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Market Insights January 2025

Robust economic growth in 4Q24 to finish the year

•Vietnam reported robust GDP growth of 7.55% in 4Q24, with a stronger services sector and solid manufacturing performance. For the full year 2024, Vietnam delivered 7.09% GDP growth, which surpassed the government’s target of 6.5-7.0%.
•The VN-Index rebounded in December given a number of positive developments regarding FTSE market upgrade, KRX implementation, and NVIDIA visit and given foreign selling pressure abated from previous month.
•While concerns around potential tariffs by the incoming Trump administration remain an overhang in the near term, we maintain our bullish stance on the market in 2025 as corporate earnings growth accelerates and foreign investors may return once Vietnam gets upgraded to emerging market status.

Vietnam's GDP grew by 7.55% YoY in the last quarter of 2024, accelerating from 7.43% level in 3Q24 and bringing full-year growth to reach an impressive 7.09%, which surpassed the government’s target of 6.5-7.0% but was generally in line with market expectations. The faster pace of growth in 4Q24 was primarily driven by stronger activities in the services sector, which saw 8.2% YoY growth in 4Q24 and 7.4% growth for the full year, with broad-based expansion seen across sub-sectors. Meanwhile, the industry & construction sector remained solid, delivering 8.4% YoY growth in 4Q24 and 8.2% growth for the whole 2024. On the expenditure front, final consumption and gross capital formation grew by 6.6% and 7.2%, respectively, while trade surplus reached USD 24.8 billion in 2024. Nominal GDP amounted to USD 476 billion, translating to a GDP per capita of USD 4,700, which is considered to be in the upper middle-income range according to the World Bank.

The manufacturing sector maintained solid growth, with the index of industrial production (IIP) expanding by 7.9% YoY in 4Q24 and 8.4% YoY in 2024. Exports and imports maintained double-digit growth in 4Q24 at 11.5%/14.9% YoY, respectively, albeit somewhat lower than 3Q24 growth. Foreign direct investment (FDI) remained a bright spot, with 2024 disbursements achieving strong growth of 9.4% YoY to reach USD 25.4 billion and 2024 commitments moderating by 3.0% YoY from a high base to USD 38.2 billion. In December, the manufacturing PMI dropped to 49.8 whereas the non-seasonally adjusted (non-sa) figure reached 51.4 due to adjustments for the Lunar New Year. Although both output and new orders indices remained above 50, the rates of expansion were the lowest in the quarter. Looking ahead to 2025, the outlook for Vietnam’s manufacturing sector seems uncertain given potential tariffs by the new incoming U.S administration. We hope further announcements once Mr. Trump takes office later in January will help to provide clarity regarding potential impact on Vietnam if any.

Consumption continued to improve in December with retail sales increasing by 9.3% YoY, the highest growth rate observed since July. For 2024, retail sales grew by 9.0% YoY, which remained below pre-COVID levels of 10-12%. We believe the data has yet captured the robust growth in e-commerce sales. Notably, tourism activities gained further momentum in December as the number of international visitors notched a high level at 1.75 million, which was above pre-COVID level in 2019.

December saw headline CPI rising 0.29% MoM, driven by adjusted medical service prices and an increase in transportation prices due to gas prices rising 1.2% MoM. For the full-year 2024, inflation came in at 3.6% YoY on average, well below the Government’s target range of 4.0% – 4.5% YoY. The biggest contributors to inflation in 2024 were food & foodstuff (+4.0%), shelter (+5.2%), health & personal care (+7.2%), and education (+5.5%).

A stronger USD with a hawkish FED put immense pressure on the VND in December as the DXY went up 2.6% MoM. The FED made another 25bps rate cut at its December meeting, which was in-line with market expectations and brought the total amount of rate cuts to 100bps in 2024. However, in their updated economic projections, FOMC members revised up their GDP growth/inflation forecasts while lowering rate cut expectations for 2025 from 100bps to 50bps. This coupled with hawkish messages from Chairman Powell at the meeting caused the DXY to spike, which exerted significant pressure on the VND. To protect the VND, the State Bank of Vietnam had to intervene by increasing bill issuance activities and tapping into its FX reserve. The USD/VND exchange rate increased 0.5% to VND25,485/USD by the end of December and was up 5% for the whole 2024.

The VN-Index rebounded in December to 1,267 (+1.3% MoM) as foreign selling pressure abated. Net foreign outflows totaled USD 90 million in the month, down substantially from over USD 470 million in November. Market was also buoyed by several positive developments: (i) positive feedbacks from FTSE representatives on progress of Vietnam to meet the remaining 2 out of 9 criteria for emerging market upgrade, (2) accelerated process to roll out KRX trading system with launch date rumored to be in early May, (3) NVIDIA’s visit to Vietnam to sign strategic partnership with the local government. Although the index grinded higher, liquidity remained somewhat subdued in December with average daily trading volume across three trading bourses at USD 521 million.

The financials sector led the VN-Index higher in December with strong performance across all three sub-sectors including banks, brokerage, and insurance. Banking stocks, which account for roughly 40% of the VN-Index, rose higher as credit growth data for November and December came in quite strong. Meanwhile, the IT sector maintained strong momentum with FPT up another 6% MoM. Sector laggards in December included Consumer Staples, Energy, and Utilities.

The VN-Index is currently trading at a trailing P/E ratio of 14.8x, still below its average P/E ratio of 16.9x over the past four years. While uncertainty around U.S. tariff policies remains an overhang in the near term, we stay bullish on Vietnam’s stock market in 2025 as corporate earnings growth accelerate, driven by a stronger real estate market as well as improving domestic consumption, and foreign investors may return once Vietnam gets upgraded to emerging market status by FTSE.

 

Admin

Admin

Published:

15/01/2025

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