VIETNAM COUNTRY REPORT

Transcription

1 VIETNAM COUNTRY REPORT GIANG TRINH Vice chairman of the Vietnam Bond Market Association Asian Securities Forum Bangkok, November 214

2 ECONOMY 2

3 STABILIZATION PRIMES GROWTH Vietnam s economy has been fully revamped for stable growth GDP is well off its bottom and should reach +5.7% in 214 Country s macro outlook is now stable. It has recently been upgraded by Moody s and Fitch, with S&P likely to follow. Reform in SoE and Banking sectors are slow, buy in firm paces Privatization will accelerate in remainder of 214 and 215 The country has moved on from its bubble-economy crisis The government is not about to repeat overheating mistakes again 3

4 ECONOMY REBALANCED HISTORICALLY HIGH REAL RATES % Nominal Real Aug-7 Aug-8 Aug-9 Aug-1 Aug-11 Aug-12 Aug-13 Aug % GDP DELEVERAGING NOW A STRUCTURAL TREND F TRADE BALANCE RATIONALIZED FX RESERVES SEE ONGOING RE-BUILD 3 $bn 4 % 6. mo's 5.25 Mo's of Imports (LHS) FX Reserves (RHS) 41 $bn 36 (3) (4) (6) (9) (12) (15) (18) Deficit (LHS) Deficit/GDP (RHS) E 14F (8) (12) (16) (2) (24) Aug-7 Aug-8 Aug-9 Aug-1 Aug-11 Aug-12 Aug-13 Aug-14 Sources: DC, IMF, GSO, WB 4

5 INFLATION WHIPPED / CURRENCY ANCHORED INFLATION VND % Core Headline 16,8 17,32 VND/$ Interbank Rate 25 17,84 Official Rate 2 18,36 18, ,4 19,92 1 2,44 5 2,96 21,48 Aug-6 Aug-8 Aug-1 Aug-12 Aug-14 22, Nov-8 Sep-9 Jul-1 May-11 Mar-12 Jan-13 Oct-13 Aug-14 Sources: DC, IMF, GSO, WB 5

6 COMPARATIVE MACRO SHINES % GDP GROWTH, 214 CHI PHIL VN INDO THAI INDIA MAL TKY SAFR BRZ POL INFLATION, CURRENT ACCOUNT / GDP, 213 CPI % Average VN INDIA TKY SRI INDO SAFR BRZ PHIL POL CHI THAI MAL (.5) (1.5) (2.5) (3.5) (4.5) (5.5) (6.5) (7.5) % VN MAL PHIL CHI THAI POL BRZ INDO INDIA SRI SAFR TKY MAL BRZ TKY CHI SAFR POL INDO THAI INDIA SRI VN FX RESERVE GROWTH, X 1. CURRENCY, SRI THB MYR 1.16 PHP RUB BRZ 1.24 TKY IDR VND 1.32 ` Jan-13 Mar-13 May-13 Aug-13 Oct-13 Jan-14 Mar-14 Jun-14 Aug-14 Sources: DC, Citibank, Bloomberg 6

7 GROWTH SMACKED, BUT RECOVERING 7 % QUARTERLY ROLLING GDP, YOY 35 % 3 RETAIL SALES Q1 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1 Nominal 5 Real M14 INDUSTRIAL PRODUCTION PRODUCTION MANUFACTURING INDEX 8 % Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Sources: HSBC, DC, GSO 7

8 INVESTMENT CYCLE ON UPSWING % yoy LOAN GROWTH IS PICKING UP Pre-bubble 2-25% average 22 % INTEREST RATES ARE NORMALIZING Lending Re-Fi % average lending rate. Dec-4 Dec-6 Dec-8 Dec-1 Dec-12 Dec-14 4 Dec-3 Oct-5 Aug-7 Jun-9 Apr-11 Feb-13 Dec-14 INVESTMENT / GDP IS BOTTOMING GOVERNMENT BORROWING ON THE RISE 48 % F VND tr F Sources: DC, GSO, IMF, MOF, SBV 8

9 FISCAL / FOREIGN DEBT RENEWED OVERHEATING IS HARDLY A CONCERN FISCAL DEFICITS ARE UNDER CONTROL, WITH MUTED INFLATION FOREIGN DEBT IS MINIMAL AND IS MOSTLY ODA ANYHOW (213E) (7) % (6) (5) Total Deficit Primary Deficit Corporate Bonds $3.7bn Banks $3.4bn (4) (3) ODA $31bn Sovereign Bonds $2.9bn (2) (1) F 14F $41bn foreign debt = 21% of GDP $31bn ODA = 76% of foreign debt Sources: DC, IMF, MOF 9

10 FOREIGN DIRECT INVESTMENT FDI HAS STAYED ROBUST AND CONTINUES TO SURGE FDI/GDP VIETNAM GREATLY SURPASSES PEERS $bn 7.5 % Avg E 14F. PAK BANG PHIL SRI INDO THAI CHI MAL VN Sources: ADB, IMF, GSO, IMF 1

11 EXPORTS GROWTH STRONG AND AHEAD OF PEERS, AS FDI FLOWS PLUS THERE IS STEADY SHIFT INTO HIGHER-VALUED-ADDED GOODS 4 % 3 12 % 1 Cellphones Other Mf'd Electronics Commodities INDIA INDO CHINA THAI MAL PHIL VIET M Sources: DC, GSO, BBG 11

12 EXPORTS EU -VIETNAM PARTNERSHIP Likely to be finalized by late 214 Vietnam s exports to EU have more than doubled since 21 EU is now Vietnam s No. 1 export market at $24.7bn in 213 Despite tariffs averaging 11% on textiles, seafood, footwear, garments 25 $bn EXPORTS AND TRADE SURPLUS WITH EU, Total Exports Trade Surplus

13 EXPORTS TRANS-PACIFIC PARTNERSHIP US-CREATED FREE TRADE BLOC WITH 3% OF GLOBAL EXPORTS EXPORTS TO USA IN $BN 13

14 BANKS: OVERVIEW Banks problem moribund new lending rather than insolvency That reflects sluggish domestic economy / high rates not NPLs NPLs have fallen quickly, from 18% in 212 to ca 13% now CB has tolerated amortization of NPLs via recovering economy Meanwhile property market has bottomed, and turned up in places Proper accounting practice will be applied on NPLs Bank profits will drag in , while underlying health improves 14

15 BANKS: INSOLVENCY RISK A NON-ISSUE INTERBANK RATES LOAN/DEPOSIT RATIOS 21 % 2w 18 3m 15 % Dec-9 Feb-11 Apr-12 Jun-13 Aug Rolling 5mo average 8 Aug-7 May-9 Feb-11 Nov-12 Aug-14 Sources: DC, IMF, SBV 15

16 BANKS: PROPERTY SECTOR ON THE MEND 3,2 apt's 2,8 PICK-UP IN HCMC APT S SOLD 2,4 2, 1,6 1, Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Sources: DC, CBRE 16

17 SOE S: CONTAINMENT NOW, PRIVATIZATION NEXT SOEs have been rolled back after nearly blowing up the economy Most have been turned into limited-liability companies Top exec s have been investigated, jailed, placed under house arrest Non-core assets are being divested Funding has been cut and must be secured at top commercial rates SOE NON-GUARANTEED SPREADS AT TOP OF COMMERCIAL RANGE bps over VGBs 4 bps Recent range for private sector 15 bps Now privatization impends, with important deals already under way 5 Mar-7 Aug-8 Mar-1 Aug-11 Mar-13 Aug-14 17

18 MACRO FORECASTS GROWTH WITH STABILITY unit F 215F Real GDP Growth % Nominal GDP US$bn CPI % Exports (cif) US$bn Export Growth % Imports (cif) US$bn Import Growth % Trade Balance (cif) US$bn FX Reserve US$bn FDI Disbursed US$bn USDVND (interbank) 1 2,85 21,115 21,35 21,35 Sources: DC, IMF, GSO, WB, SBV 18

19 SECURITIES MARKET 19

20 EQUITY MARKET The equity market is up 2% YTD. With daily turnover is double to VND3, billion/day (USD14 million/day) Valuations no longer absurdly low but they still hold own with peers SoEs privatization is under way, slow in this year, but in firm steps. Retail clients trading accounts for 9% of total turnover. Slight foreign inflow 2

21 MARKET ,2 1,1 1, INTO A NEW TRADING RANGE OF 5-65 FROM PREVIOUS 35-5, BUT WITH MACRO POWER TO BREAK OUT RATHER THAN JUST LANGUISH Volume VNI - VND 6 $m Mar-6 Jun-7 Aug-8 Nov-9 Jan-11 Apr-12 Jun-13 Aug-14 Sources: HOSE, HNX 21

22 FORECASTS AND VALUATIONS TOP 5 RATINGS: ALL-IN 31 Aug - VNI 637 unit F 215F P/E Ratio x EPS Growth % NPAT Growth % PEG x TOP 5 RATINGS: EX-PROPERTY 31 Aug - VNI 637 unit F 215F P/E Ratio x EPS Growth % NPAT Growth % PEG x

23 PER 215F (X) COMPARATIVE VALUATIONS: MARKETS FORWARD REGIONAL PER/EPS 31 AUG PHILIPPINES MALAYSIA INDONESIA INDIA 13 VIETNAM THAILAND CHINA EPS CAGR (% LCY) Source: DC for Vietnam, CLSA all others 23

24 COMPARATIVE VALUATIONS: MARKETS EX TOP 5 21 x 2 INDIA TRAILING PERs 31 AUG 214 TRAILING PBVs 31 AUG x THAILAND PHILIPINES THAILAND 2.8 PHILIPINES INDONESIA CHINA MALAYSIA SRI LANKA INDONESIA MALAYSIA INDIA CHINA SRI LANKA 12 VIETNAM 1.6 PAKISTAN 11 PAKISTAN 1.4 VIETNAM Source: Bloomberg 24

25 ALTERNATIVE ASSETS: OUT OF FAVOR PROPERTY: LOW LISTED PBVs AS PROXY FOR THE INDUSTRY 2.25 Khang Dien House 2. NBB Investment 1.75 Quoc Cuong Gia Lai Sacom Real 1.5 Thu Duc House Oct-1 Jun-11 Feb-12 Sep-12 May-13 Dec-13 Aug-14 BANK DEPOSITS: BARELY ABOVE INFLATION % Feb-1 Nov-1 Aug-11 May-12 Feb-13 Nov-13 Aug-14 42, taels 36, 3, 24, 18, 12, 6, GOLD: AUCTION DEMAND GOES TO ZERO Mar-13 Jun-13 Sep-13 Dec-13 Feb-14 May-14 Aug-14 % 5YR 2YR BONDS: SAME AS BANK DEPOSITS 4 Aug-9 Aug-1 Aug-11 Aug-12 Aug-13 Aug-14 Sources: DC, SBV, Bloomberg 25

26 EQUITY MARKET DEVELOPMENT Hochiminh Stock Exchange (HSX) and Hanoi Stock Exchange (HNX) are to merge in 215 or 216. First ETFs tracking equity indexes are traded Intraday trading is to be allowed in 215 New infrastructure for securities trading, clearing, and settlement are prepared for derivatives market. Stock index futures and bond futures are to be traded in 1H216. Government is also mulling plans to force OTC companies to list And SoE privatization is already getting underway, slowly but surely 26

27 PRIVATIZATION SCHEDULED 2 SEP 214 Monopoly airport services in Saigon: dutyfree shops, restaurants, lounges, taxis, etc. Revenue: $95m NPAT: $6m 25% of shares in IPO EXPECTED SEP/OCT 214 2% of country s textile exports, revenues $2.5bn First attempt in Jul was unsuccessful, second attempt due in Sep Confusing accounts hide very significant value in subsidiaries, land bank 49% of shares in IPO EXPECTED IP 4Q14 Monopoly on airport services nationally Issue primed by listing of subsidiary SASCO 22 facilities in operation Revenue: $4m Profit before tax: $64m 25% of shares in IPO 27

28 PRIVATIZATION EXPECTED IP , flights 15m passengers 8% occupancy May face valuation challenges Revenue: $3.4bn PBT: $25m Charter capital: $426m 25% shares in IPO EXPECTED IPO Dung Quat Refinery Finance capacity expansion: 6.5m to 1.m MT, and Euro II to Euro IV Revenue: $7.1b NPAT: $15m Charter capital: $95m 49% of shares in IPO EXPECTED IPO % market share No 2 of three carriers Allowed to drop involvement in expensive Gov t satellite program Allowed to drop merger with Vinafone, No 3 carrier Revenue: $2bn PBT: $29m Charter capital: $5m 28

29 BOND MARKET Government bond market holds strong growth this year with VND21 trillion (USD1 billion) in new issuances. Average daily turnover is double to VND4,2 bil (USD2 mil) Bond yields drop sharply, both in the short and long ends of the yield curve. The benchmark 3-year yield reaches 4.2%. FX rate is stable. Foreign investors now are back to Vietnam and bought 25% in the new G-bond issuances this year. G-bond average duration moved up to 3.2 years from around 2.4 years 1 year ago. 29

30 BENCHMARK YIELDS 3

31 THE YIELD CURVE as of 5 November

32 NEW BOND ISSUANCES (in Trillion VND) 32

33 BOND MARKET DEVELOPMENT The reopening system starts to work well, helping the number of G- bonds drop sharply to 9 bonds with the average size of USD2m/bond. PD system is to be improved. At present 22 PDs actively bid in every bond auctions. New bond trading, clearing, and settlement system is prepared. The central bank will be in charge of cash settlement for bond trading. G-bond futures are to be traded in 1H216 Credit rating companies are prepared to launch in

34 THANK YOU VIETNAM BOND MARKET ASSOCIATION 34