Vietnam Strategy 2022
Alastair Macdonald, CFA
Head of Research
18 March 2011

+84 28 3914 3588 ext. 105

From pandemic to endemic
Vietnam’s GDP growth of 2.6% in 2021 fell well short of our and consensus
expectations at the start of the year, primarily due to the ‘lost quarter’ in Q3 2021 caused
by substantial restrictions to combat Vietnam’s fourth wave of COVID-19. In contrast,
the VN-Index surprised on the upside with a gain of 36% as domestic retail investors
drove trading volumes and the index to new record highs. While global markets face
headwinds in 2022 from slowing growth and monetary tightening to combat inflation,
the outlook for Vietnam is relatively bright. We expect a strong recovery in GDP growth
combined with relatively modest increases in interest rates to support a 13% gain in the
VN-Index to our unchanged end-2022 target of 1,700.

Long Ngo
Associate Director

+84 28 3914 3588 ext. 123
Phap Dang, CFA
Associate Director

+84 28 3914 3588 ext. 143
Duong Dinh
Senior Manager

+84 28 3914 3588 ext. 140

Macro: FDI attractions endure, policy to remain supportive in 2022
We forecast above-trend GDP growth of 7.8% in 2022 as disruptions from the COVID19 pandemic progressively fade. While the pandemic has had a material negative
impact on GDP, employment and household income, the manufacturing sector has
shown remarkable resilience, achieving growth of 5.8% in 2020 and 6.4% in 2021. We
believe Vietnam’s attractions as a destination for foreign direct investment (FDI) have
endured the pandemic well and the FDI/export-led growth model will continue to
support premium GDP growth over the next five to 10 years. Although we expect
average CPI inflation to increase from a six-year low of 1.8% in 2021, we believe it will
remain manageable within the Government’s target cap of 4.0% and there should not
be undue pressure for substantial hikes in interest rates. Meanwhile, the Government
has proposed a USD15bn package for 2022-2023 to support socioeconomic recovery
and we expect fiscal policy to be more supportive than it was in 2021.

Hong Luu
Senior Manager

+84 28 3914 3588 ext. 120
Duc Vu
Senior Manager

+84 24 6262 6999 ext. 363
Nam Hoang
Manager

+84 28 3914 3588 ext. 124
Luong Hoang
Manager

+84 24 6262 6999 ext. 364


Market outlook: Earnings growth to trump interest rate headwind

Selected forecasts
VCSC Macro Forecasts for 2022
GDP (nominal):
USD402 bn
GDP growth (real):
7.8%
Inflation (average):
3.0%
Credit growth:
14.2%
VND vs USD:
0.0%
VCSC Market Forecasts
VN-Index target year-end 2022:
VN-Index target year-end 2023:
VN-Index expected TSR, 2022F:
VN-Index EPS growth, 2022F:

1,700
1,900
15%
23%

We maintain our year-end 2022 target for the VN-Index of 1,700 — 13% above the
index’s 2021 closing level of 1,498 — and set a provisional 2023 target of 1,900. Based
on our VN-Index EPS growth forecasts of 36%/23%/21% for 2021/22/23F, respectively,
these targets imply end-2022 trailing/12-month forward P/Es of 15.9x/13.1x,
respectively. The key downside risks to our forecast scenario are: 1) a renewed

healthcare crisis that results in disruption to production, trade and FDI; 2) higher-thanexpected domestic inflation and interest rates pressuring equity valuations as well as
retail investor participation; 3) tighter conditions in global markets that limit offshore
funding options for Vietnamese companies; 4) escalation in geopolitical tensions
between the US and China that disrupts Vietnam’s trade; and 5) domestic policy
disappointments. Potential upside risks are stronger than expected: 1) recovery in
global mobility; 2) new FDI registrations; 3) fiscal stimulus; 4) infrastructure investment;
and 5) market developments such as reforms that accelerate potential upgrade to
emerging market classification and sizeable new IPOs at reasonable prices.

Stock baskets for 2022

After lukewarm performance relative the VN-Index in H1 2021, our ‘bull basket’ and
Bull basket: TCB, VPB, MBB, STB, MSN, ‘bear basket’ selections from our analysts’ top picks showed substantial
MWG, PNJ, CTR, FPT, VHC, VHM, DXS,
outperformance on an equal weighted basis in H2 2021. Our refreshed baskets for H1
HPG, DGC, STK, VEA, LHG, PHR, KBC,
2022 are illustrated in the left-hand column and discussed in more detail inside this
VTP, PLX, BWE, TDM
report. To recap, our bull basket contains stocks that we believe should outperform in
Bear basket: ACB, VCB, SAB, VNM, IMP, a rising market, while our bear basket contains stocks with defensive characteristics
that should support relative outperformance if the market declines.
VRE, SCS, DPM, DCM, NT2
See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 1


Contents


HOLD

From pandemic to endemic ......................................................................................................... 3
Vietnam Macro: FDI attractions endure, policy to remain supportive in 2022 ........................... 22
Market data ................................................................................................................................ 43
Banking Sector: Spotlight on December 2021 and Q1 2022 credit growth as well as Q4 2021
restructured loans ...................................................................................................................... 61
Other Financials: Outlook is bright, but valuation looks full ....................................................... 78
Consumer Sector: The big get bigger ...................................................................................... 100
Export-oriented companies: Positive momentum continues .................................................... 117
Real Estate: Dynamic pre-sales, M&A and capital raising activities to support development
pipeline ..................................................................................................................................... 130
Construction Materials: Domestic demand to recover, input prices to stabilize at high levels 148
Industrials & Transportation: Major beneficiaries of Vietnam’s easing travel restrictions ....... 166
Oil & Gas Sector: Capitalizing on strong urea, resilient oil prices ........................................... 191
Power & Water Sector: Ready for industrial recovery ............................................................. 216
VCSC Rating System............................................................................................................... 244

See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 2


From pandemic to endemic

HOLD


Vietnam’s GDP growth of 2.6% in 2021 fell well short of our and consensus expectations at the
start of the year, primarily due to the ‘lost quarter’ in Q3 2021 caused by substantial lockdowns to
combat Vietnam’s fourth wave of COVID-19. In contrast, the VN-Index surprised on the upside
with a gain of 36% as domestic retail investors drove trading volumes and the index to new record
highs. As a result, the VN-Index outperformed both global markets and neighboring ‘TIPS’ markets
over the past two years since the end of 2019.
Google mobility indicators show an encouraging recovery in October 2021 following a rapid rollout
of vaccinations and the lifting of lockdown restrictions in HCMC and neighboring provinces.
However, the pace of recovery appears to have slowed substantially since early November 2021.
New virus case numbers nationwide have increased substantially following the economic
reopening and although new deaths attributed to COVID-19 have remained lower than during the
fourth wave in Q3 2021, they have been increasing since mid-November 2021. We believe the
more modest trajectory of recovery in mobility can be attributed to continuing risk-aversion that is
limiting a full return to normal activities in addition to the fact that certain restrictions have remained
on higher risk businesses such as bars and nightclubs. We note that Google’s mobility indicator
for ‘workplaces’ in Vietnam has not been updated beyond October 19, 2021.
Figure 1: Google mobility indicators, Vietnam (7DMA)
40
20

Figure 2: Mobility indicators (7DMA) & GDP growth
20

(%)

8%

(%)

6%


0

0
-20

4%
2%

-20

0%

-40
-60
-80

Second
Social
wave
distancing

-100
Jan-20

Jul-20

-40
Third wave,
Tet holiday

Jan-21

Fourth wave
Jul-21

Jan-22

Retail & recreation

Grocery & pharmacy

Transit stations

Workplaces

-2%
-4%

-60

-6%
-80
Jan-20

Jul-20

GDP YoY, RS

Jan-21


Jul-21

Retail & recreation

-8%
Jan-22
Workplaces

Source: Google, VCSC (data to December 22, 2021)

Source: Google, General Statistics Office of Vietnam (GSO), VCSC
(Google data to December 22, 2021)

Figure 3: VN-Index

Figure 4: VN-Index & ADTV

1,600

(Index)

(index)

(USD mn)

1,600

1,600

1,400


1,400

1,400
1,200

1,200
1,000

1,200

800

1,000

1,000

600
400

800

800

600
Dec-19

600
Dec-19


Jun-20

Dec-20
VN Index

Source: Bloomberg, VCSC

See important disclosure at the end of this document

Jun-21

Dec-21

200
Jun-20

Dec-20

Jun-21

Value traded via order matching 7DMA, RS

0
Dec-21
VN-Index

Source: Bloomberg, VCSC

www.vcsc.com.vn | VCSC<GO>


January 7, 2022 | 3


Figure 5: VN-Index & MSCI global index performance, USD

Figure 6: VN-Index & ‘TIPs’ index performance, USD

180

180

(index)

160

160

140

140

HOLD
(index)

120

120

100
100


80

80

60

60
Dec-19

Jun-20
Dec-20
VN Index, USD
MSCI Emerging

Jun-21
Dec-21
MSCI Developed
MSCI Frontier

Source: Bloomberg, VCSC

40
Dec-19

Jun-20
Dec-20
VN Index
Indonesia


Jun-21
Thailand
Philippines

Dec-21

Source: Bloomberg, VCSC

Accelerating growth with manageable inflation in 2022
While global equity markets face headwinds in 2022 from slowing growth and monetary tightening
to combat inflation, the outlook for Vietnam is relatively bright. We expect a strong recovery in GDP
growth combined with relatively modest increases in interest rates to support a 13% gain in the
VN-Index to our unchanged end-2022 target of 1,700.
We forecast GDP growth of 7.8% and CPI inflation of 3.0% for Vietnam in 2022F, while Bloomberg
consensus forecasts 7.2% and 3.5%, respectively. Meanwhile, Bloomberg consensus forecasts
global growth to decelerate from 5.8% in 2021 to 4.4% in 2022. Vietnam is thus expected to enjoy
a strong recovery in growth in 2022, in contrast to slowing global growth as the initial bounce back
from global recession in 2020 starts to fade.
Bloomberg consensus forecasts global CPI inflation to remain elevated relative to recent years at
3.9% in 2022, unchanged from 2021. Whereas CPI inflation in Vietnam is expected to increase in
2022, this is from a very low base in 2021 and should not be viewed as alarming in the context of
Vietnam’s growth and current stage of development, in our view. This relatively sanguine view of
an expected increase in inflation in Vietnam is reflected in our — and consensus — forecasts for
only modest increases in interest rates in Vietnam in 2022 and 2023, in contrast to larger forecast
increases in some Western economies, most notably in the United States.
Figure 7: Consensus GDP growth

Figure 8: Consensus CPI inflation

(%)

8

(%)
7.1

7.2

7.0

6
4

6.8

5.8
3.6

4.4
2.8

2.9

2.6

3.6

5.0
4.0

3.6 3.5


3.5
2.8

3.0

3.9

2

3.3
2.9

1.8

2.0

0

3.9
3.5

3.2 3.2

1.0

-2
-4
2018


2019

-3.1
2020

2021F

World

Vietnam

0.0
2022F

2023F

Source: Bloomberg, VCSC (data as of December 22, 2021)

See important disclosure at the end of this document

2018

2019

2020
World

2021F

2022F


2023F

Vietnam

Source: Bloomberg, VCSC (data as of December 22, 2021)

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January 7, 2022 | 4


Figure 9: Consensus GDP growth, selected regions

Figure 10: Consensus CPI inflation, selected regions

HOLD

(%)

(%)

7.2
7.1
7.0
6.8
8
5.8
6
4.4

3.6
3.6
2.9
2.8
2.6
4
2
0
-2
-4
-3.1
-6
-8
2018
2019
2020
2021F
2022F
2023F

5
4 3.6

3.5 3.5
2.8

3

3.2


3.9
3.2

3.9

3.5
2.9

1.8

2
1
0
-1

World

North America

Western Europe

2018
World

Japan

Asia Ex-Japan

Vietnam


Japan

2019

2020
2021F
2022F
2023F
North America
Western Europe
Asia Ex-Japan

Vietnam

Source: Bloomberg, VCSC (data as of December 22, 2021)

Source: Bloomberg, VCSC (data as of December 22, 2021)

Figure 11: Consensus GDP growth, ASEAN

Figure 12: Consensus CPI inflation, ASEAN

(%)
10

(%)
7.1

7.2


7.0

5

2.9

6.8

2.6

0
-5
-10

2018

2019

Indonesia

Malaysia

2020

2021F

Philippines

2022F
Thailand


6
5
4
3
2
1
0
-1
-2

3.5

3.3

1.8

2023F

2018

Vietnam

3.5

3.2

2.8

2019


Indonesia

2020

Malaysia

2021F

Philippines

2022F

Thailand

2023F

Vietnam

Source: Bloomberg, VCSC (data as of December 22, 2021)

Source: Bloomberg, VCSC (data as of December 22, 2021)

Figure 13: Consensus central bank policy rates

Figure 14: Change in consensus policy rates YoY
(ppts)

(%)
7.00


6.25

6.00

6.00
5.00

4.00

4.00

4.60

4.20

4.00
3.00

3.3

2.50
1.75

2.00
1.00

1.55
0.25


0.25

2020

2021E

0.75

0.00
2018
Eurozone
Australia

2019

United Kingdom
Asia Ex-Japan

2022F

2023F

United States
Vietnam

Source: Bloomberg, VCSC (data as of December 22, 2021)

See important disclosure at the end of this document

1.50

1.00
0.50
0.00
-0.50
-1.00
-1.50
-2.00
-2.50

1.00
0.00

0.00 0.00

0.80
0.40

0.50
0.20

-0.25
-0.75

2018
Eurozone
Australia

2019

-1.50

-2.00
2020
2021E
United Kingdom
Asia Ex-Japan

2022F

2023F

United States
Vietnam

Source: Bloomberg, VCSC (data as of December 22, 2021)

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 5


Macro: FDI attractions endure, policy to remain supportive in 2022

HOLD

FDI/export-led growth model remains intact

We forecast above-trend and higher than consensus GDP growth of 7.8% in 2022 as disruptions
from the COVID-19 pandemic progressively fade. While the pandemic has had a material impact
on GDP, employment and household income, the manufacturing sector has showed remarkable
resilience, achieving growth of 5.8% in 2020 and 6.4% in 2021.

We believe Vietnam’s attractions as a destination for foreign direct investment (FDI) have endured
the pandemic well and the FDI/export-led growth model will continue to support premium GDP
growth over the next five to 10 years. While FDI disbursements did not grow during 2020 and 2021,
they remained broadly stable at around USD20bn per annum. Although new FDI registrations
declined in 2020 and did not fully recover to the 2019 level in 2021, we believe this was primarily
due to travel restrictions and general uncertainty caused by the pandemic and we are encouraged
by the fact that the ratio of new registrations to disbursements remained within the broad range of
1.3x to 2.3x that we have seen in Vietnam over the past eight years.
During the pandemic, manufacturing remained the largest single category of new FDI registrations
at just over 50% of the total in 2020 and 2021 — in line with the average of the past five years.
Figure 15: Vietnam’s GDP growth

Figure 16: Google mobility indicators, Vietnam (7DMA)

9.0%
7.8%
8.0%
7.0%
6.8% 7.1% 7.0%
6.7%
6.2%
7.0%
6.0%
6.0%
5.0%
4.0%
2.9% 2.6%
3.0%
2.0%
1.0%

0.0%

GDP growth

40
20

(%)

0
-20

Activity to
recover further
in 2022

-40

-60
-80
-100
Jan-20

Average 2014 - 2019

Jul-20

Jan-21

Jul-21


Jan-22

Jul-22

Retail & recreation

Grocery & pharmacy

Transit stations

Workplaces

Source: GSO, VCSC

Source: Google, VCSC (data to December 22, 2021)

Figure 17: Growth in GDP and manufacturing

Figure 18: Registered FDI (12M rolling sum)

16%
14%
12%
10%
8%
6%
4%
2%
0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

GDP

Manufacturing

Source: GSO, VCSC

See important disclosure at the end of this document

(USD bn)
45
40
35
30
25
20
15
10
5
0
Dec-16

Jan-23

Dec-17

Manufacturing

Dec-18


Utilities

Dec-19

Dec-20

Real estate

Dec-21

Others

Source: Foreign Investment Agency (FIA), VCSC

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January 7, 2022 | 6


Figure 19: Registered and disbursed FDI (rolling 12M sum)
(x)

(USD bn)
50
45
40
35
30
25

20
15
10
5
0

2.5
2.0
1.5
1.0
0.5
0.0

Dec-13

Dec-15

Dec-17

Reg/Disbursed (RS)

Dec-19

Disbursed

Dec-21

Figure 20: Growth in FDI (rolling 12M sum)

HOLD


(YoY, %)
60
50
40
30
20
10
0
-10
-20
-30
-40
Dec-13

Registered

Dec-15

Dec-17

Registered FDI

Dec-19

Dec-21

Disbursed FDI

Source: FIA, VCSC


Source: FIA, VCSC

Figure 21: Net FDI inflows as % GDP

Figure 22: Exports of goods & services as % GDP

12

120

10

100

8

80

6

60

4

40

2

20


0

0
1990 1994 1998 2002 2006 2010 2014 2018 2022
Vietnam

Thailand

China

1990 1994 1998 2002 2006 2010 2014 2018 2022

World

Vietnam

Thailand

China

World

Source: World Bank, VCSC (VN data to 2021, others to 2019)

Source: World Bank, VCSC (data to 2020)

Figure 23: Manufacturing value-added, indexed

Figure 24: Share of global manufacturing value added, %


550
500
450
400
350
300
250
200
150
100
50

China 28.6%

2.0

Index, 2000 = 100

30
25

1.5
20
1.0

15
10

0.5

5
Vietnam 0.34%

0.0
2000

2004

2008

2012

2016

2020

2000

2004

2008

2012

2016

2020

Vietnam


World

Indonesia

Vietnam

Indonesia

Malaysia

Malaysia

Philippines

Thailand

Philippines

Thailand

China (RS)

Source: World Bank, VCSC (data to 2020)

See important disclosure at the end of this document

Source: World Bank, VCSC (data to 2020)

www.vcsc.com.vn | VCSC<GO>


January 7, 2022 | 7

0


Policy to remain supportive in 2022

HOLD

Although we expect average CPI inflation to rise from a six-year low of 1.8% in 2021 to 3.0% in
2022, we believe it will remain manageable within the Government’s target cap of 4.0% and there
should not be undue pressure for substantial hikes in interest rates. Consensus forecasts policy
rates to increase by only 20 bps/40 bps in 2022/23F, respectively, and our banking team expects
a similar cumulative increase in the deposit cap (on term deposits of less than six months maturity)
of 70 bps over the next two years. We expect recovering growth and demand for funding to drive
a modest upturn in deposit rates while we expect rising US interest rates will also push Vietnam’s
Government bond yields higher in 2022. However, we expect the interest rate headwind to be
relatively mild in Vietnam, which has maintained positive real deposit rates throughout the
pandemic, in contrast to negative real rates in the US and other parts of the world.
Meanwhile, the Government has proposed a USD15bn package for 2022-2023 to support
socioeconomic recovery and we expect fiscal policy to be more supportive than it was in 2021.
Vietnam’s budget deficit has expanded by considerably less than in many other parts of the world
during the pandemic, leaving considerable ‘fiscal room’ for incremental support and stimulus
measures over the next couple of years.
Figure 26: 10Y Gov’t bond yields and VN-US spread

Figure 25: US & Vietnam inflation, BCOM Index*
(index)

(%)

7
6
5
4
3
2
1
0
-1
-2
Dec-14

120

8

110

7

100

6

90

5

80
70

60
50
Dec-15

Dec-16

Dec-17

BCOM Index, RS

Dec-18

Dec-19

VN CPI YoY

Dec-20

(ppts/%)

Dec-21

4
3

2
1
0
Dec-14


Dec-15

Dec-16

Dec-17

VN-US 10Y

US CPI YoY

Dec-18

VN 10Y

Source: Bloomberg, VCSC (* a diversified commodity price index)

Source: Bloomberg, VCSC

Figure 27: 10Y Gov’t, BIDV deposit rates & inflation (%)

Figure 28: Fiscal budget as % GDP

8

0

7

-2


6

-4

5

-6

4

-8

3

-10

2

-12

1

-14

0
Dec-18

-2.1

-2.2


Dec-19

-3.2

Dec-20

Dec-21

US 10Y

-3.8

-4.9

-5.1

-16
Dec-19

Dec-20

Dec-21

2018

2019

2020


2021E

2022F

2023F

CPI inflation 3MMA

VN 10Y Gov't

Latin America

North America

Western Europe

3M depo

12M depo

Japan

Asia ex-Japan

Vietnam*

Source: Bloomberg, BIDV, VCSC

See important disclosure at the end of this document


Source: Bloomberg, VCSC (* VCSC f’casts, ex-principal repayment)

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 8


Market Outlook: Earnings growth to trump interest rate headwind

HOLD

We maintain our year-end 2022 target for the VN-Index of 1,700 — 13% above the index’s 2021
closing level of 1,498 — and set a provisional 2023 target of 1,900. Our 2022 index target is
consistent with a market-cap weighted average upside to our target prices for stocks under our
coverage. Based on our VN-Index EPS growth forecasts of 36%/23%/21% for 2021/22/23F,
respectively, these targets imply end-2022 trailing/12-month forward P/Es of 15.9x/13.1x,
respectively. Our VN-Index EPS forecasts are broadly in line with consensus, which forecasts EPS
growth of 34%/27%/23% for 2021/22/23F, respectively.
Figure 29: EPS growth forecasts, VN-Index targets and implied P/Es at targets
2018

2019

2020

2021

2022F

2023F


VN-Index*

893

961

1,104

1,498

1,700

1,900

Change, %

-9

8

15

36

13

12

Index EPS


59.2

63.6

64.0

86.9

107.1

129.5

Change, %

10

9

-1

36

23

21

TTM P/E at targets, x

15.1


15.1

17.3

17.2

15.9

14.7

12M Fwd P/E at targets, x

14.1

15.0

12.7

14.0

13.1

N/A

P/E at 31-Dec-21 index, x

1,498

17.2


14.0

11.6

0

13

27

Upside to targets, %

Source: Bloomberg, VCSC (* VCSC target for 2022 and illustrative target for 2023; VCSC index EPS forecasts
derived from applying aggregate growth rates for our HSX coverage to actual 2021 index EPS)

The combination of interest rate cuts in response to the pandemic in 2020 and positive revisions
to earnings forecasts since Q3 2020 has resulted in a surge in retail investor participation and a
spectacular bull run for the VN-Index since its recent low in Q2 2020 during peak uncertainty over
COVID-19. We believe interest rates have now bottomed, dampening one of these drivers.
Figure 30: VN-Index consensus* EPS forecasts
(EPS)
150
130
110

Figure 31: VN-Index consensus* 12M forward EPS
(Index)

VN-Index, RS

2017
2019
2021F
2023F

2016
2018
2020
2022F

1,700
1,500
1,300

90

1,100

70

900

50

700

30
Dec-15

Dec-17


Dec-19

Source: Bloomberg, VCSC (* Bloomberg consensus)

500
Dec-21

1,700

(EPS)

(Index)
1,500

120
110
100

1,300

90

1,100

80
70

900


60
700

50

500
Dec-15

Dec-17
VN-Index

Dec-19

40
Dec-21

Consensus 12M fwd EPS, RS

Source: Bloomberg, VCSC (* Bloomberg consensus)

We believe earnings growth should trump modest increases in interest rates in 2022, supporting
further upside for the market. However, with consensus earnings growth forecasts above 20% for
both 2022F and 2023F and ADTV and velocity of turnover (ADTV/market cap) already at very high
levels relative to the market’s history, delivery against consensus expectations for earnings growth
could become increasingly critical to sustain retail investor participation and the bull market.
See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 9



Figure 32: Changes in consensus EPS forecasts, deposit rates and sentiment
QoQ change

Q4 2021
HOLD

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Earnings revisions

Flat

Negative

Stabilizing


Positive

Positive

Positive

Flat

Positive

Deposit rates

Flat

Falling

Falling

Falling

Flat

Flat

Flat

Flat

Negative


Positive

Flat

Positive

Positive

Positive

Flat

Positive

VN-Index (EOP value)

663

825

905

1,104

1,191

1,409

1,342


1,498

VN-Index change QoQ

-31%

25%

10%

22%

8%

18%

-5%

12%

Investor sentiment*

Source: Bloomberg, Fiinpro, VCSC (*Based on QoQ changes in ADTV, brokerage accounts & margin loans)

Figure 33: VN-Index, ADTV & velocity of turnover
(index,
ADTV)

1,600


Figure 34: VN-Index, brokerage accounts, margin loans
(%)

1,400

(index)

120

1,000
800
600

1,600

100

1,400

80

1,200

60

1,000

1,200

40


VN-Index
Brokerage accounts, k RS
Margin loans, USD mn RS

(accounts,
loans)

8,000
6,000

800

4,000

600

400
20

200
0
Dec-13

Dec-15

VN-Index

Dec-17


ADTV USD mn

Dec-19

0
Dec-21

400
200
0
Dec-13

Velocity of turnover, RS

Source: Bloomberg, VCSC

2,000

Dec-15

Dec-17

Dec-19

0
Dec-21

Source: Bloomberg, Fiinpro, VSD, VCSC

Whereas the TTM P/E for the VN-Index of 17.5x looks moderately expensive vs the average since

end-2014 of 15.7x, the consensus 12-month forward P/E of 13.9x is in line with the average since
end-2014 of 14.2x. This does not look like a demanding valuation, in our view, given our
expectations for double-digit earnings growth and for interest rates to remain close to historical
lows. We believe there is scope for P/E multiples to hold around current levels even if interest rates
increase modestly in line with our and consensus forecasts and that earnings growth can drive
further upside in the market.
Figure 35: VN-Index TTM P/E since Dec-2014

Figure 36: VN-Index 12M forward P/E* since Dec-2014

22

22

20

(x)

18

18

16

16

14

14


12

12

10

10

8
Dec-14

(x)

20

Dec-15

Dec-16

TTM P/E
+2SD

Dec-17

Dec-18

Mean
-1SD

Source: Bloomberg, VCSC


See important disclosure at the end of this document

Dec-19

Dec-20

+1SD
-2SD

Dec-21

8
Dec-14

Dec-15

Dec-16

12M Fwd P/E
+2SD

Dec-17

Dec-18

Dec-19

Mean
-1SD


Dec-20

Dec-21

+1SD
-2SD

Source: Bloomberg, VCSC (* Bloomberg consensus)

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 10


We note that Government bond yields have declined by significantly more than bank deposit rates
over the past three years. For example, Vietnam’s 10Y Government bond yield has dropped by
about 3 ppts from just over 5% at the end of 2018 to just over 2% currently, while term deposit
rates for maturities of up to 12 months at BIDV — one of the largest State-owned commercial
banks (SOCBs) — have fallen by around 1.5 ppts over the same period.

HOLD

We believe this divergence can be attributed to substantial ‘captive’ domestic institutional demand
for Government bonds, along with compression in sovereign yields in major economies in recent
years. Given that SOCBs offer quasi-sovereign risk and bank deposits are the practical home for
individual domestic investors’ liquidity, we believe SOCB deposit rates are a more meaningful
proxy for risk-free rates in the Vietnamese market than Government bonds; as such, we rebased
our ‘house’ cost of equity assumptions accordingly in H2 2021 to use an average SOCB 12-month
deposit rate as our risk-free rate. This has two implications for our outlook in 2022.

First, the current yield gap between the consensus 12M forward earnings yield on the VN-Index
and the 12M deposit rate is much lower than the corresponding yield gap vs the 10Y Government
bond yield. This implies that although equities are cheaper relative to cash than they were prior to
the recent 2020-2021 bull market, they do not look as cheap on this measure as they do relative
to Government bonds. Second, the fact that bank deposit rates have not fallen as much as
Government bond yields in the past three years may suggest that term deposit rates may not rise
as much as bond yields in an environment of recovering growth and tightening liquidity.
Figure 37: 10Y Gov’t yield & BIDV deposit rates (%)

Figure 38: 12M Fwd EPS yield, 10Y Gov’t, 12M depo (%)

8
7
6
5
4
3
2
1
0
Dec-18

Dec-19
VN 10Y Gov't

Dec-20

3M depo

6M depo


Dec-21
12M depo

10
9
8
7
6
5
4
3
2
1
0
Dec-18

Dec-19

BIDV 12M depo

Dec-20
VN 10Y Gov't

Dec-21
12M Fwd EPS yield

Source: Bloomberg, BIDV, VCSC

Source: Bloomberg, VCSC (* Bloomberg consensus)


Figure 39: 12M Fwd yield gap vs 10Y Government bond

Figure 40: 12M Fwd yield gaps vs 10Y Gov’t & 12M depo

8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0

8.0
(ppts)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
Dec-18


(ppts)

Dec-14

Dec-15

Dec-16

Yield gap
+2SD

Dec-17

Dec-18

Mean
-1SD

Source: Bloomberg, VCSC

See important disclosure at the end of this document

Dec-19

Dec-20

+1SD
-2SD


Dec-21

Dec-19

Yield gap vs 12M depo

Dec-20

Yield gap vs 10Y Gov't

Source: Bloomberg, BIDV, VCSC

www.vcsc.com.vn | VCSC<GO>

Dec-21

January 7, 2022 | 11


Downside risks

HOLD

The key downside risks to our forecast scenario are: 1) a renewed healthcare crisis that results in
disruption to production, trade and FDI; 2) higher-than-expected domestic inflation and interest
rates pressuring equity valuations and retail investor participation; 3) tighter conditions in global
markets that limit offshore funding options for Vietnamese companies; 4) escalation in geopolitical
tensions between the US and China that disrupt Vietnam’s trade; and 5) domestic policy
disappointments.
1. Renewed healthcare crisis

Figure 2 above illustrates impact of restrictions on activity to combat the pandemic on GDP. Figure
41 below suggests that the equity market 1) anticipated forthcoming periods of increased
restrictions (such that near-term market lows preceded troughs in real economic activity) and 2)
suffered a much more modest decline in anticipation of such periods after the initial elevated shock
and uncertainty at the start of the pandemic. While the maximum drawdown in the VN-Index prior
to the first social distancing restrictions in Vietnam in Q2 2020 was 34%, the maximum drawdowns
ahead of each of the four subsequent waves of the virus ranged between 12% and 14%, including
the drawdown ahead of the fourth wave that resulted in the period of greatest disruption to the
economy and loss of output in Q3 2021.
Our base case scenario is that the COVID-19 pandemic in Vietnam — along with much of the rest
of the world — is already starting the transition to become an endemic pathogen alongside other
established diseases; furthermore, a combination of higher vaccination rates, precautionary
behavior and operational innovations will allow the economy to operate more fully even during
periods of elevated virus case numbers. However, if the perceived threat to public health is again
so high that further material restrictions have to be imposed, the risk of renewed disruption to
production and income remains.
If we assume a similar market response to another looming period of restrictions to limit the spread
of the virus, we might expect the VN-Index to decline by no more than around 10% in anticipation
of the resultant disruption to the economy. However, another lengthy period of severe disruption
such as the Q3 2021 lockdown in HCMC and neighboring provinces could potentially lead to tipping
points for businesses that have thus far managed to survive the pandemic and renewed concerns
for the financial system. We believe banks have thus far been able to absorb and even grow their
way through the asset quality stress caused by the pandemic. However, this might not remain a
viable strategy in the face of further significant increases in impaired loans.
Figure 41: Google workplaces mobility and VN-Index
1,600
1,400
1,200
1,000
800

600
Dec-19

Jun-20

Dec-20

Workplaces, RS
Source: Bloomberg, Google, VCSC

See important disclosure at the end of this document

Jun-21

20
10
0
-10
-20
-30
-40
-50
-60
-70
Dec-21

Figure 42: New COVID-19 cases, daily
18,000
16,000
14,000

12,000
10,000
8,000
6,000
4,000
2,000
0

VN-Index, LS

HCMC

Other provinces/cities

Source: Ministry of Health (MoH), VCSC

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 12


Figure 43: COVID-19 vaccinations, daily

Figure 44: Cumulative COVID-19 vaccinations

Millions
2.5

HOLD


Millions
160
140

2.0

120
100

1.5

80
1.0

60
40

0.5

20
0.0

0

Source: MoH, VCSC

Source: MoH, VCSC

Figure 45: New cases & new deaths, 30D rolling sums


Figure 46: New cases 30D rolling sum and deaths/cases

600,000

40,000
35,000

500,000

600,000

6.0%

500,000

5.0%

400,000

4.0%

300,000

3.0%

200,000

2.0%

100,000


1.0%

0

0.0%

30,000
400,000

25,000

300,000

20,000
15,000

200,000

10,000
100,000

5,000

0

0

New cases, LS


Source: MoH, VCSC

New deaths, RS

New cases, LS

New deaths/new cases, RS

Source: MoH, VCSC

2. Higher-than-expected inflation and interest rates
As discussed above, we believe lower interest rates were a significant factor driving the bull market
since the low at the beginning of Q2 2020 — along with upward revisions in consensus earnings
forecasts. Lower rates supported increasing retail investor participation in the market via both a
reduced opportunity cost of investing in stocks and cheaper and increasing availability of margin
loans from brokerage firms.
Interest rates are higher in Vietnam than in most of the rest of the world and we expect the balance
of payments to remain in surplus, hence we see no need for the State Bank of Vietnam (SBV) to
raise rates to protect the dong. However, if inflation were to increase more than expected, this
could lead to higher-than-expected interest rates that could have a negative impact on the market
via higher risk-free rates and borrowing costs — including higher rates on margin lending.
As at the end of Q3 2021, total margin loans did not look obviously alarming relative to either total
market cap (just over 2%) or relative to brokers’ equity (at just over 120% vs the regulatory cap of
200%). We do not yet have data for Q4 2021 margin loans. However, there could be greater
leverage in practice than both measures suggest. The free float of many listed companies is
considerably lower than 100%, hence margin loans vs free float market cap is rather higher than
vs total market cap. And while aggregate margin loans vs aggregate brokers’ equity does not look
stretched, the position varies considerable amongst individual broking firms (as discussed in the
‘Other financials’ section of this report).
See important disclosure at the end of this document


www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 13


Figure 48: Margin loans vs brokers’ equity

Figure 47: Margin loans vs total market cap
(USD mn)

(%)

7,000

2.5%

HOLD

(%)

(USD mn)
7,000

140%

6,000

120%


5,000

100%

4,000

1.5%

4,000

80%

3,000

1.0%

3,000

60%

2,000

40%

1,000

20%

6,000


2.0%

5,000

2,000
0.5%

1,000
0
Dec-13

Dec-15
Margin loans

Dec-17

0.0%
Dec-21

Dec-19

0
Dec-13

Margin loans/market cap, RS

Source: Bloomberg, Fiinpro, VCSC

Dec-15


Dec-17

Margin loans

Dec-19

0%
Dec-21

Margin loans/brokers' equity, RS

Source: Fiinpro, VCSC

3. Tighter conditions in global markets
There has been substantial interest in offshore debt issuance — and potentially also in offshore
equity issuance — from several large companies in 2021, including several financial institutions,
real estate developers and automobile manufacturer VinFast. Tighter conditions in debt and/or
equity markets that limit offshore funding options for Vietnamese companies could pose some
constraints on expansion plans and increase overall funding costs.
4. Escalation in geopolitical tensions
Vietnam’s two largest trading partners are the US (28.4% of Vietnam’s exports in 2021) and China
(33.1% of Vietnam’s imports in 2021). The two countries together accounted for 41% of Vietnam’s
total merchandise trade in 2021. Vietnam has pursued a neutral path throughout the rising
geopolitical tensions between the US and China in recent years and an investigation into Vietnam’s
trade with the US that was initiated in late 2020 by the US Trade Representative (USTR) concluded
in July 2021 that no trade action would be taken against Vietnam. Our assumption is that Vietnam
will continue to trade with both countries with no major changes to current terms. However, there
is a risk that further developments between the US and China might interfere with Vietnam’s trade.
For example, if the US were to impose more stringent rules of origin restrictions on imports into
the US, this could potentially impact Vietnamese exports that use raw materials or intermediate

goods imported into Vietnam from China.
Figure 49: Vietnam’s goods exports by destination, 2021

Figure 50: Vietnam’s goods imports by origin, 2021
4.7%

US

US
21.9%

China
28.4%

EU
ASEAN

6.0%

South Korea

6.5%

16.6%

8.7%
11.9%

China


21.1%

Japan

33.1%

6.8%

See important disclosure at the end of this document

ASEAN
South Korea

16.9%

Japan

Others

12.4%
5.1%

Source: Vietnam Customs, GSO, VCSC

EU

Others

Source: Vietnam Customs, GSO, VCSC


www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 14


5. Domestic policy disappointments

HOLD

We believe the market is already anticipating some benefit to the economy and corporate earnings
from a substantial policy package to support socioeconomic recovery in 2022 and 2023, which was
first mentioned in the media in late 2021 and which the Government proposed to the National
Assembly in the first week of 2022 (please see the Macro section of this report for more details).
The equity market rallied in response to both the initial press reports and again on the news of the
Government’s formal proposal. Because some positive expectations are already in the market,
there is a risk that any significant reductions or delays to the package could cause some
disappointment. Aside from this support package, our base case assumption is that there will be
no major changes in the current direction of policy. However, there is a risk that unexpected
developments (e.g., increased restrictions on Government approvals for business projects
resulting from a renewed anti-corruption drive) could negatively impact the market.

Potential upside risks
Potential upside risks to our outlook are stronger than expected:
1) Recovery in global mobility – which could accelerate recovery in travel, tourism, hospitality
and related businesses.
2) New FDI registrations – which would imply faster medium-term growth and development.
3) Fiscal stimulus – which could stimulate faster recovery in consumption and investment.
4) Infrastructure investment – especially if Vietnam succeeds in attracting more foreign
investment capital to help fund infrastructure projects.
5) Market developments such as a) reforms that accelerate potential upgrade for Vietnam from

frontier to emerging market classification by major global index providers such as MSCI and FTSE
Russell and b) material new IPOs at reasonable prices that broaden and deepen market
capitalization and liquidity and enlarge the investible universe of Vietnamese companies for large
institutional investors.
As illustrated in Figure 52 below, the VN-Index included 21 stocks with market caps over USD3bn
as at the end of 2021, which together comprised 61% of the VN-Index’s market cap. Seven — or
one third of these 21 relatively large cap stocks are banks — a sector that has the lowest foreign
ownership limits in the market.
Figure 51: Investment & Development fiscal budget
25

8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

(USD bn)

20

15
10
5
0


2016

Figure 52: VN-Index stocks with mkt cap over USD3bn

2017

2018

2019

2020E

VCB
VIC
VHM
HPG

Others

MSN
GAS
VNM
BID

2021E

NVL

VJC


Fiscal budget spent on Investment & Development, LS
as % GDP, RS
Source: GSO, Ministry of Finance (MoF), VCSC

See important disclosure at the end of this document

PLX

TCB

VRE

FPT
ACB

SAB
MWG

GVR
MBB

CTG

VPB

Source: Bloomberg, VCSC

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 15



Stock baskets for 2022

HOLD

After lukewarm performance relative the VN-Index in H1 2021, our ‘bull basket’ and ‘bear basket’
selections from our analysts’ top picks showed substantial outperformance on an equal weighted
basis in H2 2021. Our refreshed selections for 2022 are illustrated in Figures 58 - 60 below. To
recap, our bull basket contains stocks that we believe should outperform in a rising market, while
our bear basket contains stocks with defensive characteristics that should support relative
outperformance if the market declines.
We introduced this approach in our January 2020 Vietnam Strategy Report with three stock
baskets (two bull baskets and one bear basket) and simplified our picks into two baskets in our
January 2021 Vietnam Strategy Report. Each basket was revised once at the end of June each
year and our revised baskets were published in our respective mid-year strategy update reports.
The baskets consist of stocks nominated by our analysts based on their overall judgement
supported by a factor model that we use to examine differences between stocks on several criteria
(e.g., exposure to domestic vs external demand, commodity prices and interest rates, and financial
metrics such as leverage and free cash flow generation).
Figure 53: Guide to VCSC factor model
Factor

Explanation

Domestic vs external
demand

What drives revenues? Pure domestic demand scores high, primarily global
(external) demand scores low.


Price taker vs pricing
power

Companies with pricing power score high, price-takers in competitive
markets score low.

Premium growth
opportunity

Products or services in, or expected to hit, the steep section of growth
'S-curves' score high.

Cash generation

Companies generating strong free cash flow (i.e., operating cash flow less
capex) score high.

Operating leverage

High fixed costs vs variable costs (such that small increases in revenues
drive large increases in profits) score high.

Financial leverage

High net debt/equity or assets/equity for banks scores high. A small increase
in the value of assets thus drives a large increase in equity value.

Commodity consumer vs
producer


Commodity consumers score high. Margins and profits increase (decrease)
if commodity prices fall (rise).

Interest rates

Beneficiaries of low interest rates score high. Highly indebted companies
benefit disproportionately from lower rates.

Source: VCSC (applied to most companies – we use a slightly different set of factors for financial stocks)

The simple average performance of the component stocks in each basket are shown in Figure 54
and the performance of stocks in each basket in H2 2021 in Figures 56 - 57. Our selections are
very much ‘bottom-up’ driven and are intended to be more strategic than tactical. However, we
also take current share prices and our analysts’ projected TSRs into account.

See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 16


Figure 54: Simple average price performance in 2021

60

70

65


70

(%)

60

HOLD
(%)

58

50

50

40

40
30

Figure 55: Simple average price change, H2 2021

41

39

27
22


20
6

5

10
6

10

34

33

30
20

17

20

36

30

28

27

40


0

0
H1 2021

H2 2021
Bear
VN-Index

Bull

2021

Source: Bloomberg, VCSC (2021 = linked H1 and H2 changes)

Source: Bloomberg, VCSC (VCSC coverage & sector classification)

Figure 56: VCSC Bull basket, H2 2021

Figure 57: VCSC Bear basket, H2 2021

Source: Bloomberg, VCSC

-3

DCM

-5


POW

VCB

VTP
VHM
TCB
VPB
PNJ
PLX
GAS
VN-Index
DHC
PTB
SCS
REE
TLG
CTR
Average
MWG
STK
MSN
KBC
SZC
NLG
DGW
DCG

-30


-13 -11

7

KDH

-3 -2
-9 -8 -5 -5

6

TDM

-10

0
-20

1

10

Average

20 22 24

DHG

3 6 7


15 16

PPC

20

34 35 36

18 20

VN-Index

40

29

30

30 35

BMP

47

48

50

55 58


VNM

60

70

NT2

80

82

(%)

PHR

80 84

92 97

VRE

100

90

(%)

SAB


120

Source: Bloomberg, VCSC

Our analysts’ stock picks for our bull and bear baskets for 2022 are summarized below. More
detailed discussion of individual stocks can be found in the industry sections of this report.
Figure 58: Thematic stock baskets for 2022
Sector

Bull basket

Bear basket

Financials

TCB, VPB, MBB, STB

ACB, VCB

Consumer

MSN, MWG, PNJ, CTR, FPT, VHC

SAB, VNM, IMP

Real estate

VHM, DXS

VRE


Materials & construction

HPG

Industrials & diversified

DGC, STK, VEA, LHG, PHR, KBC

Transport

VTP

SCS

Oil & gas

PLX

DPM, DCM

Power & water

BWE, TDM

NT2

Source: VCSC (VCSC industry classifications)

See important disclosure at the end of this document


www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 17


Figure 59: Bull basket for 2022

HOLD

Stocks

Comments

TCB

Mortgage disbursement should increase in 2022 with less disruption from social distancing.
TCB will be a major beneficiary as one of the largest mortgage providers in Vietnam.
Technological investments after the IPO in 2018 (e.g., transaction banking system and digital
deployment of brokerage services at TCB Securities) are projected to make a meaningful
contribution in 2022.

VPB

2022 should be a good year for VPB with what we think should be the completion of securing
a strategic investor for the listed company and continuing progress in lowering its cost of funds
via improvement in CASA and more offshore funding. Additionally, consumer finance should
bounce back to low-teen credit growth after two years of less than 10% credit growth p.a.

MBB


Primarily a valuation call as MBB continues to trade at a discount to ACB — 1.4x vs 1.6x 2022F
P/B, respectively — while it has been outperforming ACB in loan growth in 2021 and we project
superior NII growth in 2022. We believe the reduction in exposure to SME lending (replaced
by lending to power projects) lowers risk and will help NIM expansion in 2022.

STB

STB is still primarily judged by the pace of non-performing asset clearance. We think 2022
should see some major milestones such as the sale of the Phong Phu land bank and the 32.5%
ownership stake in STB held by bad debt asset manager VAMC. In addition, a new deal with
exclusive bancassurance partner Dai-ichi Life might see new upfront fees booked in 2022.

MSN

Strong consumer ecosystem that focuses on consumers’ daily essential needs; potential value
creation via M&A.

MWG

Preeminent player in Vietnam's modern retail sector, which is undergoing rapid long-term
growth.

PNJ

Leading fashion gold jewelry company that is riding on Vietnam's fast-growing discretionary
spending.

CTR


Capitalizing on Vietnam’s growing mobile data consumption via its telecom infrastructure
leasing business.

FPT

Vietnam’s preeminent IT outsourcing company with sustainable cost advantages and
strengthening technological capabilities.

VHC

Best-of-breed company in Vietnam’s near monopoly pangasius export sector.

VHM

Market leader in the residential housing sector with a unique mixed-use development format
with a full suite of complementary products/services, the country’s largest land bank, proven
brand equity and access to flexible mortgage packages for customers.

DXS

Leading real estate brokerage company with a unique corporate structure that highly aligns the
interests of local managers with the company’s growth. Potential expansion into secondary
brokerage as well as the company’s digitalization drive could further support long-term growth.

HPG

Vietnam’s largest private steel producer with established scale and proven operational
efficiency. Capex for new capacity expansion and product diversification to commence in 2022.

DGC


Chemical businesses (phosphorus and chlor-alkali-vinyl) capitalizing on structural supply
shortages both domestically and globally.

STK

Beneficiary of Vietnam's growing role as a global textile and apparel hub as well as booming
global demand for high margin recycled polyester yarn.

VEA

Strong exposure to Vietnam’s fast-growing automobile and extensive motorbike markets; high
dividend yields.

LHG

Undervalued IP developer that is showing progress on its key IP project in the prime location
of Long An Province.
(Table continues on the next page)

See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 18


PHR

Natural rubber planter and industrial estate developer with potential to convert its huge rubber

land bank to industrial estates in fast-growing Binh Duong Province.

KBC

Major IP developer has track record of attracting brand-name tenants and highly benefits from
its undervalued residential land bank in industrial hubs.

VTP

Capitalizing on e-commerce growth via its express delivery and fulfilment businesses.

PLX

The leading player in Vietnam’s petroleum distribution sector with 50% market share and
expected NPAT growth of ~40% in 2022.

BWE

The second largest water distribution company in Vietnam, which offers robust growth and a
decent yield.

TDM

A private water supply company benefiting from vigorous water demand and water tariff
increase in Binh Duong Province (one of the top-three provinces for FDI attraction in Vietnam).

HOLD

Source: VCSC


Figure 60: Bear basket for 2022
Stocks

Comments

ACB

In spite of recent soundings of a more aggressive posture in taking lending market share in
years to come, we believe ACB offers a high-quality loan book that has historically performed
very well in past credit downturns. ACB's decision to provision for all restructured loans in 2021
means there should be minimal provisioning overhang in 2022.

VCB

VCB possesses a high-quality loan book that like ACB has performed well during past credit
downturns. Additionally, VCB has had the highest LLR in our coverage since 2015. VCB's share
price held up well in 2021 despite committing to one of the largest customer support packages
undertaken by a listed bank in Vietnam.

SAB

Top-two beer company in Vietnam with a strong financial position and cash generation;
earnings to recover from trough as COVID-19 disruptions ease.

VNM

Leading dairy brand with strong financial position and cash generation.

IMP


Top-tier manufacturing technology in Vietnam’s pharma industry; ample spare capacity to
foster long-term growth.

VRE

Vietnam’s largest mall operator/developer with dominant market share coupled with strong
financial position and cash flow generation.

SCS

Cargo terminal operator with duopoly position at SGN airport and strong cash conversion
ability. High operating leverage with scope to expand with low capex requirements.

DPM

One of two largest urea producers in Vietnam with expected strong earnings growth and an
ample dividend yield (6%-10%)

DCM

One of two largest urea producers in Vietnam benefitting from strong urea prices with expected
2022 earnings growth of ~40%.

NT2

One of the most efficient gas-fired power plants in Vietnam with robust projected dividend yields
of 7%-11%.

Source: VCSC


See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 19


Changes in share prices in 2021 for all the stocks under our coverage are illustrated in Figure 61
– 68 below and are grouped according to our industry classifications, which differ from GICS sector
classifications.

HOLD

Figure 61: Financials share price changes in 2021
160
(%)
140
120
100
80
60
40
20
0
-2
-20
-14
-40

Figure 62: Consumer share price changes in 2020

141

62
53 59

213

(%)

191

200

107
98 101 104
71

250

81 86

150
100

30

50

4


13

30

21

56

41

64

72

85

94

0
-50

-8
-22 -17

Source: Bloomberg, VCSC

Source: Bloomberg, VCSC

Figure 63: Real estate share price changes in 2021


Figure 64: Constr’n materials share price changes in 2021

400
350

(%)

349

250

(%)

300

210

200

250
150

200

148

146

150


152

50

17

86

100

91

100
21

50

0

1

-4

-50

52

43

34


0

VRE

DXS*

VHM

KDH

NLG

NVL

DXG

DIG

BMP

HT1

CTD

HPG

HSG

NKG


Source: Bloomberg, VCSC

Source: Bloomberg, VCSC

Figure 65: Industrials & Diversified price changes in 2021

Figure 66: Transportation share price changes in 2021

300

140

262

(%)

250

(%)

117

120
182

200
147 149

150


117

100
50

50
1

74
61 65

21 25 25

0
-1

-50

85

100
80
60

49

40

30


20

See important disclosure at the end of this document

3

7

VJC

HVN

ACV

0
-20

-13

VTP
Source: Bloomberg, VCSC

3

SCS

GMD

CII


Source: Bloomberg, VCSC

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 20


Figure 67: Oil & Gas share price changes in 2021
200
180

(%)

174

Figure 68: Power & Water share price changes in 2021
184

HOLD112

120

109

(%)
100

160
133


140

80

120
100

79

80

60

83

59

40

60
40
20

20

15

29
17


31

32

35

41

22

1

0

0
PLX

GAS

PVS

PVT

PVD

Bond Source: Bloomberg, VCSC

See important disclosure at the end of this document


BSR

DCM

DPM

NT2

PPC GEG POW TDM BWE REE HDG PC1

Source: Bloomberg, VCSC

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 21


Luong Hoang
Manager

+84 24 6262 6999 ext. 364
Nguyen Truong, CFA
Senior Analyst


+84 28 3914 3588 ext. 132

Vietnam Macro: FDI attractions endure, policy to remain
HOLD
supportive in 2022

Macro outlook
We expect Vietnam’s economy to rebound strongly and grow by 7.8% in 2022, driven by:
1. Vietnam’s high vaccination coverage of over 90% of the population over 18, which has helped
the country to reopen almost all domestic activities and move closer towards the plan to fully
reopen international commercial flights in H2 2022.
2. Continuing global recovery (Bloomberg consensus forecasts global GDP growth at 4.4% in
2022) and an improving domestic outlook should support demand and further enhance FDI
and exports.
3. The Government’s stimulus package (~4.1% of nominal GDP to be disbursed in 2022 and
2023), and a low interest rate environment should boost investment and production as well as
supporting household consumption.
Downside risks to our forecast include:
1.

Stricter-than-expected
internationally.

lockdowns/social

distancing

measures

domestically

or/and

2.

China’s ‘zero COVID’ policy, which could potentially lead to prolonged closures of the border

between Vietnam and China.

3.

slower-than-expected disbursement from the Government’s support policies.

Meanwhile, upside risks to our forecast are:
1. faster reopening of the economy and
2. higher than expected policy support from the Government.
Other key macro forecasts
•

We expect FDI disbursement to accelerate to USD22.0bn (+11.7% YoY) in 2022. The
upcoming reopening of international borders should help to bolster investment promotion
activities and feasibility studies, while the surge in registered capital for new & expanded
projects in 2021 should translate into stronger disbursement in 2022.

•

Vietnam’s exports should continue to benefit from global recovery. We forecast exports and
imports to increase by 16% YoY and 14% YoY to USD387bn and USD378bn in 2022,
respectively, leading to a trade surplus of USD11.2bn.

•

Despite rising pressure from global and domestic recovery, which could lead to demand-pull
inflation and potential rebound in prices of services under the State’s management, we expect
Vietnam’s inflation to remain under control in 2022 (we forecast average inflation at 3.0%)
thanks to easing global commodity prices and the Government’s flexibility to manage prices of
certain goods and services in the CPI basket.


•

We expect Vietnamese interest rates to increase modestly in 2022. However, we believe rates
can remain low compared to recent years due to our expectations that inflation will remain
under control and the Government is keen to promote a strong recovery in growth.

•

A strengthening greenback in the global market could put pressure on the VND to depreciate
vs the USD. However, we forecast the dong will remain stable against the USD in 2022 as it
should be supported by strong foreign inflows from solid FDI disbursement, exports and
remittance inflows.

See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 22


COVID-19 and vaccination

HOLD

The rapid spread of COVID-19 led to a lockdown in HCMC and strict social distancing
measures in southern Vietnam during Q3 2021
Since the start of the pandemic through the end of June 2021, Vietnam recorded only 15,000
COVID-19 cases. However, the ultrafast transmission of the Delta variant saw cases skyrocket to
800,000 in Q3 2021, which caused the Government to implement a lockdown in HCMC and strict

social distancing measures in southern Vietnam that caused serious disruptions in production and
other economic activities while resulting in a 6.0% YoY contraction in Q3 2021 GDP.
However, rapid vaccination progress helped the economy to reopen beginning in October 2021
while GDP recovered strongly and increased 5.2% YoY in Q4 2021 without implementing any strict
restrictions; however, cases continued to surge to over 1.7 million as of end-2021.

Figure 69: Daily COVID-19 cases in Vietnam

18,000

Figure 70: Patients on supplemental oxygen and daily
deaths

500

9,000

16,000

450

8,000

14,000

400

7,000

12,000


350

10,000

300

8,000

250

6,000
5,000
4,000

200

6,000

3,000

150

4,000
2,000
0

100

2,000


50

1,000

0

HCMC

Hanoi

Other provinces/cities

Source: Ministry of Health (MoH), VCSC compilation

-

Death (LS)

On supplemental oxygen (RS)

Source: MoH, VCSC compilation

Vietnam made tremendous progress in its vaccine rollout
As of the end of June 2021, only 5% of the population over 18 was vaccinated and around 0.3%
was fully vaccinated. However, Vietnam made tremendous progress in its vaccine rollout in H2
2021. As of end-2021, more than 90% of the population over 18 in Vietnam was fully vaccinated,
while nearly 56% of children aged 12-17 were fully vaccinated. The country’s rapid vaccination
rollout has helped to reduce the fatality rate to 1.9% as of the end of December 2021 (vs 2.5% in
September 2021) and aid the reopening of the economy.


See important disclosure at the end of this document

www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 23


Figure 71: Daily vaccination (2021)

Figure 72: Vaccination progress

HOLD
2,500,000

2,000,000

1,500,000

Total doses received (million)

192.0

Total doses administered (million)

152.8

Adults vaccinated (million)

70.0


% of population (≥ age 18)

99.5%

Adults fully vaccinated (million)

63.8

% of population (≥ 18)

1,000,000

90.7%

Third/booster doses (million)

5.7

% of population (≥ age 18)

500,000

8.1%

Children aged 12-17 vaccinated (million)
-

Source: MoH, VCSC compilation


7.7

% Children aged 12-17 (%)
Children aged 12-17 fully vaccinated
(million)

85.3%

% Children aged 12-17 fully vaccinated (%)

55.7%

5.0

Source: MoH (data as of January 1, 2022), VCSC compilation

Labor market and business registrations
The labor market was hit hard by COVID-19 restrictions
According to the GSO, 23.7 million people were affected by COVID-19 in Q4 2021 (a reduction of
3.5 million people QoQ). Of the total, 2.3 million had lost their jobs (accounting for 9.1%), 12.4
million had to temporarily suspend their production/business (accounting for 50.1%), 8.8 million
had their working hours reduced (accounting for 35.7%) and 16.9 million had their income reduced
(accounting for 68.3%).
Figure 73: Labor force
52.5

Figure 74: Unemployment

million people
(%)


52.0

71

2.0

70

1.8

51.5

(%)

million people

4.0
3.5

1.6
3.0

69

1.4

51.0
50.5


68

1.2

2.5

50.0

67

1.0

2.0

0.8

1.5

49.5

66

0.6

49.0
65
48.5

1.0
0.4


Labor force (LS)

Labor force participation rate (RS)

Source: GSO, VCSC

See important disclosure at the end of this document

Unemployment (LS)

Q4 2021

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019


Q2 2019

Q1 2019

Q4 2021

-

Q3 2021

0.0

Q2 2021

63

Q1 2021

47.5

Q4 2020

0.5

Q3 2020

0.2

Q2 2020


64

Q1 2020

48.0

Unemployment rate (RS)

Source: GSO, VCSC

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January 7, 2022 | 24


The unemployment rate reached a multiyear high in Q3 2021

HOLD

Vietnam’s total labor force dropped to 49.1 million in Q3 2021 with the labor force participation rate
hitting the lowest level in a decade at 65.6%, before improving to 50.7 million and 67.7% in Q4
2021, respectively. Also, the unemployment rate climbed to a more-than-10-year high of 3.7% in
Q3 2021 before sliding to 3.3% in Q4 2021. Meanwhile, overall average income improved by 2.7%
QoQ to VND5.33mn/month in Q4 2021; however, it still dropped 10.4% YoY.
Net increase in operating businesses at lowest level since 2016
In 2021, the total number of businesses that joined/rejoined the market was just under 160,000
(-10.7% YoY). Meanwhile, the number of firms that withdrew from the market — including
temporary suspension, awaiting dissolution or completing dissolution — surged 17.8% YoY to
around 120,000 enterprises. This led to a net increase of 40,125 operating businesses (-48.1%

YoY) in 2021 — the lowest annual increase since 2016.

Figure 75: Monthly business registration data
25

120%
100%
Thousands

20

80%
60%

15

40%
20%

10

0%
-20%

5

-40%
-60%

Dec-21


Sep-21

Jun-21

Mar-21

Dec-20

Sep-20

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Mar-19

Dec-18

Jun-18

Sep-18

Mar-18


Dec-17

Sep-17

Jun-17

Mar-17

Dec-16

Sep-16

Jun-16

Mar-16

-80%

Dec-15

-

Number joining (LS)
Number leaving (LS)
Enterprises joining/rejoining the market (3MMA YoY, RS)
Enterprises withdrawing from the market (3MMA YoY, RS)

Source: GSO, VCSC


Fiscal and monetary responses
Vietnam’s fiscal packages remain small vs those of other economies
•

In 2020, the Government announced fiscal packages to support enterprises, organizations,
households and individuals affected by COVID-19, with a total value of around VND294tn
(USD12.8bn), representing 3.7% of 2020 nominal GDP. However, around 60% of the package
was in the form of tax and land rent deferral, which must be paid by year-end. Meanwhile, strict
administrative requirements caused slow disbursement of the other packages.

•

In 2021, the Government announced a series of fiscal packages with a total value of VND203tn
(USD8.8bn) — or 2.5% of GDP. Similarly, tax and land rent deferral support accounted for
around 60% of the total figure. However, unlike the packages released in 2020, 2021’s
packages had easier eligibility requirements and application procedures.

•

In addition to the above packages, the Government has asked relevant Ministries to reduce
prices
of
telecommunications
(VND10.0tn/USD435mn
package),
electricity
(VND17.0tn/USD740mn package), water, and education, among other services.

See important disclosure at the end of this document


www.vcsc.com.vn | VCSC<GO>

January 7, 2022 | 25