MACROECONOMICS 2019

 

The Vietnamese economy in 2019 had achieved positive results, with growth on a strong trajectory. The target of a stabilized macro-economy with controlled inflation was maintained, as the average CPI Index increased by just 2.79% YoY, much lower than the annual target of 4% YoY. Economic growth reached over 7% for the second consecutive year, ranking amongst the top in terms of Asian growth rates.

 

Economically, there has been a clear structural shift with the rise of the private sector, greatly influential towards stabilizing the growth trajectory of important macro indicators. While exports from the FDI-invested sector increased just slightly, by 4% YoY, locally-owned companies maintained a stunning growth rate of 18% YoY. Many industrial and technological products such as telephones, electronics, machines & equipment, and automobiles that were manufactured by Vietnamese enterprises have been racking up in terms of export value.

 

The tourism industry continued to grow at a robust expansion, with an increase of 16% YoY in international arrivals and 17% YoY in tourism exports. Due to the increase in exports of goods and services of the domestic sector, the trade surplus of goods and services in 2019 reached $7.9 billion USD, more than double compared to 2018. Therefore, the total balance of payments in 2019 reached a large surplus, approximately $ 20 billion USD, amassing large foreign exchange reserves while indirectly increasing supply in terms of available liquidity for the banking system. Thus, interest rates were kept at a comparatively low level, having slightly reduced by the end of the year.

 

STOCK MARKET REVIEW


In contradiction to the positive developments of macroeconomics, 2019 is considered as a challenging year for Vietnam Stock Market.

 

 

 

 

The VN Index ended 2019 at 960.99 points, gaining 68.45 points or 7.67% YoY. The market surged in the first 3 months of the year, being supported by strong foreign inflows (especially via Exchange-traded fund (ETF) tracking Vietnam market). VN-Index then lost upward momentum in the following months of the years (except for July and September) due to rising fears of US-China trade war escalation, an inverted yield curve, and geopolitical tensions, all of which triggered foreign outflows. Sentiment of retail investors (who account for 86% of market trading value in Vietnam in 2019) was lackluster from both global uncertainties and lack of new near-term catalysts, such as large IPOs or state divestment, FOL solutions, market upgrade news, etc. Therefore, retail investors had either actively withdrew from the market, or switched to safer investment instruments such as corporate bonds and gold. Average daily trading value via order matching (across 3 bourses) declined by -34% YoY in 2019 to USD 149 million in 2019. Foreign investors in total net bought USD206 million in 2019 via both matching orders and put-through transactions, much lower than 2018 net inflows of USD 1.84 billion USD.

 

New foreign capital inflows into Vietnam are still mainly through ETFs, due to the limited access of foreign investors to the market. The total net inflow of capital from ETFs has been about USD 220 million. All 5 ETFs simulating the Vietnamese market recorded positive inflows of capital in the past year, especially two funds VFMVN30 ETF and VanEck Vectors Vietnam ETF. Launched in July 2019, the Premia Vietnam ETF is the latest fund to enter the market and has only made a modest contribution at the beginning of $24 million. SSIAM VNX50 ETF and DWS FTSE Vietnam Swap UCITS ETF has attracted net inflows of USD 2.5 million and USD 14.9 million respectively.

 

 

 

The unfavorable market conditions also affected the capital mobilization activities of many enterprises to some extent. Far from the vibrant year of 2018 with a series of blockbuster deals in the first six months, 2019 was a quiet year for IPO activities with only a few small businesses conducting public offering auctions. Similarly, capital mobilization activities are quite limited.

 

Regarding the derivatives market which has been officially in operation for two years, positive growth has been recorded. There are currently two products on this market including: VN30 Index Futures Contract and 5-year government bond futures contracts. By the end of 2019, according to the report of State Securities Commission of Vietnam (SSC), the market has reached over 90,000 accounts, up 58% compared to the end of 2018. The system of trading and clearing members of the derivatives market consists of 19 securities companies which are granted clearing members' certificates. In addition, Covered Warrant (CW) was a new product to be officially traded on June 28, 2019. The launching of this product contributes to supporting investors in preventing fluctuations of the stock market.

 

It is important not to overlook the booming corporate bond market in 2019. According to statistics published by Hanoi Stock Exchange (HNX) and businesses, there were 211 companies offering a total of VND 300,588 billion bonds, divided into 807 issuance of which there were 12 unsuccessful releases. The total number of bonds issued for the whole year was VND 280,141 billion, equivalent to 93.2% of the offering value and increased by 25% compared to 2018. The large number of issued bonds in the year led to the sharp increase in the size of the corporate bond market, from 9.01% of GDP (2018) to about 11.3% of GDP (2019). The total amount of circulating corporate bonds reached nearly VND 670 trillion.

 

 

The expansion of bond market, especially corporate bonds, is an inevitable trend to create a balance and improve the quality of financial markets. However, corporate bond is now still a quite new investment channel in Vietnam. The recently impressive growth may contain certain risks that need to be identified and adjusted by management agencies to ensure the healthy and sustainable development of the market.

 

   Trang sau