218.5.11 VIETNAM STOCK MARKET OUTLOOK Target at the end of 218 Point VN-Index 1,597 HNX-Index 245 Upcom-Index 81 An (84.28) 6287 823 an.ntn@shinhan.com May 11 st 218 VN stock Index (pt) 1,24 Market Cap.(1bn VND) 2,825,16 Number of listed companies 353 HNX stock Index (pt) 12 Market Cap.(1bn VND) 111,24 Number of listed companies 384 Upcom stock Index (pt) 56 Market Cap.(1bn VND) 434,43 Number of listed companies 737 Index charts 1,25 1,1 95 8 VNIndex (LHS) HNXIndex (RHS) 16 14 12 1 217: Looking back 218 Macro Outlook 218 Stock Market Overview 217 Looking Back An Impressive growth year for Vietnam stock market Vietnam stock market showed a strong increasing period since the beginning of 217, the benchmark VN-Index reached a decade-high of 984.24 points on the last trading day of 217 (December 29th), which increased nearly 5% YoY and became one of top three best growing stock market in the world. With the breakout of the index, market liquidity was improved significantly with around USD312 million and USD14 million per trading session on HOSE and HNX exchanges, respectively. Market capitalization also hit USD125 billion in 217 (+73%yoy). Stock market contributed 74.6% of GDP this year, exceeded the Government s target for 22 (7%). Derivative market and Divestment deals the new waves of Vietnam stock market 217 is the milestone of Viet Nam s securities market, of which, future contracts started going to operation since August 1th 217. This investment tool, managed by the Ha Noi Stock Exchange (HNX), had over 946,3 contracts and 15,8 trading accounts over the past 2 months. Turning to the IPO and Divestment transactions, 217 not only recorded as a successful year for State capital divestments, highlighting with a 53.6% stake of Sabeco (SAB) worth USD5 billion and a 3.33% stake of Vinamilk (VNM) worth USD4 million, but also impressive IPO of large capitalization business, such as Petrolimex (PLX), Vietnam Airlines (HVN), Vietjet Air (VJC), Vincom Retail (VRE) and VPBank (VPB), etc. 65 8 Prosecution news Negative Impact on Indexes Besides supporting news, 217 also had negative news dragged the market down in some periods. For example, the rumor about Mr. Bac Ha - the former Chairman of BIDV Bank was arrested, VNIndex fell nearly 18 points in August 9th - the strongest decline within 2 months. Prior information about the prosecution, arrest some former oil industry leader - Mr. Dinh La Thang and Mr. Nguyen Quoc Khanh (Chairman of Petrovietnam), the stock market in December 11th reacted negatively (-23 points). Macro Indicators 216FY 217FY 218E 219E GDP 25.3 219.3 233.9 249.2 Growth rate (%) 6.2 6.8 6.7 6.5 Inflation rate CPI (%) 2.7 3.5 <4. 4.2 Credit growth (%) 18.7 18.2 17. 15.5 Source: Bloomberg, Finpro, Shinhan Investment Corp. 1
218.5.11 A successful year for Funds The size of fund increased from USD153 million in 216 to USD315 million in 217, because of two factors: the growth of investment assets and the new cash flow of investors. 217 recorded the breakthrough growth of the open-end fund market in Vietnam. In the first 1-months, total NAV of open-end funds was USD33 million (+13.32% YoY), a remarkable growth rate in the last 4 years. This year has witnessed the strongest-ever trading by foreign investors with total net buy value in nearly USD1.2 billion, exceeded the peak in 27. The total value of foreign portfolios hit USD 31.4 billion (+81.3%yoy), of which had the highest contribution of Dragon Capital in buying Viglacera (VGC), Vietjet Air (VJC), FPT retail (FRT), etc. Derivative Market Transaction (217FY) 3, 25, Transaction volume Transaction value (VND bn) 3, 2,5 2, 2, 15, 1,5 1, 1, 5, 5 Market Capitalization Comparable Top 1 Highest Capitalization Stocks (217FY) Poland Turkey Vietnam 188.62 141.67 155.28 114.23 65.52 5.99 258.37 266.14 (USD bn) 38.44 217 216 215 5% 3% 1% 7% 7% 6% 5% 3% 3% 3% 3% VNM VIC VCB GAS SAB CTG VRE BID PLX ROS Others Foreigners Trading Value Market Share of Funds (217FY) (USD mn) 1,5 114 14% 3% 1% Investment Fund 1, 711 2% Open-end Fund 5 79 21 336 163.7 128.5 3% 5% Closed-end Fund Member Fund ETFs (5) -342 21 211 212 213 214 215 216 217 2 Real Estate Invesment Fund
218.5.11 INDUSTRIES STOCK PRICES PERFORMANCE (217FY) 7 55 4 25 1-5 -2 1/17 2/17 3/17 4/17 5/17 6/17 7/17 8/17 9/17 1/17 11/17 12/17 Real Estate Consumer Staples Consumer Discretionary Energy Health Care Industrials Information Technology Materials Utilities Finances
Thousands 218.5.11 SECTOR IN FOCUS Banking sector got the highest growth rate in stock prices (+65.7%YoY) while the second was Real Estate with 56.9%YoY in growth rate. In 217, Food and Beverage was the most impressive sector with the divestment deals of leading companies from SCIC likes Vinamilk (VNM) or Sabeco (SAB). On the other hand, insurance and consumer durables & apparel were the two lowest growth performance sectors with -13.75%YoY and -5.92%YoY, respectively. Real estate business 217 showed a highest growth in 5 years Attracting a large amount of investment (+ 4.1% YoY) in the picture of positive changes from busines ses and government policies, real estate sector reached the highest rate of expansion in the total nu mber of enterprises in the industry over the same period of 216, up to 62% with 5,65 registered enterprises. Besides, the industry also had the highest new registered capital with VND388,376 bn, accounting for 3% of the total new registered capital. The banking industry experienced advantages in many events The highlighting events supporting for the banks in 217 were restructuring and handling bad debt through the Resolution No. 42, the Decree 69 and the renewed circular 6. Thanks to these decisions, the banks such as Vietcombank (VCB) or BIDV bank (BID) improved theirs healthy. More over, series of banks IPO (VIB, VP Bank (VPB), Lien Viet Post Bank (LVP) and Kien Long Bank, attracting foreign capital removement to the industry. Furthermore, foreign exchange reserves hit a record of USD52 bn and the State Bank of Vietnam (SBV) raised the ceiling of credit growth to 2% l ed the industry to more attract. The wave of virtual currency through the bitcoin channel and noncash payment era with the development of Live Bank model and QR code openned a rosy outlook for the industry. FMCG Growth Nationwide (217FY) 8.9% 5.1% 6.% 6.3% 5.6% 6.4% 2.9% 4.2% 3.6% 4.9% 7.9% 1.6% 1.9% 1.8% 1.4% 1.%.7% 4.9% 5.8% Source: Nielsen Vietnam Unit Value Growth Volumn Change (Weighted Value) Nominal Value Growth Growth of Real Estate Business (217FY) 1,6 12 1.22 1,2 8.9 8 6.35 5.78 8 4.99 4 4 8 75 95 11 127 213 214 215 216 217 Capital (in VND bn) Number of firms Capital/firm Source: National Business Registration Portal. Credit Growth (213FY 217FY) 2% 18.2% 17.3% 17.% 15% 14.2% 12.5% 1% 213 214 215 216 217 Source: World Bank 4
218.5.11 Food & Beverage (F&B) Bright outlook in rapid urbanization trend The massive launch of the international convinience shops: CircleK, Shop&Go and 7 Eleven in retailing sector is the driving force for businesses in F&B industry to expand the business networks, upgrading utility and quality of service. In 3Q.217, positive turnaround reached 6.4% (+2.9%YoY), mainly came from output growth (+5.8%YoY). Particularly, the beverage segment continues to show an impressive growth of 8.5%YoY in weighted value, of which, the production rose by 6.4%YoY. The main motivation of the sharply growth was divestment deals of State Capital Investment Corp. (SCI C) such as Vinamilk (VNM) or Sabeco (SAB). REPRESENTATIVE SECTORS (217FY) 7 6 5 4 3 2 1 1/17 2/17 3/17 4/17 5/17 6/17 7/17 8/17 9/17 1/17 11/17 12/17-1 -2 Real Estate Insurance Utilities Banks F&B Source: Bloomberg 5
218.5.11 218 Macro Outlook In general, 218 is remaining a rosy year for Vietnam s economy, leading to a positive outlook for Vietnam stock market. Particularly, GDP and Inflation are expected to grow as the same rate as 217 while Interest rate is forecast to be lower in the first half of 217 and go up during the months of the end of 218. The foreign exchange will be stable since the Government applies some method to keep it not moving significantly and the bond yields will rise since it was down at the lowest point level last year since the past 5 years. Forecast 218 GDP: 218 Vietnam GDP expects to keep the uptrend in 218 based on the growth of Total consumption, Capital flows into Vietnam (FDI), Government spending and net export-import. In detail, the Government forecast 218 GDP growth at the range of 6.5 6.7%YoY - same as 217. This number consisted with the estimation of international financial institutions such as Asian Development Bank (ADB ;6.5%), HSBC (6.4%) and World Bank (6.5%). Looking at the estimated global GDP growth from IMF, the number is 3.-3.5%YoY, thus with the growth rate of 6.5 6.7%, Vietnam is in the group of good GDP growth countries. The growing GDP is estimated based on four main indicators below: 218 Consumption: 218 consumption growth to be forecast at 11.7%YoY in the picture of growing consumption demand. The increasing number of middle-class people (double until 22 mentioned by BMI reports) and the higher salary (13-14%YoY) push the consumption demand up. In fact, 217 total consumer spending was VND3,934bn (+27.5%YoY). Vietnam GDP (213FY 218F) (VND tn ) 6, 5, 5.4 6. 6.7 6.2 6.8 6.7 (%) 8. 6. 4, 4. 3, 2. 2, 213 214 215 216 217 218F GDP GDP growth Source: GSO, Shinhan Investment Corp.. Vietnam Consumer Spending (213FY - 218F) (VND tn ) 5, Vietnam FDI (217FY 218FY) (USD mn) 17 4, 3, 12 2, 7 1, 213 214 215 216 217 218F Source: GSO, Shinhan Investment Corp 2 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Licensed Capital Registerred Capital Source: General Department of Custom, Shinhan Investment Corp. 6
218.5.11 Investment FDI: FDI is the primary factor contributing to GDP growth. In 218, FDI is expected to grow just slightly higher than the rate of 217 5% compared to the rate of 44.2% in 217. The motivation for the growth is not only thanks to preferential policies from the government, but also based on series of FTAs signed. In the 218 223 FDI strategy plan of Government, the fund will focus on four main sectors: Manufacturing, Services, Agriculture and Travel. Government spending: In 218, the government spending expected to increase at the modest rate (3%). There are three primary factors explained for this, including higher State revenue, increasingly spending on infrastructure and debt borrowing. According to 218 estimated State budget plan, in 218 the total State revenue is VND1.3 qn (+8.3%YoY) while the total State expenditure is VND1.5 qn (+7.1%YoY). Export Import: In 218, the Government conservatively forecast the growth rate for this segment at the rate of 8-1%YoY in the background of global trade agreements signed and the development of Vietnam economy. In 217, the trade surplus is USD2.7bn, of which, the growth rate of Export and Import values were 21.1%YoY and 2.8%YoY respectively, mentioned by GSO. Meanwhile, service trade deficit was USD3.9 bn, in which, transport services imports reached USD8.2 bn, accounting for 47.9% of total service imported. The total export and import value of 217 was VND425bn (+41.6%YoY). Vietnam Trade Balance (213FY 218F) (USD Bn) 3 25 2 15 1 5 (USD Bn) 4 2-2 213 214 215 216 217 218F Import (LHS) Export (LHS) Trade Balance (RHS) -4 Government Domestic Revenue Breakdown (1Q.218) Expected Salary Growth for 218 19.3% 3.6% 23.9% Non-state, commercial and non-commercial taxes Foreign invested enterprises The state-owned sector Collection of land use fees (%) 6 5 4 3 1.6% 13.3% 1.1% 19.3% Personal income tax Environmental Protection tax 2 1 Source: GSO, Shinhan Investment Corp Others India Vietnam Thailand China Indonesia Source: Korn Ferry, Shinhan Investment Corp. 7
218.5.11 State-Owned Enterprise (SOE) Divestment, IPO and Listing Deals State Owner Enterprise (SOE) divestment, IPO and listing are the three main factors supporting for the uptrend of the market and expanding the market size as well. 218 will be a year for these deals which continue the wave from 217. Following the Decree 126/217/NĐ-CP, many State companies have to go to public until 22, thus, creating a SOE divestment, IPO and listing wave. Some of big IPO deals from State in 218 are Hanoi Trade Corp. (Hapro), Vinafood II or Vietnam Textile Research Institue (VTRI). In addition, to make the market more active, many private companies also do the IPO and listing on stock markets such as Vinhomes, FPT Retail (FRT) or Techcombank (TCB). Stock Markets Movement After strongly increased last year, Vietnam stock market significantly went down since April of this year (-15.7%MoM). The fluctuation of global equity markets and this is the time of parliament meeting led investors to rebalance theirs porfolio. Besides, some political scandals also worry investors. However, for the long-term view, Vietnam stock market still hints an uptrend. This is supported by the upcoming IPO & listing deals, increasing FDI and growing consumption demand. The success of CP- TPP (Trans-Pacific Partnership Agreement) agreements also gave a positive effect on the growth of Vietnam stock market. In detail, the 1-year targets for VN-Index, HNX-Index and Upcom-Index are 1,597; 245 and 81 points respectively. Based on these targets, the expected profit the investors will gain is around 5%. The market expected to fluctuate in the period of between May and June 218 before officially recovering in July. In July, some new decrees will be announced as a result of parliament meetings in June. For example, PPP investments or Petroleum business decrees. These changes expected to boost Vietnam economy development, then give a postive effect on equity markets. In addition, the State will continue to divest its shares at joint stock companies. Normally, these events will be hold in the last half of the year which is a strong motivation factor for the uptrend of the market. No. Period Events Affect on stock Market 1 End of May 218 - Vinhomes (VHM) will be listed - Slightly Recover 2 June 218 - CoverWarrant will be launched - Parliament Meetings end - Up - Fluctuate - Techcombank (TCB) will be listed 3 July 218 - New Decree expected to be applied - First half of the year macro economic data released - 2Q.218 business results season 4 September 218 - National Holidays - Vietnam Airlines (HVN) will move to HOSE 5 4Q.218 - Divestment Deals - Up - Expected to be Up - Fluctuate - Slightly effect - Up - Foreign Owner Limitation (FOL) expansion 8