as compared to previously. First, after the trade war, all nations agree that global supply chain depends too much on China. Any disruption to China’s production would cause a crisis to other markets.

If American-China Trade Agreement first stage gives hope to some multinational corporations that moving of supply chains would be delayed, the pandemics put an end to it. Many companies have been moving away from China at even greater scale and speed than at the onset of the trade war, resulting in a “Prosperity Belt” led by US, and Vietnam has direct benefit from.

Second, increasing use of technology to continue operation, cutting cost are heavily utilized during pandemic. Thus, digitalization tend is strengthened for the time coming. In my opinion, this pandemic is a major factor in the economy more stabilized restructure. Noteworthy sectors for next months are industrial zones, materials, tech and banking.

ASSET ALLOCATION: I think that the current trends in investment channels are obvious. First, interest rate is low and might go lower in the future as Government has to decrease the cost of capital to stimulate public investment and to lend, support businesses and individuals after the pandemic.

Bond investment through open-end fund still remains a safe choice that has better yields than mid and long term deposit. Stocks continue to be the leading channel of mid term capital as ther has been large sell off recently. The inflow of foreign capital into Vietnam in the coming time is a very positive signal for the stock market, besides the public investment packages that the Government is discussing and will deploy in the coming time.

Real estates is an exciting investment channel because of low interest and an unseen large scale asset purchase trend globally. However, investors need to note that this is a very long term and risky channel at the time, as the pandemic will reveal inefficient and shady real estate businesses.

5 FAVOURITE STOCKS: MWG, FPT, VCB, HPG & PHR.

Forbes Việt Nam: Hướng dẫn đầu tư 2020

VU QUANG THINH – CEO of Dynam Capital

MACRO OUTLOOK: The Covid-19 pandemic was a big, sudden, life-changing event and everything was transitioning to a “new normal state”. The world would get more normal when vaccine and effective solutions come. However, the great trends that are stimulating Vietnam economy growth will go on.

Foreign capital will keep moving to nations with young and cheap labor force, synchronized infrastructure and open investment environment. This movement gets stronger with the US-China trade tension and is carried out by more and more multinational corps and governments in response to risks of global supply chain disruption during the Covid-19 pandemic.

Meanwhile, rising middle class will create new consumption habits and speed up urbanization in Vietnam. Private economic sector and foreign investment together with Government’s resolution and stimulus for growth and reformation will help achieve the GDP 5% annual target.

Pandemic has made things more fragile but this time Vietnam has the capacity, accumulated foreign currency and healthy banking system to prevent inflation, keep stable interest rates and overcome potential bad debts.

Covid is also the push we need to achieve new level in digitalization. The disease has strengthened government resolve to disburse public investment as a stimulus measures.

INDUSTRIES PROSPECTS:  Covid-19 is a hard hit to travel, retail, transportation, aviation, food, fashion and education in the first half of the year, yet it is a push for construction materials, infrastructure, technology, e-commerce and delivery.

However, depending on the ability to limit the pandemic and to adjust to the new normal, even the most impacted sectors would recover strongly during the second half of 2020 and 2021 once Covid is under control.

ASSET ALLOCATION: Stocks of companies with large potential for growth that have high liquidity, filled “room” and fair valuation are still a favourite asset. Yet, the fragility that investors experienced in Q1 2020 will require flexibility in investing, and bond is an effective hedging measure.

5 FAVORITE STOCKS: FPT, HPG, KDH, VCB and GMD

Forbes Việt Nam: Hướng dẫn đầu tư 2020

HOANG VIET PHUONG – Head of Research & Investment Advisory SSI

MACRO OUTLOOK: Covid-19 has had negative effects to global economy. Recession is being talked about regularly. Also, there is no indication when we will discover a vaccine. This means the world don’t know when the fight against Covid-19 will end. This recession has a few differences to previous crises.

First, economy and trade stagnation result from administrative measure to counter the pandemics such as social distancing, borderline closing…, not from financial reasons like currency or economic restructure.

Second, both supply and demand are declined.

Third, economies are experiencing simultaneous difficulties caused by pandemic similarly while international integration is higher than ever.

To counter this problems, the key is not abundant foreign reserves, heavy weaponry or latest technology but the ability to handle crisis, keep healthcare system efficiency and ensure security including food and energy, the independence in supply chains of products essentials to face the crisis, especially medicines and medical devices.

In those regards, Vietnam has met early success in recovering the economic and social activities, adapting to the influence of the pandemic and getting ready to get to the next stage.

First, Vietnam government has carried out effective prevention measures and stop the disease spread. This is in large part due to public’s strong approval. The economy and society have recovered faster than do in our neighbour countries.

Second, Vietnam’s healthcare system are able to detect, prevent and cure the disease. This is the reason why health and casualty damage is kept at a low scale.

Third, Vietnam has strong agricultural export. This helps the economy to sustain public’s essential demand while the pandemic was getting contained.

Internationally, Covid-19 has increased the demand for redistribution of global supply chain and restructure of international trade post pandemic. Vietnam can benefit from this trend if we can attract brands to move manufacturing process from China to Vietnam. New trade agreements like EVFTA also open more opportunities for Vietnam.

INDUSTRIES PROSPECTS: Assuming this epidemic will be well controlled in Vietnam from the second half of this year onwards, I believe that the sectors that will grow in the coming 1 – 2 years are production of essential goods, tech, sectors that benefit from public investment like construction and construction materials, sectors that benefit from redistribution of global supply chain like industrial zone real estate.

ASSET ALLOCATION: Gold price has increased from the beginning of 2020 as the global economy outlook stays pessimistic. Its price in the coming months will be unpredictable depending on how the pandemic will be handled.

For saving deposit, interest rate is getting lower due to regulation policy and low credit demand. We think that stock market will have many opportunities now that Vietnam is a bright example in disease containment and foreign capital attraction.

5 FAVORITE STOCKS: BVH, ACB, VEA, VTP and HPG.

Forbes Việt Nam: Hướng dẫn đầu tư 2020

LA GIANG TRUNG – CEO of Passion Investment

MACRO OUTLOOK: Under Covid-19 influences, global macro economy outlook has changed. We have to pay close attention to the potential disruption to the whole world economy: a second outbreak could happen and prolong recession. Inflation rate could rise abruptly due to increase in money supply. Growing number of businesses that go bankrupt and default would put a strain on banking system and lead to a crisis in the financial system.

Nevertheless, Vietnam economy has reasons to hope for a quick recovery. Even before the outbreak happened, Vietnam macro economy has already been fairly more stable than in previous crises. Vietnam’s government’s effort against the disease up to the end of May ranks among best in the world, therefore, effects on healthcare are limited, Vietnam economy is able to bounce back faster as it suffers less severe consequences than do other nations.

In the long term, Vietnam can keep drawing in more FDI as the global supply chain goes through changes.

INDUSTRIES PROSPECTS: Sectors with positive outlook in near future are those that benefit the most from public investment stimulus policies such as construction and building materials. In addition, industries that supply necessity such as seafood, food, essential consumption can remain strong during the hard time.

ASSET ALLOCATION: As the economy will experience a difficult next 1–2 years, companies’ revenue and profit will be hit, making this a very tough time to invest in the stock market.

Now that stock market has recovered strongly from the bottom in March, the risk are getting higher. Investors should lower their proportion of risky assets, maybe holding 80-90% in savings and only 10-20% in stocks for now.

However, should the market decrease again and all of the problems facing companies be reflected in their stock price, that will be a good time for investors to increase their allocation to stocks.

5 POTENTIAL STOCKS: HPG, VCS, BMP, VHC and FPT

Forbes Việt Nam: Hướng dẫn đầu tư 2020

PRETRI DERYING – CEO PYN ELITE

MACRO OUTLOOK: We are entering the post outbreak stage, global demand is falling which will affect Vietnam export. Exports could fall by 5-10% this year and remain weak during 2021. However, I believe that Vietnam economy will grow by 3-5% in 2020 and by more in 2021, which are wonderful rates considering the situation.

Vietnam has a competitive dynamic economy, high growth rate and a domestic market expanding in the next 10 years. The financial system is regulated well and receives no domino effects from the pandemic .

Before the outbreak, the world had shown signs of slow economic growth due to accumulated expenditure debts from previous years and low growth in EU and the US. Now that Covid-19 unexpectedly entered the picture, global economic growth is the weakest during the latest decade.

INDUSTRIES PROSPECTS: in Vietnam, banks, retail, aviation, petroleum has been hit hard because of lock-downs and declining demand for oil. Yet, these are also areas that would grow the fastest in the next two years thanks to continuation of disrupted business.

ASSET ALLOCATION: Before the sell-off during the pandemic, Vietnam stock market had been attractive. Right now, it remains the same. Put 100% in stocks! Overall, Vietnam stocks are in a good position to outperform developed markets. Net debt/equity of companies in Vietnam is 35%, while it is 52% in EU and 70% in the US.

5 FAVOURITE STOCKS: VEA, ACV, POW, CTG and LPB

Forbes Việt Nam: Hướng dẫn đầu tư 2020

LE ANH TUAN – Deputy CIO and Head of Research at Dragon Capital

MACRO OUTLOOK: Covid-19 biggest influence on global economy is declining demand. Now that the US and EU has contained the disease, reopening is a matter of time. There are worry about a second outbreak when countries reopen but I think it’s unlikely to happen on such a large scale.

The first outbreak caught many countries by surprise, therefore, if there are signs of another one they will surely adapt large scale testing measures, like the 9 millions test cases in Hubei (China) in order to contain the disease. Moreover, most large economies reopen slowly because of large number of positive cases and they will fully recover only when vaccine or drugs that shorten the course of treatment is discovered.

In terms of production, we are impacted in general, but not as bad as forecasted. For example, exports in April only fell by 12% despite Vietnam major export markets like the US, EU, Japan,,, was still closed. However, general statsitics are not everything. If we look at individual export orders of large corporations, we can see that SMEs are heavily impacted.

Vietnam macro economy at the moment is looking better than predicted in Q1 2020: exchange rates remain stable, interest tends to get lower, no systemic risks, inflation is under control. Macro outlook is optimistic but micro is facing hit to small vulnerable business.

Vietnam is among bright spots when it comes to containing Covid-19. This is the key to Vietnam economic quick recovery domestically, excluding travel, restaurants and hotels services. These businesses, which used to receive 1.5 million of tourists monthly, are hit severely, affecting the whole economy.

A good thing about this crisis in comparison with previous ones is that central banks and governments have timely and decisively injected money to support people and businesses. Covid-19 causes rising tension between big countries, pushing the wave of moving supply chain outside of China, even harder than in 2018 when US-China trade war started.

Vietnam is among countries that will benefit. If the government are determined to develop infrastructure to welcome FDI, Vietnam economy is on the verge of breaking through. In my opinion, solving the infrastructure problems is solving the economic growth problem.

INDUSTRIES PROSPECTS: Once vaccine is introduced, service industry will bounce back strongly as its customers are middle and upper class which aren’t affected badly. Yet, some will recover slowly such as aviation.

The trend in moving supply chain away from China will be stronger and Vietnam will be among those that share the major benefit. If FDI could be drawn in, real estate market and banking system would develop healthily. Thanks to the infrastructure investment, stocks of industries involved in land bank and real estate development could be accumulated for long term.

Stocks in raw materials and banking are also a good option. Retail industry was hit hard during the pandemic but big hand will acquire small businesses, expand marketshare, therefore these stocks is at a good buying price.

5 FAVOURITE STOCKS: at the beginning of 2020 I reccommended FPT, ACB, MWG, VCB and VPB. Right now, except MWG, all of them has recovered significantly, even crossed previous high earlier in the year. I still keep this list, and if I can make one more addition it will be HPG.

(*) Forbes Vietnam issue 85, June 2020.

 

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