JPM Vietnam Equity Strat 2019-12-11 PDF

Asia Pacific Equity Research
12 December 2019
Vietnam Equity Strategy

Watch for reforms and flows in 2020
We reiterate our strong overweight view on Vietnam with a VN-Index target Southeast Asia and Emerging
at 1,105 points, implying 15% potential upside. Key policy reforms, BOP Markets Equity Strategist
inflows and benefits from the supply chain shift should continue to bolster growth Rajiv Batra AC
next year. We expect earnings growth to drive market returns (Bloomberg (65) 6882-8151
consensus 2020E: 15%). The VN-Index currently trades at 13.4x FY20E P/E, 5% rajiv.j.batra@jpmorgan.com
above the 10Y average and lower than ASEAN peers. We like cyclical sectors: Bloomberg JPMA BATRA <GO>
Banks, Consumer Discretionary, and IT based on high earnings visibility and J.P. Morgan Securities Singapore Private
discount valuation. We stay neutral on Real Estate as the sector’s post-2020 Limited
prospects look weak, offsetting the benefit from passive flows. EM Equity Strategist
Pedro Martins Junior, CFA
 Key catalyst to monitor: stock market reforms. The government passed a (55-11) 4950-4121
new securities law, improving regulations on FOL, trade settlement, and pedro.x.martins@jpmchase.com
participation of institutional investors. These changes should help Vietnam Banco J.P. Morgan S.A.
become included in the MSCI EM watch-list and open up the opportunity for Jainik Mody, CFA
foreign inflow, which is significantly affected by current FOL regulation. A (44 20) 3493-0443
total of 27 stocks, including 6/10 listed banks, with US$19bn market cap are not jainik.mody@jpmorgan.com
accessible by foreign investors. Implementation of the reform should be J.P. Morgan Securities plc
watched carefully: 1) Amendment of Investment Law & Enterprise Law in ASEAN Head of Research
2020, 2) Applying Delivery versus Payment (DvP), T+0 settlement, and 3) Ajay Mirchandani
Launching NVDRs for foreign-limited stocks. We think Vietnam might be (65) 6882-2419
included in the MSCI EM watch-list by 2021 based on the current reform ajay.mirchandani@jpmorgan.com
plan. J.P. Morgan Securities Singapore Private
Limited
 New product developments: The launch of new ETFs based on new indices
consisting of large-cap, high-liquid stocks that have FOLs maxed out can attract
inflows into the Vietnam stock market. The ETF based on VN30 Index raised
US$250mn of inflows into Vietnam in 2017-19 (44% of 2019 inflows). Similar
flows into new ETFs could provide potential upside to the market next year.
 Economics forecasts: J.P. Morgan economics team expects GDP growth to

moderate to a trend-like 6.4%y/y (average of 2014-16) from the high base of
7.1% in 2018 and 6.8% in 2019 as the continued benefits of the relocation of
manufacturing bases balance lukewarm global demand.
 Sector allocation & stock picks for 2020: We overweight Vietnam Banks
(OW TCB, ACB, and VCB; Neutral VPB), Consumer Discretionary, and
IT. Based on Bloomberg consensus estimates, stocks in those sectors are
expected to deliver 20-25% earnings growth in 2020 compared to the VN-Index
average of 15%. Meanwhile, the sectors currently trade at a discount valuation,
with 2020E P/E ratios lower than the VN-Index’s and 12M trailing P/E ratio
below the 5Y average. We stay neutral on Real Estate as new launches and
infrastructure development are slowing down, while passive fund flows to
MSCI/FTSE Vietnam Index is the only positive catalyst for this sector.
 Key risks to our call: 1) Slower global growth, exports & BOP flows, 2)
Complications of global trade tensions that directly affect Vietnam (US tariffs
on VN, currency manipulation tag), and 3) Potential credit rating downgrade.
See page 29 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
This document is being provided for the exclusive use of VIET LINH VU.
Rajiv Batra Asia Pacific Equity Research
(65) 6882-8151 12 December 2019
rajiv.j.batra@jpmorgan.com
Vietnam Equity Strategy

Figure 1: VN-Index sector returns 2020 year ahead outlook
Looking forward to 2020, we stay overweight on Vietnam equities on the basis of
IT 48.8%
high-quality earning growth against a firm macro backdrop. Our base-case
Real Estate 19.4% FY20E target is 1,105 points for the VN-Index and 910 points for MSCI
Cons. Disc 17.8%
Vietnam (15% upside for both). In our view, key policy reforms, BOP inflows and
benefits from the supply chain shifts will continue to bolster growth and keep
Financials 15.7% inflation stable in 2020. Recently, the State Bank of Vietnam has announced the
Utilities 14.2% intention to curb deposit rates to support growth in 4Q19 and 2020. This firm
economic backdrop will materialize in corporates' earnings growth, which is
Health Care 12.4%
estimated to be 15% next year according to Bloomberg consensus. We expect
Energy 10.4% Vietnam equities to deliver a 15% return in 2020, in-line with consensus EPS
VN-Index 7.8%
growth. The VN-Index is traded at 13.4x 2020E P/E, 5% above the 10Yr average, we
expect market P/E to remain stable in our base case.
Materials -1.2%
Industrials -1.7% Bull case: VN-Index 1,220 points and MSCI VN 1,005 points (27% upside). In
our bull case, we expect market EPS growth to reach 17% and P/E re-rating to add
Cons. Staples -6.5%
10% to total return. Key catalysts that need to materialize in our bullish scenario:
Source: Bloomberg data as of 11 Dec 2019. 1) Global growth pick up stronger than expected; 2) Positive movement towards EM
status by FTSE/MSCI; 3) Significant foreign inflows following re-classification or
Figure 2: VN-Index vs peers returns market reforms; and 4) Accelerated infrastructure investments.
2019 YTD (USD)
Bear case: VN-Index 865 points and MSCI VN 712 points (10% downside). In
MSCI Frontier 10.6% our bear case, EPS growth would fall behind expectations by 10% and PE de-rate by
MSCI EM 9.0%
20%. Key risks that might trigger a bearish trend: 1) Slower global growth than
expected; 2) Delay of key reforms; and 3) Complications of global trade tensions that
VNINDEX 7.8% directly affect Vietnam (US tariffs on VN, currency manipulation tag).
PCOMP 7.8%
Table 1: VN-Index historical performance & JPM targets
SET 6.7%
12M 12M EPS
STI 4.5% Index Trailing Forward growth PE de/re- Index
JCI Year points P/E P/E (% y/y) rating return
3.1%
2006 751.8 45.0
FBMKLCI -7.8% 2007 927.0 28.6 128.4% -46.0% 23.3%
2008 315.6 13.5 -38.6% -44.5% -66.0%
Source: Bloomberg data as of 11 Dec 2019. 2009 494.8 12.1 12.5 74.2% -10.0% 56.8%
2010 484.7 10.4 12.8 13.9% -14.0% -2.0%
Figure 3: VN-Index vs peers 20E PE 2011 351.6 7.4 7.4 -13.6% -16.1% -27.5%
2012 413.7 11.8 8.7 -12.1% 33.9% 17.7%
2013 504.6 12.4 10.4 15.5% 5.6% 22.0%
FBMKLCI 15.5 2014 545.6 12.9 12.0 4.0% 4.0% 8.1%
2015 579.0 12.5 13.6 9.1% -2.7% 6.1%
PCOMP 15.3
2016 664.9 16.5 14.3 -7.5% 24.1% 14.8%
SET 15.2 2017 984.2 19.0 18.0 25.0% 18.4% 48.0%
2018 892.5 15.8 13.6 10.9% -18.2% -9.3%
JCI 14.4 Current 961.8 15.8 13.4 8.1% -0.6% 7.8%
Base case 1,105 15.8 15.0% 0.0% 15.0%
VNINDEX 13.4 2020 Bull case 1,220 17.6 17.0% 10.0% 27.0%
STI 12.4 Bear case 865 12.8 10.0% -20.0% -10.0%
Source: Bloomberg data as of 11 Dec 2019, J.P. Morgan estimates.
MXEF 12.4
MXFM 12.2
Source: Bloomberg data as of 11 Dec 2019.
(65) 6882-8151 12 December 2019
Figure 4: VN-Index absolute & Relative (vs. FM) performance Figure 5: VN-Index performance & ADTV
140 1050 250,000
135 Absolute return Relative to MSCI Frontier Market ADTV(U$ thousands, RHS) VN-Index (points,LHS)
130 1000
200,000
125
950
120
115 150,000
900
110
105 850
100,000
100
800
95
50,000
90 750
Nov-2017
Jan-2018
Mar-2018
May-2018
Sep-2018
Nov-2018
Jan-2019
Mar-2019
May-2019
Sep-2019
Nov-2019
Jul-2018
Jul-2019
700 -
Jan-19
Jun-19
Jul-19
Jul-19
Dec-18
Dec-18
Feb-19
Feb-19
Mar-19
Apr-19
May-19
May-19
Aug-19
Sep-19
Sep-19
Oct-19
Nov-19
Nov-19
Source: Bloomberg.
Source: Bloomberg, J.P. Morgan.
Figure 6: VN-Index – Forward PE Figure 7: VN-Index – Forward PE relative to FM

21 2.5
19
2.0
17
15
1.5
13
11 1.0
9
0.5
7
5 0.0
09 10 11 12 13 14 15 16 17 18 19 09 10 11 12 13 14 15 16 17 18 19
Vietnam vs FM rel. PE Average +1SD -1SD
12M Fwd PE Average +1SD -1SD
Figure 8: VN-Index EPS estimate over time Figure 9: VN-Index - foreign equity flows monthly (US$mn)
200.0
150 159.9
140
100.4 93.6
130 100.0
50.9
120 27.6
16.1 7.1
110 0.0
100 -13.7 -11.1
90 -53.6 -53.7
-100.0 -75.0
80
70
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 -200.0
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
2019E 2020E
Source: Bloomberg, J.P. Morgan. Source: Bloomberg, J.P. Morgan.
(65) 6882-8151 12 December 2019
Key catalysts to watch

Figure 10: Vietnam equities by
ownership Stock market reforms and MSCI EM reclassification
% On November 26th 2019, Vietnam National Assembly approved the new securities
Local
Foreign
owned,
law, replacing the 2010 version (Source: Customs News). The new law would be
owned,
58%
25% effective from January 1st 2021. Key changes:
1) Introducing the concepts of Depository Receipts (DR) as a type of securities,
providing a legal framework for Non-Voting Depository Receipts (NVDR).
2) Further guidance on Foreign Ownership Limits (FOLs) on listed companies to be
provided by government.
Foreign
room,
17% 3) Merging Ho Chi Minh stock Exchange (HOSE) and Hanoi Stock Exchange
(HNX) into Vietnam Stock Exchange (VNX).
Source: Bloomberg.
4) Re-organizing Vietnam Securities Depository Center (VSD) into Depository and
Table 2: Vietnam equities by Clearing Corporation.
foreign room (HOSE)
5) Refining the definition of professional investors, related parties, insiders, and
Market public companies.
No. of cap
stocks (US$bn) 6) Refining the regulation on public offerings of securities, new IPOs have to list on
Foreign room <1% 27 19.2 the stock market within 30 days after IPO.
Foreign room >1% 350 124.4
Total 377 143.7 7) Requiring companies that become public to list on UpCOM Stock Exchange.
Source: HOSE, Bloomberg data.
8) Refining the regulation on information disclosure.
Table 3: Vietnam max FOL stocks Key points of the reforms align with MSCI’s and FTSE’s criteria for upgrading
by sector
Vietnam to emerging market status: the FOL-related issues would be addressed by
No. of points 1) and 2) while points 3) & 4) improve the clearing & settlement procedures.
Sector stocks The other changes would lead to better information disclosure, streamlining equity
Banks 6
Consumer Discretionary 5 issuance processes, and encourage more participation of foreign investors into
Information Technology 1 Vietnam.
Real Estate 1
Industrials 8 FOL has continued to be a key barrier to foreign investment in the Vietnam stock
Materials 2 market. Although the FOL has been lifted for several stocks (Vinamilk, Sabeco), it
Utilities 1 remains imposed on key sectors such as banking, real estate, retailing (6/10 banks in
Energy 1
Health Care 2
VN-Index have FOL maxed out). This severely limits investment choices and
Total 27 increases transaction costs for foreign investors in this market.
Source: HOSE, Bloomberg data. We see this revamped securities law as a critical step in developing the stock market
of Vietnam. Meaningful improvement to meet MSCI/FTSE criteria would be the key
catalyst to speed up the reclassification process and trigger foreign inflows.
Implementation of each reform point should be watched carefully, including:
1. Amendment of Investment Law and Enterprise Law to complete the legal
framework on NVDR and FOLs (Expected 2020).
2. Improving trade settlement process: applying Delivery versus Payment
(DvP) and T+0 settlement (Expected 2020-2021).
3. Launch of NVDR products (Expected 2021).
As most of the reforms would be applied at the earliest in 2020-21, we think
Vietnam might be included in the MSCI EM watch list in 2021. For further
information on Vietnam’s progress to EM classification, please refer to J.P. Morgan
index research: How Far Away Is Vietnam to Emerging Markets? (He Zhang, Mar
20 2019)
(65) 6882-8151 12 December 2019
Foreign flows from new ETFs
In November 2019, Ho Chi Minh City Stock Exchange launched 3 new indices: VN
Diamond, VN Fin Select and VN Fin Lead. The new indices are constructed based
on large-cap, high-liquidity stocks that currently have their FOL maxed out. These
indices can be used by domestic asset management firms to launch new Exchange-
Traded Funds (ETFs) that raise funds from foreign investors.
Table 4: New indices constituents & market cap
VN Diamond Market cap VN Fin Lead Market cap VN Fin Market cap
(US$mn) (US$mn) Select (US$mn)
CTD 209.56 BID 6,947.91 BID 6,947.91
CTG 3,220.03 BVH 2,030.46 BMI 98.80
DXG 307.93 CTG 3,220.03 BVH 2,030.46
FPT 1,609.81 EIB 886.46 CTG 3,220.03
GMD 293.10 HCM 304.86 EIB 886.46
KDH 627.38 HDB 1,164.15 HCM 304.86
MBB 2,121.06 MBB 2,121.06 MBB 2,121.06
MWG 2,101.35 SSI 425.20 SSI 425.20
NLG 300.07 STB 772.55 STB 772.55
PNJ 789.00 TCB 3,364.94 TCB 3,364.94
REE 490.36 TPB 748.53 TPB 748.53
TCB 3,364.94 VCB 13,641.67 TVB 27.21
TPB 748.53 VND 123.98 VCB 13,641.67
VPB 1,988.41 VPB 1,988.41 VCI 223.60
VND 123.98
VPB 1,988.41
Source: HOSE, NDH.vn
There are no restrictions for foreign investors in a mutual fund/ETF in Vietnam.
Thus, the new ETFs serve as a proxy to Vietnam stocks that are limited to foreigners.
As an example, Vietnam’s VN30 ETF (Ticker: E1VFVN30) attracted US$250mn of
inflows from foreign investors during 2017-19. VN30 flows account for 44% of total
market flows in 2019. If the new ETFs are launched in 2020, similar inflows could
provide potential upside next year.
Figure 11: VN30 ETF flows & VN-Index 2017-19 Figure 12: VN30 ETF cumulative flows during 2017-19
1200 300 120
1100 250 100

89.1
1000 200 83.3
80 78.9
900 150 60
800 100 40
700 50 20
600 0 0
Jan-2017
Mar-2017
May-2017
Jul-2017
Sep-2017
Nov-2017
Jan-2018
Mar-2018
May-2018
Jul-2018
Sep-2018
Nov-2018
Jan-2019
Mar-2019
May-2019
Jul-2019
Sep-2019
Nov-2019
-20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2017 2018 2019
VN-Index (LHS) Cummulative flows (US$mn - RHS)
Source: Bloomberg data. Source: Bloomberg data.
Figure 13: VN30 ETF flows/Total market flows (%) Figure 14: Major ETFs flows to Vietnam (US$mn)
50% 44% 150
100.9
40% 100 78.9 83.3 89.1
30% 31.8
50
2.2 9.2
20%
0
10% 7%
5%
-50 -19.9
-36.2
0% 2017 2018 2019
2017 2018 2019 VN30 ETF VNM US x-Tracker FTSE Vietnam
Source: Bloomberg data.
(65) 6882-8151 12 December 2019
Sector allocation
Vietnam’s positive economic outlook leads to favorable earnings prospects of
cyclical sectors, especially for stocks in Banks, Consumer Discretionary, and IT.
Based on Bloomberg consensus estimates, stocks in those sectors are expected to
deliver 20-25% earnings growth in 2020 compared to the VN-Index average of 15%.
Meanwhile, the sectors currently trade at a discount valuation, with 2020E P/E ratios
lower than the VN-Index’s and 12M trailing P/E ratio below the 5Y average. We
decided to trade on this gap by overweighting Vietnam Banks, Consumer
Discretionary, and IT.
We stay neutral on Vietnam Real Estate stocks. Despite the sector’s highest 2020E
earnings growth, we remain cautious with the sector's prospects post-2020. On a
positive note, the sector might benefit from passive fund flows to Vietnam due to
their majority weight within MSCI Vietnam (49.2%) and FTSE Vietnam (36.3%).
Table 5: Sector EPS growth & 12M Figure 15: Vietnam sectors' EPS growth (x-axis), 12M Fwd PE (y-axis) & market cap (bubble size)
Fwd PE
35
FY20E Higher
FY20E
Sector Earnings PE
PE (x) 30 Health Care
growth
$ 1.3 bn
Real Estate 40.5% 18.5

25
Financials 26.3% 9.5
Cons. Cons. Staples
Staples 4.8% 21.0 20 $ 23.3 bn VN-Index FY2020E:
Energy Real Estate
Utilities 3.5% 14.8 15% earnings growth,
$ 3.6 bn $ 39.6 bn
Industrials 10.3% 14.4 Utilities
15 Industrials
$ 12.1 bn Cons. Disc
Energy 4.8% 15.3 $ 12.4 bn
$ 4.6 bn
Materials 20.3% 7.6 IT Higher growth
10 Financials
$ 1.9 bn (Bloomberg
$ 39.7 bn
Cons. Disc 21.2% 10.3 consensus)
Materials
IT 18.4% 9.5 5 $ 5.0 bn
Health Care 27.0% 27.1
VN-Index 15.0% 13.8 0

Source: Bloomberg consensus estimates, J.P. -10% 0% 10% 20% 30% 40% 50%
Morgan calculations. Source: Bloomberg.
Table 6: VN-Index sectors’ net income growth history and consensus estimates
NI growth 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E
Real Estate 282% 151% -79% 32% 361% -44% 17% 90% 11% 108% 15% 41%
Financials 98% 9% 29% -8% -5% 6% 0% 21% 41% 23% 13% 26%
Consumer Staples 79% 48% -4% 0% -1% 14% 56% -21% 6% 3% 2% 5%
Utilities 0% -76% 14% 42% 33% 21% -36% -20% 38% 12% 0% 3%
Industrials 55% 29% -51% 4% 8% 66% 19% 82% 39% 4% -14% 10%
Energy -102% 10% -66% 332% 123% 28% 18% 47% -23% 10% 12% 6%
Materials 21% -1% 41% -4% 6% 7% 31% 60% 3% -3% -6% 20%
Consumer Discretionary 746% -31% 41% -6% -25% -5% 15% 52% 28% 36% 30% 24%
Information Technology 27% 19% 24% -8% 4% 4% 20% 3% 47% -12% 23% 18%
Health Care 68% 25% 7% 16% 17% -1% 12% 10% 7% -1% -47% 27%
Source: Bloomberg data, Bloomberg consensus.
(65) 6882-8151 12 December 2019
Table 7: VN-Index sectors’ P/E (x)
12-month Trailing P/E 2020E
P/E
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 P/E
Real Estate 19.4 12.0 49.3 46.0 8.4 17.0 18.3 15.1 26.3 24.7 27.2 17.5
Financials 15.7 14.1 9.0 11.1 9.8 11.6 15.0 10.1 12.6 12.2 12.5 10.0
Consumer Staples 16.7 11.4 12.7 19.0 23.3 19.3 12.9 25.7 28.9 24.4 25.0 23.3
Utilities 10.0 15.6 9.2 7.4 9.8 8.8 6.8 12.8 14.6 13.8 16.4 15.6
Industrials 13.9 6.9 7.4 8.6 12.3 8.5 8.5 10.9 18.1 12.6 12.9 12.9
Energy NA 31.6 28.5 8.7 11.2 11.5 0.8 0.6 23.5 15.3 16.1 15.0
Materials 8.9 9.5 3.4 5.6 8.2 9.5 8.0 6.4 9.2 8.3 8.4 6.6
Consumer Discretionary 12.5 7.1 4.1 5.4 8.7 14.4 12.0 11.9 16.0 12.9 14.1 10.7
Information Technology 10.7 10.3 6.7 6.7 8.1 10.0 9.8 10.1 10.4 10.1 13.0 10.8
Health Care 11.5 8.5 7.6 9.0 12.1 13.8 7.2 10.9 21.1 15.6 16.2 24.2
VN-Index 13.5 11.1 9.3 11.3 11.1 11.8 11.2 12.4 17.3 15.7 16.6 13.7
Figure 16: Gap between each sector’s 12M trailing P/E and VN-Index’s
(65) 6882-8151 12 December 2019
Banks: capital generators amidst high growth
We believe that Vietnam banks offer an increasingly rare combination of high and
self-sustaining earnings growth. This, along with a favorable credit cycle, should lead
to significant multi-year returns, in our view. Comparable investment opportunities
in the recent past include Indonesia (2005-13) and India (2010-17). High visibility on
nominal GDP and current account surplus in our forecast horizon allows for
extrapolation of strong earnings and credit growth in Vietnam. Yet, 104% bank
loans/GDP is high for ~US$2,500 GDP/capita, which should likely constrain growth
after the next few years.
J.P. Morgan Research team has initiated coverage on VCB, TCB and ACB at OW
and on VPB at Neutral, with 14-68% potential upside in the next 12 months.
(Vietnam Banks: Capital generators, amidst high growth, Harsh Wardhan Modi &
team, 1 November 2019).
Table 8: Vietnam banks valuations

Mkt 3M Avg
Bank Price Rating PT Cap Vol PE (x) PB (x) Div. Yield (%) RoE (%)
(LC) (LC) ($bn) ($mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E
JPM Coverage
ACB 24,300 OW 40,000 1.68 1.7 7.0 6.4 5.8 1.45 1.21 1.02 - 2.06 2.47 23.3 20.6 19.2
TCB 22,400 OW 40,000 3.58 2.0 8.7 7.5 6.6 1.36 1.15 0.98 - - - 16.9 16.6 16.0
VCB 85,400 OW 100,000 14.02 2.6 18.8 16.7 14.6 4.16 3.11 2.63 0.91 0.91 0.91 24.3 21.2 19.5
VPB 19,050 N 20,000 2.23 2.5 6.8 6.9 6.7 1.26 1.06 0.92 - - - 20.2 16.7 14.7
Not Covered
BID 39,950 - - 5.98 1.9 24.71 16.73 12.79 2.11 1.95 nm 1.86 2.22 2.86 12.6 13.7 16.9
CTG 20,000 - - 3.53 2.3 12.64 11.22 9.65 1.13 1.01 nm 3.18 3.18 3.18 10.8 12.1 13.1
HDB 27,850 - - 1.25 2.0 10.13 9.23 7.56 1.59 1.60 nm 1.19 5.38 6.21 18.6 19.0 20.0
MBB 21,100 - - 2.31 4.2 7.27 6.24 5.12 1.37 1.18 0.97 2.55 3.00 2.98 20.9 20.9 21.0
Average 15.7 13.1 11.1 2.61 2.09 1.95 1.23 1.57 1.73 19.4 18.1 17.8
Table 9: VN banks ROE expectations
RoE (%) 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E
ACB 6.4% 7.5% 8.1% 9.5% 13.1% 26.9% 23.3% 20.6% 19.2%
TCB 4.8% 7.4% 9.6% 17.4% 27.7% 21.5% 16.9% 16.6% 16.0%
VCB 8.7% 8.8% 9.8% 11.7% 14.3% 22.5% 24.3% 21.2% 19.5%
VPB 26.3% 15.0% 20.1% 24.8% 26.9% 22.8% 20.2% 16.7% 14.7%
Sector 11.6% 9.7% 11.9% 15.8% 20.5% 23.4% 21.2% 18.8% 17.3%
Source: J.P. Morgan estimates, Company data.
Figure 17: VN banks P/B vs ROE

3.50
3.00 VCB
2.50
2020 PB (x)
2.00 BID
1.50 TCB HDB ACB
1.00 CTG VPB MBB
0.50
-
11.0 13.0 15.0 17.0 19.0 21.0 23.0
2020 RoE (%)
Source: J.P. Morgan estimates, Bloomberg. Bloomberg estimates for non-covered banks.
(65) 6882-8151 12 December 2019
Figure 18: Vietnam banks: Deposit growth and loan growth
35%
30%
25%
20%
15%
10%
5%
0%
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Deposit growth (Y/Y) Loan growth (Y/Y)
Source: CEIC, J.P. Morgan
Figure 19: Asia: Loan growth (% y/y)

14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
TH MY TW HK SG KR ID IN PH CH VN
Source: CEIC, J.P. Morgan. Note: VN as of Jul-19, latest monthly data for others.
Figure 20: Vietnam Banks: LDR

115%
110%
105%
100%
95%
90%
85%
80%
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Source: CEIC, J.P. Morgan
Figure 21: Asia: LDR (%)

120%
110%
100%
90%
80%
70%
60%
50%
40%
IN TW PH MY HK TH VN ID SG CH KR
Source: CEIC, J.P. Morgan. Note: VN as of Jul-19, latest monthly data for others.
(65) 6882-8151 12 December 2019
Consumers: Discretionary over Staples
Vietnam’s consumer stocks have been expanding rapidly with average earnings
growth of major stocks at 60% p.a. over the last 5 years. This development is fueled
by the growing middle-income population, stable inflation, strong tourist growth, and
deeper penetration of modern retail channels (E-commerce, convenience stores, and
shopping malls). In 2020, consensus estimate for earning growth of Consumer
Staples stocks is flat (5%) with a premium valuation (23.3x 20E P/E) compared to
Consumer Discretionary stocks (24% earnings growth and 10.7x 20E P/E).
Although many Consumer Discretionary stocks have maxed out their foreign
ownership limit (49%) and can only be purchased at a premium (ranging from 7% to
30% for different stocks), we believe this premium could be justified by a better
growth/valuation trade-off. Our strategy is overweighting Consumer
Discretionary.
Figure 22: Vietnam's average monthly wage and growth Figure 23: Monthly retail sales & growth
USD/month, %12m/12m VND Billion/month, %y/y
350 14% 450,000 50%
Monthly retail sales & consumer services revenue (LHS)
12% %y/y (RHS) 45%
300 400,000
40%
10%
250
350,000 35%
8%
200 30%
6% 300,000
150 25%
4% 250,000
20%
100
2%
200,000 15%
50 0% 10%
150,000
0 -2% 5%
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
100,000 0%
Jul-13
Oct-13
Apr-14
Jul-14
Oct-14
Apr-15
Jul-15
Oct-15
Apr-16
Jul-16
Oct-16
Apr-17
Jul-17
Oct-17
Apr-18
Jul-18
Oct-18
Apr-19
Jul-19
Oct-19
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Average wage (USD/month) Change (%12m/12m)
Source: Ministry of Labor, CEIC Data.

Source: CEIC Data, GSO.
Figure 24: Inflation Figure 25: Vietnam's tourist growth

% y/y % y/y
6.0 80.0%
Headline CPI Core CPI
70.0%
5.0 60.0%
50.0%
4.0
40.0%
3.0 30.0%
South Korea, 22.1%
2.24 20.0% Japan, 15.0%
Total, 13.0%
2.0 10.0% China, 9.4%
1.99
USA, 8.0%
0.0%
1.0
-10.0%
-20.0%
0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M19
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
USA Total China South Korea Japan

10
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Table 10: Consumer Staples stocks comp table (Top 5)
EPS Growth (%) ROE (%) P/E (x) EV/EBITDA (x) Net
T12M
Price Mkt Cap Debt/
Company Ticker 5Y Div.yld
(US$) (US$MM) FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E EBITDA
Avg. (%)
(x)
Vietnam Dairy Products JSC VNM VN 5.1 8,800.8 22.1 5.6 6.2 38.7 38.1 20.9 19.7 14.5 13.6 -0.5 3.8
Saigon Beer Alcohol Beverage Corp SAB VN 10.2 6,531.8 13.8 27.1 23.1 33.5 36.0 30.0 24.4 21.4 17.2 -2.4 0.6
Masan Group Corp MSN VN 2.6 3,087.6 219.9 -15.7 16.5 13.9 14.5 15.9 13.7 10.6 9.6 2.3 NA
Hanoi Beer Alcohol & Beverage JSC BHN VN 3.4 790.3 -16.1 NA NA NA NA NA NA NA NA -4.5 9.6
Hoang Anh Gia Lai Intl. Agriculture JSC HNG VN 0.7 724.8 NA NA NA NA NA NA NA NA NA 18.7 NA
Average 59.9 5.7 15.3 28.7 29.5 22.3 19.2 15.5 13.5 2.7 4.7
Table 11: Consumer Discretionary stocks comp table (Top 5)

Price Mkt Cap Debt/ T12M
Company Ticker 5Y
(US$) (US$MM) FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E EBITDA Div.yld
Avg. (x) (%)
Mobile World Investment Corp MWG VN 4.8 2,113.1 34.8 25.7 25.5 34.4 32.1 13.2 10.5 7.7 6.1 0.3 1.4
Phu Nhuan Jewelry JSC PNJ VN 3.6 793.4 46.1 15.5 19.5 27.8 28.2 16.6 13.9 12.9 10.7 1.4 2.9
Phuoc Hoa Rubber JSC PHR VN 2.3 317.0 139.4 34.3 1.3 30.8 35.3 6.8 6.7 6.1 7.3 -2.3 0.9
Taseco Air Services JSC AST VN 3.8 171.9 NA 15.9 15.7 33.2 33.1 21.4 18.5 13.6 11.3 -1.0 2.3
Danang Rubber JSC DRC VN 1.0 117.9 29.3 30.5 23.9 12.2 13.8 14.9 12.0 5.4 5.0 1.0 4.3
Average 62.4 24.4 17.2 27.7 28.5 14.6 12.3 9.1 8.1 -0.1 2.4
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IT: growing strong with global demand
The main revenue stream Vietnam’s IT sector is from providing outsourcing services
(IT-BPO) to developed markets such as US, EU, and Japan. The sector has grown
rapidly in the last 5 years with average earning growth at 13% p.a. (23% expected in
2019).
We continue to see the key factors in play to support Vietnam’s IT growth as: 1)
Uptrend of global IT spending, especially in the US market; 2) Competitive IT labor
cost compared to other outsourcing hubs; 3) Government’s support in curbing
lending rate to the Technology sector; and 4) The sector currently trades at 10.8x PE,
a discount to the VN-Index while having stronger EPS growth prospects in 2020.
Table 12: Information Technology stocks comp table (Top 3)

Company Ticker 5Y
Avg. (x) (%)
FPT Corp FPT VN 2.4 1,618.8 19.7 31.4 17.9 24.0 24.7 11.9 10.1 7.0 5.7 -0.2 3.5
CMC Corp/Vietnam CMG VN 1.6 161.8 13.4 NA NA NA NA NA NA NA NA -0.6 2.0
Digiworld Corp DGW VN 1.0 43.3 NA 28.8 23.6 17.6 18.9 6.8 5.5 7.1 6.0 2.8 2.1
Average 16.6 30.1 20.7 20.8 21.8 9.4 7.8 7.1 5.9 0.7 2.5
Figure 26: Global IT spending and growth Figure 27: Software spending growth
% y/y %y/y
4,000 6.0% 14.0%
3,500 12.0%
5.0%
3,000 10.0% 9.7%
4.0% 8.5%
2,500
8.0%
2,000 3.0% 6.3%
6.0%
1,500
2.0% 3.9%
4.0%
1,000
1.0% 2.0%
500
- 0.0% 0.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018
Global IT spending (US$bn, LHS) Growth (%y/y, RHS) Total N.America Western Europe Japan
Source: Bloomberg Data. Source: Bloomberg Data.
Figure 28: Computer service/Total services exports Figure 29: IT labor cost - Vietnam & peers
90 USD/month
80 76.7 6,000 5,636
71.9
70
60.8 5,000
60 4,184
50 4,000
38.4
40 32.4
3,000
30 2,314 2,150
20 14.5 1,814
2,000
8.3 1,368
10 1,003 937
1,000 703 872
0 367 515
180 233 270
Philippines
Vietnam
Thailand
Indonesia
Malaysia
China
India
-
Vietnam Philippines Malaysia India China
25% Percentile Median 75% Percentile
Source: CEIC Data. Source: SalaryExplorer.com
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Real Estate: Neutral outlook, a play on passive flows
Despite strong EPS growth (40.5%) in 2020 as estimated by Bloomberg consensus,
we see several headwinds for Vietnam’s property sector in the near term: 1) Slower
new launches in 2019 that signal a weaker earning prospect post-2020; 2) Sluggish
infrastructure investment that weigh on residential development; and 3) Expensive
valuation compared to the VN-Index. Our strategy is staying neutral for the sector
in 2020. On a positive note, the sector might benefit from passive fund flows into
Vietnam due to their majority weight within MSCI Vietnam (49.2%) and FTSE
Vietnam (36.3%).
Table 13: Real Estate stocks comp table (Top 5)
Company Ticker 5Y
Avg. (x) (%)
Vingroup JSC VIC VN 5.0 16,850.1 9.9 22.4 69.8 6.1 8.1 74.6 43.9 24.2 14.7 3.9 NA
Vinhomes JSC VHM VN 4.0 13,299.8 23.4 21.2 45.7 31.4 34.9 16.7 11.4 17.3 10.6 3.5 1.1
Vincom Retail JSC VRE VN 1.5 3,538.0 NA -3.2 27.6 9.6 10.7 29.6 23.2 17.1 14.4 -0.1 3.0
No Va Land Investment NVL VN 2.5 2,322.5 NA -13.8 5.9 14.6 12.9 18.5 17.5 19.9 12.8 4.2 NA
Khang Dien House JSC KDH VN 1.2 630.9 47.8 9.8 31.0 12.9 15.0 15.7 12.0 11.2 8.7 NA 1.4
Average 27.0 7.3 36.0 14.9 16.3 31.0 21.6 17.9 12.3 2.9 1.8
Figure 30: Ho Chi Minh City's number of projects approvals and Figure 31: Government investment disbursement & growth (%4Q/4Q)
construction approvals 200,000 40%
90 83 175,000 35%
80
150,000 30%
69
70
125,000 25%
59
60 53 100,000 20%
50
75,000 15%
40
50,000 10%
30 24
25,000 5%
20
12
- 0%
10
(25,000) -5%
0
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
Project approval Construction approval
2017 2018 2019 Government investment (VND Bn - LHS) Growth (%4Q/4Q - RHS)
Source: Ho Chi Minh City Real Estate Association Source: CEIC Data.
Figure 32: MSCI Vietnam Index sector weights Figure 33: FTSE Vietnam Index sector weights
Industrials, Utilities, 2.6% Oil & Gas, Materials,
5.3% Financial 3.2% 0.8%
Energy, 1.0% Services, Industrials,
Materials, 11.4% 8.6%
6.9% Real Estate,
49.2%
Financials,
8.6% F&B, 15.9%
Real Estate,
36.3%
Retail, 9.5%
Conosumer Travel &

Staples, Leisure, 5.7%
26.3% Banks, 7.3%
Utilities, 1.5%
Source: FTSE
Source: MSCI
13
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Figure 34: Vietnam Industrial Production

Economic overview
(Notes extracted from J.P.Morgan Economics
Publication, Author: Park Seok Gil - November 29 2019)
Vietnam’s strong industrial production and customs

exports performance in 3Q is fading in 4Q, likely
reflecting the tech mini cycle that boosted 3Q activity
with new model launches. That said, in 2020 we expect
GDP growth to moderate to a trend-like 6.4%y/y
(average of 2014-16) from the high base of 7.1% in 2018 Source: GSO, CEIC, and J.P. Morgan
and 6.8% in 2019 as the continued benefits of the

Figure 35: Manufacturing PMI and IP
relocation of manufacturing bases balance lukewarm
global demand.
Table 14: Vietnam macro forecasts

2019E 2020E 2021E
Growth (% oya) 6.8 6.4 6.5
Inflation (% eop) 3.0 3.0 3.2
USD/VND (eop)
Current account (% GDP) 1.9 1.9 1.8
Overall fiscal balance (% GDP) -4.5 -4.3 -4.1
Public debt/GDP (%) 57.4 57.1 56.8
Ratings Outlook: Stable
Source: J.P. Morgan estimates. Source: GSO, Markit, and J.P. Morgan
IP likely has peaked Figure 36: Vietnam Customs Exports

Vietnam’s industrial production rose by 1.0%m/m, sa in
October, a modest pace compared with its performance
earlier this year. Three-month sequential growth slowed
to 27.4%3m/3m, saar from 34.3% in September, and
likely peaked in 3Q19. The tech sector’s strong 3Q
production gain is likely to fade in 4Q, related to new
model launch cycles.
Customs exports fell again in October

Customs exports also fell for the second month in
October (-0.4%m/m, sa, after -1.9% in September). As a Source: GSO and J.P. Morgan
result, three-month sequential growth slowed to
16.3%3m/3m, saar from 35.0% in September, led by a Figure 37: Manufacturing PMI and Exports
correction in tech exports (down 4.3%m/m, sa in
September and 2.3% in October).
The payback is more evident in the foreign-invested

sector (down 2.4%m/m, sa in October and 1.7% in
September) than in domestic sector exports, and exports
to EM Asia (excluding China) fell while exports toward
the US continued to rise strongly. These details suggest
that the regional tech manufacturing supply chain is
easing somewhat after 3Q’s rise, while Vietnam
continues to benefit from US-China trade tension. Source: GSO, Markit, and J.P. Morgan
Manufacturing PMI exports orders fell for the second
month to 51.1, the lowest level since November 2015,
hinting at a further near-term cooldown in exports.
14
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Figure 38: Vietnam FDI
Incoming FDI maintains robust trend

Incoming foreign direct investment (FDI) is a potential
source for strong economic growth. Likely reflecting US-
China trade tension and re-based manufacturing,
Vietnam’s planned incoming FDI surged in 1H19, and
implementation of FDI is also rising after a short 2Q ease
following a strong 1Q rise. This robust trend in incoming
FDI plans suggests that Vietnam’s GDP growth should
remain robust in 2020, albeit at a modestly slower pace
than in 2019. Source: Vietnam Foreign Investment Agency, CEIC, and J.P. Morgan
Inflation to rise on swine flu outbreak Figure 39: Vietnam's CPI inflation
In 2019, consumer inflation drifted lower to 2.2%oya in
October from 3.0% in December 2018, as supply-side
price pressures eased in food and transportation prices
and core prices stabilized at under 3%. That said, we
expect consumer prices to rise sharply on food price
inflation from the outbreak of swine flu, returning to
3.0% by the end of 2019.
Source: GSO and J.P. Morgan

Table 15: Economic activity heat map
Economic indicators Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19
Industrial Industrial output (% y/y) 9.1 7.7 9.6 11.4 7.9 10.3 9.1 9.3 10.0 9.6 9.7 10.5 10.2
Activities PMI (SA) 51.5 53.9 56.5 53.8 51.9 51.2 51.9 52.5 52.0 52.5 52.6 51.4 50.5
Retail sales (% y/y) 10.9 NA 11.1 11.7 11.4 12.8 13.1 13.2 13.2 12.7 12.5 12.4 12.4
Consumption Auto sales (% y/y) 24.7 39.1 37.1 35.7 25.2 -6.1 44.9 -2.8 16.8 22.2 27.8 6.3
Tourists (% y/y) 22.9 22.4 21.3 19.9 5.0 8.0 7.0 7.6 8.8 7.5 7.9 8.7 10.8
Exports (% y/y) 6.0 2.5 8.1 -0.1 -1.1 1.9 6.0 8.3 7.8 8.8 11.2 17.2 12.2
External Imports (% y/y) 8.5 14.3 13.4 2.8 3.8 10.4 15.5 19.7 9.8 11.3 6.9 8.6 13.6
factors FDI registration (% y/y) -3.0 -7.8 -20.3 -15.5 81.9 75.7 80.1 50.4 38.7 -37.2 -37.4 -32.3 -22.3
FDI disbursement (% y/y) -9.1 8.8 -22.2 73.3 9.2 10.8 0.7 29.5 -3.0 11.1 -2.0 0.7
Credit growth (%ytd) 10.3 11.2 12.3 13.9 1.9 1.1 3.1 4.5 3.1 6.2 8.4
Monetary
M2 growth (%ytd) 9.0 9.8 10.6 12.4 3.0 1.8 2.9 3.6 5.4 7.1 6.1 8.4
Fiscal Public investment growth (%y/y) 17.5 17.1 14.2 8.5 3.9 4.7 1.1 4.9 2.7 2.2 4.1 3.7 N/A
Source: GSO, Bloomberg, CEIC, State Bank of Vietnam. Note: Green = acceleration, yellow = deceleration, red= contraction.
Table 16: Government target & Figure 40: Quarterly GDP growth and Govt. target (%)
indicators 9.0
Quarterly GDP growth Government target
2019 9M19
Key indicators Target Actual
GDP growth 6.8% 6.98% y/y 8.0 7.7
7.5 7.5
Headline CPI < 4% 1.98% y/y 7.3 7.3
Credit growth 14% 8.4% YTD 7.0 7.0
7.0 6.8 6.8 6.9 6.8 6.7
Exports/Imports growth 8-10% 8.4% y/y
6.5 6.6 6.7
Retail sales growth 12% 13% y/y 6.3
Public debt/GDP < 61.3% 58.4% (*) 6.0 6.1 6.1
External debt/GDP < 49% 49.7% (*) 6.0 5.8
5.5 5.5
Budget (VND Tn) 5.3
5.1 5.2
Revenue 1,411.3 1,028.7
Expenditure 1,633.3 962.2 5.0
Public Investment 429.3 174.3
Fiscal Balance (222.0) 66.5
(*) 4Q18 Data 4.0
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Source: Government of Vietnam, GSO, MOF.
Source: Government of Vietnam, Bloomberg.
15
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Inflation
Figure 41: Headline & Core Inflation
%y/y
8.0
Headline CPI Core CPI
7.0
6.0
5.0
4.0 3.52
3.0
2.0 1.99
1.0
0.0
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Nov-15
Feb-16
May-16
Aug-16
Nov-16
Feb-17
May-17
Aug-17
Nov-17
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Aug-19
Nov-19
Source: Vietnam GSO, Bloomberg.
Figure 42: CPI Basket

%
Source: Vietnam GSO.

Table 17: CPI by component
%y/y
Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19
Headline CPI 3.46 2.98 2.56 2.64 2.70 2.93 2.88 2.16 2.44 2.26 1.98 2.24 3.52
Core CPI 1.72 1.70 1.83 1.82 1.84 1.88 1.90 1.96 2.04 1.95 1.96 1.99 2.18
Clothing 1.68 1.68 1.73 1.67 1.67 1.75 1.80 1.87 1.86 1.85 1.82 1.74 1.59
Entertainment 1.73 1.72 1.98 1.92 1.92 1.94 1.96 2.03 1.91 1.67 1.64 1.65 1.63
Food and Foodstuff 4.80 5.10 5.32 5.53 4.68 4.27 3.42 2.44 2.33 1.69 1.81 2.65 5.62
Household Appliances & Goods 1.32 1.35 1.35 1.34 1.30 1.31 1.32 1.44 1.41 1.36 1.36 1.33 1.35
Housing & Construction Materials 2.27 1.13 0.94 1.73 2.80 3.25 4.21 3.33 2.92 2.80 2.72 2.94 3.73
Medical Products & Health Care 0.50 3.65 1.80 1.75 -0.20 -0.21 -0.31 -0.29 5.93 8.88 8.83 8.84 8.88
Telecommunications -0.86 -0.81 -0.81 -0.76 -0.79 -0.78 -0.69 -0.69 -0.65 -0.62 -0.52 -0.56 -0.58
Transport & Communication 6.24 0.21 -3.95 -4.54 -1.66 1.36 2.27 -0.53 -0.03 -0.62 -2.65 -3.19 -2.13
Misc 2.32 2.40 2.35 2.07 2.12 2.30 2.41 2.54 2.93 2.95 3.04 3.12 3.13
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Consumption
Retail sales and consumer Figure 43: Retail sales & consumer services revenue growth
services continued to grow VND Bn, %y/y
450,000 50.0%
firmly, increasing by 12.7% Monthly retail sales & consumer services revenue (LHS) %y/y (RHS)
y/y, higher than recent months. 45.0%
400,000
40.0%
10M19 consumption grew by
12.3% y/y, higher than last 350,000 35.0%
year’s growth (11.2% y/y)
30.0%
300,000
25.0%
250,000
20.0%
200,000 15.0%
10.0%
150,000
5.0%
100,000 0.0%
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Source: Vietnam GSO, CEIC data.
Figure 44: Retail sales & consumer services revenue growth – by components
%y/y
While tourism growth has 35.0%
slowed down from a 3-year Total Goods Accomodation, F&B Services Other Services Tourism
high in 2018, sales of goods 30.0%
have picked up remarkably in
10M19 (+13.4% y/y) and
25.0%
became the main driver for
consumer sales.
20.0%
15.0% Goods, 13.4%

Total, 12.3%
Tourism, 11.6%
10.0%
Accomodation, F&B
Services, 9.5%
5.0% Other Services, 8.0%
0.0%
2013 2014 2015 2016 2017 2018 10M19
Figure 45: Consumer confidence index

According to Nielsen’s report, 135
Vietnam consumer index
129 129
reached a record high in 1Q19, 130
leading the regional average by 125

124
122
12 points and ranked third 120
120
globally, only behind the 117
115
Philippines and India. (Source: 115
112
Link) 110 108
109
107 107
105
100
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19
Source: Tradingeconomics.com, Nielsen.
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Figure 46: Tourists arrival growth
After a muted 1H19, tourist %y/y
arrival started to regain 80.0%
momentum in 3Q19, with
monthly Chinese tourists 70.0%
starting to increase on a y/y
basis (9M19 up 4.4% y/y). 60.0%
10M19 growth of visitors from 50.0%

South Korea maintained a
40.0%
solid 22.1% y/y increase,
Japanese tourists accelerated 30.0%
(+15% y/y). Chinese tourists South Korea, 22.1%
bounced back in 3Q19 (+9.4% 20.0% Japan, 15.0%
q/q, +25% y/y), bringing 9M19 Total, 13.0%
arrivals growth to 4.4% y/y. 10.0% China, 9.4%
USA, 8.0%
0.0%
-10.0%
-20.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 10M19
USA Total China South Korea Japan
Figure 47: Tourists by origin

%
100%
Strong and resilient tourism 90%
growth from South Korea has 36% 35%
80% 39%
expanded the country’s share 52% 51% 51% 49% 45%
55% 54%
of visitors to Vietnam, 70%
4%
increasing its share to 25% 60% 5%
4%
5% 6%
compared to China’s 31%. 50% 6% 6%
6% 6% 6% 7%
7% 6% 22% 24%
40% 9% 8% 8% 8% 19%
8% 8% 15%
30% 9% 10% 11%
9% 14%
10%
10%
20%
31% 32% 31%
24% 25% 25% 22% 27%
10% 18% 21%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 9M19
China South Korea Japan USA Others
18
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Production
Table 18: Industrial Production indices
%y/y
Production heat map Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19
Overall 9.6 11.4 7.9 10.3 9.1 9.3 10.0 9.6 9.7 10.5 10.2 9.2 5.4
Animal Feed 6.6 7.3 5.5 4.7 10.6 6.7 9.0 7.0 9.0 7.6 7.0 2.6 1.1
Aquatic Product 13.2 22.9 12.4 13.4 6.0 13.1 8.9 6.9 11.1 12.7 9.8 8.3 15.7
Bedding 20.1 30.1 12.4 25.9 5.2 16.8 10.7 21.8 9.7 12.7 18.5 9.5 13.0
Beer 4.3 7.1 13.9 15.8 16.6 16.4 10.6 10.5 8.4 12.2 13.4 9.0 11.3
Butter 10.9 18.1 12.9 9.5 9.1 7.3 6.9 6.2 7.4 7.6 7.4 10.3 9.6
Cables and Wires 17.1 23.4 17.0 22.5 13.5 22.1 20.8 15.3 11.6 15.1 26.2 9.8 15.6
Cement 8.6 8.2 7.2 11.3 0.9 7.3 7.1 10.0 17.9 10.9 13.3 11.3 13.3
Coal -0.3 5.5 6.6 5.8 7.2 13.9 5.8 9.1 28.3 33.4 16.9 8.1 6.6
Soap & Detergent 8.5 24.6 14.2 24.6 6.9 20.9 5.5 24.0 12.5 15.9 12.9 18.5 16.3
Fertilizer 19.4 11.3 2.6 3.6 0.9 -1.6 8.3 8.3 11.3 13.1 -9.4 -2.6 3.3
Manufacturing 11.0 13.7 10.1 12.8 10.3 10.5 11.6 10.6 10.4 10.3 12.3 10.8 6.5
Mining and Quarrying 0.2 -3.2 -6.7 -5.0 0.4 2.0 -1.5 4.0 4.4 14.4 -6.6 -0.2 -5.3
Motorbikes -0.3 -0.4 7.9 4.9 4.0 -1.3 -4.5 -2.9 -15.3 -9.0 -11.4 -12.2 -5.8
Motored Vehicles 25.6 20.1 20.4 21.2 30.9 19.8 12.0 -6.4 17.3 0.9 -2.5 1.6 8.2
Other 10.7 28.8 16.7 11.5 2.9 21.7 20.2 29.3 19.1 19.6 20.6 19.9 12.1
Other Metal Product 15.0 16.0 17.7 1.9 6.0 12.4 -2.7 6.0 5.7 6.7 6.0 4.0 3.9
Other Plastic Products 4.1 11.1 11.3 16.4 13.4 16.8 17.2 19.1 20.1 14.9 16.4 11.6 13.2
Paint 8.6 25.4 17.4 24.3 14.4 20.1 14.6 14.2 15.6 17.5 13.4 10.0 6.8
Paper Label and Packing 11.5 17.9 9.6 4.1 18.1 29.7 14.8 13.3 18.1 12.3 18.3 12.5 17.7
Pharmaceutical Products 32.5 24.2 -12.2 -15.4 13.7 2.2 5.7 3.3 11.4 -10.7 -14.5 2.3 6.9
Power Generation 9.2 11.7 8.8 10.9 9.8 9.4 11.0 8.6 10.5 10.3 10.6 8.1 7.5
Shoes and Sandals 16.4 17.0 9.9 7.4 4.0 8.6 6.8 12.4 14.3 15.0 11.4 14.1 18.6
Steel 38.9 37.6 32.9 44.9 40.0 47.3 43.4 44.0 42.7 37.0 16.7 15.0 14.0
Stone Sand Pebble and Clay 0.7 3.6 0.7 4.6 0.0 -2.4 5.3 8.6 10.4 8.1 3.9 -1.2 -0.1
Tobacco 7.6 24.4 2.6 2.3 -0.8 10.6 0.6 2.7 -0.1 8.7 7.6 1.6 -1.6
Water Supplying 7.6 9.4 6.8 5.1 12.6 8.2 9.0 7.9 8.7 7.9 8.8 8.2 7.0
Source: GSO, Bloomberg.
Note: Green = acceleration, yellow = deceleration, red= contraction.
Table 19: Purchasing Manager Index

%y/y
Purchasing Manager Index Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov- 19
PMI (SA) 56.5 53.8 51.9 51.2 51.9 52.5 52.0 52.5 52.6 51.4 50.5 50.0 51.0
Employment SA 57.8 54.0 52.5 48.8 49.7 52.1 49.5 52.4 50.6 50.9 49.2 48.8 50.5
New Export Orders SA 67.7 52.3 49.3 47.2 58.1 58.1 53.2 51.5 50.9 51.7 52.0 49.8 52.1
Backlogs of Work SA 50.3 51.1 49.5 44.6 51.0 50.1 50.0 53.2 50.8 48.2 50.8 51.0 51.4
Future Output Index 81.4 74.3 74.5 68.1 72.8 73.5 77.4 70.7 72.9 69.9 65.6 69.9 67.8
Input Prices SA 55.5 48.7 50.4 50.6 50.8 54.0 53.8 51.9 51.1 50.4 50.7 52.2 50.3
New Orders SA 57.5 55.7 52.1 52.4 53.7 53.6 54.1 54.2 54.4 52.3 52.0 50.7 51.2
Output SA 57.8 53.6 52.3 53.2 54.0 52.8 53.0 53.1 54.9 51.0 49.7 49.8 52.0
Output Prices SA 53.4 47.2 50.5 50.0 50.2 50.2 49.5 49.0 48.4 49.3 48.1 50.4 49.6
Quantity of Purchases SA 57.4 56.4 53.1 54.5 55.4 53.4 54.3 55.3 55.2 53.1 50.2 50.0 52.1
Suppliers' Delivery Times SA 50.1 49.3 49.5 50.1 50.7 49.8 50.4 50.9 50.3 48.8 49.2 49.9 50.7
Stocks of Finished Goods SA 63.8 47.6 50.6 46.5 50.4 49.9 49.8 50.1 53.2 49.3 49.6 48.9 49.4
Stocks of Purchases SA 57.5 53.4 50.9 49.2 49.5 52.6 51.5 51.4 50.1 50.7 50.2 50.4 51.4
Source: GSO, Bloomberg.
Note: Green = acceleration, yellow = deceleration, red= contraction.
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Figure 48: Vietnam monthly power generation and manufacturing output growth
%y/y
30.0
Power generation Manufacturing output
25.0
20.0
15.0
10.0
5.0
0.0
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Figure 49: Vietnam total volume of cargo transported

'000 tons, %y/y
Total cargo volume (thousand tons) Growth (%y/y)

1,800,000 25%
1,600,000
20%
1,400,000
1,200,000
15%
1,000,000
800,000
10%
600,000
400,000 5%
200,000
- 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19
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Foreign direct investment
Table 20: Key FDI projects in manufacturing - 2019
The shift of manufacturers to
Date Projects Industry Capital (U$mm)
avoid the effects of US-China
Sep-19 LG Display Hai Phong (Expansion) Electronics 410
trade tensions is reflected in
the FDI flows to Vietnam from May-19 Meiko Vietnam (Hong Kong) Electronics 200
late 2018 into 2019. Mar-19 Royal Pagoda Private Limited (Singapore) Textiles 200
Mar-19 Cooper Tire & Rubber Holding and Sailun group (China) Tires 280
We took note of several key Mar-19 Universal Alloy Corporation Asia Pte., Ltd (Singapore) Aerospace 170
manufacturing FDI projects Feb-19 Guizhou Advance Type Investment co.,ltd (China) Tires 214
that registered in Vietnam in Jan-19 New Wing Interconnect Technology Bac Giang (Foxconn) Electronics 110
9M19, including new factories Jan-19 GoerTek (Hong Kong) Electronics 260
and expansion of Meiko, Jan-19 Keytronic EMS Electronics 70
Foxconn, Keytronic, and Source: Vietnam Ministry of Planning & Investment.
GoerTek.
Figure 50: Monthly FDI registration and disbursement
US$mn
10,000
Total FDI registered in 9,000
Vietnam in 9M19 was 3% y/y
higher. The growth rate looks 8,000
slow due to several mega real 7,000

estate projects logged in June
6,000
2018. The number of FDI
projects has increased 5,000
meaningfully in the last 12 4,000

months (+27% y/y). 9M19 FDI
3,000
disbursement grew at a steady
pace of 7% y/y. 2,000
1,000
0
Mar-17
Apr-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Mar-18
Apr-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Mar-19
Apr-19
Jun-19
Jul-19
Aug-19
Feb-17
May-17
Feb-18
May-18
Feb-19
May-19
Monthly FDI Registration Monthly FDI disbursement
Source: Vietnam Ministry of Planning & Investment, CEIC.
Chinese investors have Figure 51: Changes in number of FDI projects registration in Vietnam – total and top countries
increased their number of new (%12m/12m)
projects by 72% y/y, faster 80%
China, 72%
than investors from Singapore 70%
(+10% y/y), Korea (+2% y/y)
60%
and Japan (+5% y/y).
50%
40%
30% Total, 27%

Korea has claimed back the
no.1 FDI investor spot in 20%
Vietnam with 19% of FDI 10%
Singapore, 10%
value registration, followed by Japan, 5%
0% Korea, 2%
China (18%).
-10%
-20%
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Source: Vietnam Ministry of Planning & Investment, Bloomberg.
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Figure 52: Number of FDI project registrations - by country
3500
3,046
3000 2,759
2,556 2,591
2500 959
2,013
899 893
2000 226 1,629
1,588
713 186
1500 1,275 210
580 1043
130
1000 424 828 861 118
106
105 702 490
505 429
500 366
341 367 219
298 299
291 389
169 278 284 303
0 89 99
2013 2014 2015 2016 2017 2018 9M19
China Japan Korea Singapore Others Total
Figure 53: Countries' share of new FDI capital registration

%
100%
90% 21%
28% 28%
37% 39% 35%
80%
70% 18%
64% 8%
60% 21%
13%
15% 10% 20%
50% 19%
40% 19%
26%
7% 36%
30% 39%
36% 37% 14%
20% 9% 17%
10% 6% 18%
16% 8%
8% 8% 7% 7%
0% 2% 4%
2013 2014 2015 2016 2017 2018 9M19
China Japan Korea Singapore Others
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Trade
Figure 54: Vietnam trade balance Figure 55: Import export growth and monthly trade balance
with top trade partners – 9M19 %y/y, US$mn
US$bn 60% 4,500
Exports Trade balance Exports growth (%y/y) Imports growth (%y/y)
80 68.6
Imports 4,000
60 Trade balance 50%
44.7 3,500
40 28.2
34.0 40% 3,000
15.0 14.8
20 18.3 2,500
30%
0 0.8 2,000
-20 (14.2) (20.5) (10.7) 20% 1,500

(27.2)
-40 1,000
(35.3)
10%
-60 (50.3) 500
(55.4)
-80 0% -
China
Japan
S.Korea
Others
US
(500)
-10%
(1,000)
Source: CEIC Data, Vietnam GSO.
-20% (1,500)
Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19
Source: Vietnam Customs, CEIC.
Figure 56: Vietnam import share by product
Source: Vietnam Customs.
Figure 57: Vietnam export share by product
Source: Vietnam Customs.
23
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Table 21: Exports growth by product (%y/y)
Exports Latest month (US$mn) Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19
Total 23,000 6.0 2.5 8.1 (0.1) (1.1) 1.9 6.0 8.3 7.8 8.8 11.2 17.2 12.2
Electronics 3,300 11.8 6.6 (0.9) 4.2 (5.0) 4.8 20.0 16.3 9.6 20.6 24.2 32.0 22.2
Textile & Garment 3,000 17.8 21.2 20.0 11.7 6.4 (1.8) 16.4 8.7 10.4 3.8 13.2 13.8 7.1
Footwear 1,400 15.1 5.7 2.3 7.6 12.9 7.5 13.1 11.3 13.9 16.8 18.4 14.3 16.7
Machinery 1,500 20.6 23.4 21.2 20.7 14.5 1.8 (5.8) (4.5) (0.5) 3.1 15.1 11.1 15.4
Wood 850 6.1 18.4 22.2 11.1 16.3 (8.5) 24.1 22.7 20.9 13.3 16.4 16.4 25.0
Fishery 750 (0.9) (0.7) 4.1 3.6 4.5 (13.6) (10.3) (9.4) (2.1) (1.8) (3.3) (6.3) (3.8)
Transport 650 13.6 5.7 18.9 4.8 5.1 1.0 17.8 11.6 5.5 14.2 11.6 21.7 8.3
Bags 300 (3.9) 20.9 11.3 6.6 1.0 (6.7) 17.1 22.8 1.2 13.6 15.7 17.9 20.1
Vegetables 285 17.9 24.8 (10.4) (10.0) (1.0) (25.1) (6.7) 25.7 15.3 (1.8) (18.9) (33.3) (13.6)
Cashew Nuts 276 (24.6) (23.4) (21.9) (10.7) (9.9) (33.4) (18.3) (21.3) (13.7) (3.1) (4.2) (8.0) 9.6
Plastic Products 280 9.0 12.3 15.0 14.6 13.4 1.2 15.0 14.9 8.4 9.0 7.0 7.7 21.7
Rice 223 (19.6) (26.8) 21.3 39.8 (24.8) (17.1) (24.4) (29.8) (24.0) (3.1) 18.6 6.8 17.1
Steel 289 6.2 4.4 (0.9) 3.0 26.3 (22.1) (23.0) (27.0) 7.3 (22.8) (29.4) (20.7) (7.4)
Coffee 175 20.0 24.5 21.7 (13.3) (22.1) (30.2) (28.1) (21.1) (25.3) (15.7) 6.3 (10.6) (22.0)
Gasoline 144 43.1 68.0 81.1 53.4 22.7 43.6 7.4 (22.8) 52.5 18.2 16.9 (1.5) 37.5
Chemicals 160 17.1 100.8 34.0 49.9 51.7 38.2 22.1 26.8 56.3 14.3 (1.1) (12.5) 23.1
Electric Wires 190 17.8 8.3 (11.5) (9.8) (16.7) (3.4) (0.1) 16.7 12.1 7.7 22.5 23.2 15.2
Valuable Stones 320 (21.1) (5.1) 21.9 8.2 (2.0) 9.9 11.4 8.7 (23.6) 186.4 706.1 1,011.1 611.1
Chemical Products 100 17.3 28.5 23.5 21.6 10.7 1.9 19.5 23.5 14.6 30.4 40.6 44.4 11.6
Pepper 37 (20.0) (5.5) (17.6) (24.9) (33.8) (26.3) (17.2) (6.5) 19.7 20.0 15.1 (7.7) (28.5)
Cassava 80 (25.2) (2.3) (15.3) (36.1) (0.1) 11.5 (11.2) 14.3 (28.4) (25.5) 7.9 67.2 26.7
Ceramics 40 6.0 10.6 0.4 9.7 5.8 2.1 (7.9) 8.1 0.9 (3.7) 13.4 - -
Coal 10 (24.3) 74.5 (60.4) (9.7) (21.7) (91.0) (89.3) (100.0) (100.0) 97.0 (77.8) (40.8) (49.7)
Rattan 35 13.2 19.6 38.1 34.4 40.6 7.8 69.5 40.0 51.1 43.2 41.6 33.3 40.0
Tea 22 (18.7) (4.8) 1.1 13.1 (0.9) (7.8) 16.9 3.3 (7.1) (16.1) (0.1) 20.8 31.0
Others 16,000 6.1 0.2 6.7 (5.0) (5.1) 0.7 4.9 7.1 6.3 8.5 8.5 16.4 7.4
Source: Vietnam Customs, Bloomberg.
Table 22: Import growth by product (%y/y)
Imports Latest month (US$mn) Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19
Total 22,500 8.5 14.3 13.4 2.8 3.8 10.4 15.5 19.7 9.8 11.3 6.9 8.6 13.6
Electronics 5,100 1.4 16.1 14.4 (2.7) 0.0 17.1 18.9 46.8 16.1 32.7 27.0 35.1 34.2
Machinery 3,100 6.1 14.6 8.0 4.3 2.9 9.0 17.7 22.4 4.5 8.8 8.7 8.5 10.7
Fabric 1,000 7.5 5.3 10.1 3.1 5.3 22.0 17.6 9.2 (0.3) 14.3 6.6 (4.3) 2.0
Steel 794 23.5 3.2 3.7 6.9 (2.6) (0.4) 23.5 5.0 (7.0) (1.7) (3.5) (10.9) (4.6)
Plastics 765 15.7 28.0 33.1 12.8 3.0 (2.4) 7.4 17.4 4.5 (2.6) 9.4 6.7 5.8
Automobile 590 30.7 29.5 9.3 (9.4) 134.2 100.8 60.9 94.2 118.8 73.2 49.3 22.1 21.8
Raw Materials 450 2.3 6.3 15.8 5.0 5.2 11.3 12.1 10.7 8.3 11.8 19.5 4.2 (2.2)
Other Metals 595 10.6 16.7 11.2 2.4 9.2 (15.8) (18.6) 17.3 10.8 (0.5) (51.7) (14.3) 20.9
Plastic Products 570 (3.1) 5.2 10.8 3.6 5.5 5.3 12.0 27.5 15.7 11.5 12.9 7.7 14.0
Chemical Products 450 1.9 14.4 8.4 2.0 6.1 6.3 5.9 5.9 13.1 5.5 15.2 4.5 12.5
Chemicals 410 17.4 22.7 28.5 8.0 7.9 12.3 3.5 5.1 12.5 (1.7) (0.7) 2.4 2.5
Petroleum 435 0.1 (15.6) (21.1) (49.4) (67.2) (60.4) (34.6) (18.0) (50.8) (57.6) (21.2) (8.8) (13.5)
Cotton 170 14.1 16.9 40.5 21.8 12.1 (7.8) 4.4 19.4 7.2 3.0 (16.5) (29.8) (31.4)
Cattle Feed 320 37.8 27.0 27.1 63.4 3.9 2.2 (0.8) (5.8) 17.1 (24.8) 29.2 32.0 (8.6)
Medicaments 240 (11.3) (15.2) 8.0 (7.2) 10.7 1.3 9.3 8.2 9.9 15.2 14.0 - 20.0
Wood 220 15.2 27.9 16.2 6.1 13.1 14.5 18.0 25.4 29.7 23.0 13.5 12.5 10.0
Textile & Leather 220 35.9 38.7 27.1 17.5 12.0 6.5 10.6 29.7 8.5 4.2 11.1 (8.7) 8.8
Seafood 140 2.5 22.4 3.3 9.8 4.0 1.3 4.5 26.7 10.2 (2.0) 22.8 (3.6) 12.0
Vegetables 130 16.9 16.9 (3.9) 22.1 1.7 12.3 13.1 105.8 64.9 19.1 (18.0) (35.7) (18.8)
Paper 150 22.3 16.4 6.7 4.5 12.3 1.2 - (4.6) (1.0) (0.2) 18.0 (2.5) (5.3)
Transport 60 3.0 72.3 (2.6) 44.7 12.0 (15.5) 48.0 8.4 34.8 2.9 165.9 592.3 (7.7)
Rubber 111 5.0 26.6 4.1 6.5 17.7 12.9 8.1 43.8 10.7 6.0 36.9 17.1 17.5
Fertilizer 77 21.8 11.4 9.0 34.5 70.9 12.8 (23.7) (21.8) (2.6) (23.4) 32.7 (18.9) 20.1
Milk 75 24.4 21.8 16.5 2.3 10.3 77.7 (2.6) 6.8 16.1 19.4 18.0 - -
Other Oil Products 80 3.7 6.1 36.7 39.2 15.2 27.5 (20.2) (5.5) 19.5 (0.2) (6.1) (6.7) 14.3
Insecticides 65 (1.9) 2.7 4.1 (18.2) 30.1 (0.0) (2.9) (3.0) 16.7 (4.5) (3.9) (6.7) -
Motorbike 80 31.4 44.3 64.8 91.3 54.7 56.7 41.5 61.8 18.2 50.1 33.7 23.1 60.0
Liquefied Gas 82 (27.5) 82.2 (45.4) 15.1 (57.0) 1.3 5.2 145.4 27.2 (30.8) (27.0) 28.6 52.8
Animal Oil and Fat 55 (2.8) (11.8) (3.2) (5.1) (3.2) (2.3) (5.1) 26.0 39.8 (20.5) (5.0) (8.0) (21.4)
Wheat 70 58.2 7.3 53.5 (43.9) (36.0) 21.7 (83.7) (33.5) (59.7) (39.5) (4.8) (66.4) (18.6)
Source: Vietnam Customs, Bloomberg.
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Banking, interest rates, and foreign exchange

Vietnam posted moderate credit Figure 59: Credit, deposit & M2 growth
growth during 1H19 (+7.3% ytd, %
+14.1% y/y), which is aligned with 40%
M2 growth (% y/y) Credit growth (% y/y) Deposit growth (%y/y)
the government target of 14% for
35%
2019. The State Bank of Vietnam
has noted an increase in proportion 30%
of credit to manufacturing and
exports-oriented industries. 25%
20%
Deposits grew at a slower pace of
9.9% y/y and M2 expanded by 9% 15% 14.1%
y/y.
9.9%
10%
9.0%
5%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H19
Source: State Bank of Vietnam, CEIC.
Figure 60: Credit/GDP and M2/GDP

Figure 58: Credit by sector %
Agriculture, Forestry
Other
& Fishery 170% 164.7%
Activities Credit/GDP M2/GDP
9.1%
36.3% Industrials 160%
19.9%
150%
140% 134.1%
130%
120%
Transportation/
110%
Construction
Telecom 9.7%
3.0% 100%
Trading
21.9%
90%
Source: State Bank of Vietnam, CEIC. 80%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: State Bank of Vietnam, GSO.

Table 23: Interbank interest rates
%
Tenor Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19
O/N 4.35 4.50 5.05 3.95 4.15 2.45 2.95 3.25 2.75 4.40 1.70 1.65 3.90
1 Week 4.90 4.75 5.05 4.05 4.25 3.20 3.05 3.25 2.85 4.40 2.50 1.95 4.00
1 Month 5.00 5.05 5.15 4.30 4.25 3.35 3.45 3.55 3.20 4.40 3.00 2.85 4.30
3 Month 5.25 5.25 5.40 4.50 4.85 4.10 3.90 3.80 3.95 4.40 4.10 4.15 4.60
6 Month 5.30 5.25 5.45 4.60 4.70 4.50 4.30 4.30 4.25 4.45 4.40 4.15 4.60
9 Month 5.30 5.50 5.40 4.60 4.60 4.45 4.50 4.50 4.30 4.75 4.60 4.15 4.70
12 Month 5.30 5.50 5.40 4.75 4.75 4.45 4.80 4.80 4.30 4.80 4.70 4.15 4.80
Source: Bloomberg.
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Figure 61: USD/Vietnamese Dong Exchange Rate

24,000
USD/VND spot SBV BID Price Upper trading band Lower Trading band
23,500
23,000
22,500
22,000
21,500
21,000
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Source: Bloomberg.
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Government bonds
Figure 62: Public Debt/GDP and External Debt/GDP

%
70
Public Debt External Debt Public debt ceiling External Debt ceiling
65
60
58.4
55
50
49.7
45
40
35
30
25
20
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Bloomberg, Ministry of Finance.
Figure 63: Government bond yield curve

6.0
5.5
5.0
4.5
4.0
Bond yield (%)
3.5
3.0 Nov-19
2.5 May-19
2.0 Nov-18
1.5
1.0
0.5
0.0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Bond Tenor (yrs)
Source: Bloomberg.
27
(65) 6882-8151 12 December 2019
Figure 64: Government bond yield movements

6.0
5.5
5.0
4.5
4.0
3.5
3.0
1Y
2Y
2.5
3Y
5Y
2.0
7Y
10Y
1.5
15Y
1.0
Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19
Source: Bloomberg.
Table 24: Government bond yield

%
Tenor Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19
1Y 4.15 4.10 3.34 2.99 3.26 3.25 3.26 3.27 2.98 2.80 2.80 2.17 2.15
2Y 4.26 4.21 3.48 3.23 3.37 3.49 3.46 3.54 3.07 2.90 2.94 2.28 2.20
3Y 4.41 4.30 3.61 3.40 3.51 3.59 3.61 3.66 3.15 3.00 3.02 2.39 2.30
5Y 4.63 4.56 3.80 3.76 3.88 3.92 3.85 3.91 3.51 3.32 3.08 2.54 2.41
7Y 4.90 4.76 4.20 4.13 4.20 4.27 4.29 4.26 4.02 3.79 3.66 3.18 3.31
10Y 5.19 5.13 4.86 4.76 4.83 4.80 4.75 4.69 4.46 4.17 4.07 3.69 3.59
15Y 5.43 5.41 5.18 5.07 5.15 5.15 5.10 5.07 4.73 4.49 4.32 3.80 3.71
Source: Bloomberg.
28
(65) 6882-8151 12 December 2019
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Asia Commercial Bank, Techcombank, Vietcombank, VP Bank.
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such term is defined in Directive 2014/65/EU) for VP Bank within the past 12 months.
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services in the next three months from VP Bank.
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other than investment banking from Asia Commercial Bank, Techcombank, Vietcombank, VP Bank.
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29
(65) 6882-8151 12 December 2019
Asia Commercial Bank (ACB.HM, ACB VN) Price Chart Date Rating Price (D) Price Target
(D)
57,673 01-Nov-19 OW 24100.00 40,000
49,434
41,195
OW D40,000
32,956
Price(D)
24,717
16,478
8,239
0
Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
16 17 17 17 17 18 18 18 18 19 19 19 19
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Nov 01, 2019. All share prices are as of market close on the previous business day.
Techcombank (TCB.HM, TCB VN) Price Chart Date Rating Price (D) Price Target
(D)
70,272 01-Nov-19 OW 23700.00 40,000
61,488
52,704
OW D40,000
43,920
Price(D) 35,136
26,352
17,568
8,784
0
Jun Sep Jan Apr Aug Dec
18 18 19 19 19 19
30
(65) 6882-8151 12 December 2019
Vietcombank (VCB.HM, VCB VN) Price Chart Date Rating Price (D) Price Target
(D)
01-Nov-19 OW 87700.00 100,000
145,068
124,344
103,620
OW D100,000
82,896
Price(D)
62,172
41,448
20,724
0
Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
16 17 17 17 17 18 18 18 18 19 19 19 19
VP Bank (VPB.HM, VPB VN) Price Chart Date Rating Price (D) Price Target
(D)
01-Nov-19 N 21500.00 20,000
64,967
55,686
46,405 N D20,000
Price(D) 37,124
27,843
18,562
9,281
0
Aug Nov Feb May Aug Nov Feb May Aug Nov
17 17 18 18 18 18 19 19 19 19
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
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31
(65) 6882-8151 12 December 2019
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Asia Pacific Equity Research

Vietnam Equity Strategy

 Economics forecasts: J.P. Morgan economics team expects GDP growth to

Vietnam Equity Strategy

Source: Bloomberg data as of 11 Dec 2019.

Figure 6: VN-Index – Forward PE Figure 7: VN-Index – Forward PE relative to FM

Key catalysts to watch

1100 250 100

Source: Bloomberg data. Source: Bloomberg data.

Real Estate 40.5% 18.5

VN-Index 15.0% 13.8 0

Source: Bloomberg data.

Table 8: Vietnam banks valuations

Table 9: VN banks ROE expectations

Figure 17: VN banks P/B vs ROE

Source: CEIC, J.P. Morgan

Figure 19: Asia: Loan growth (% y/y)

Figure 20: Vietnam Banks: LDR

Figure 21: Asia: LDR (%)

Source: Ministry of Labor, CEIC Data.

Figure 24: Inflation Figure 25: Vietnam's tourist growth

USA Total China South Korea Japan

Source: CEIC Data, GSO.

Table 11: Consumer Discretionary stocks comp table (Top 5)

Table 12: Information Technology stocks comp table (Top 3)

Source: Bloomberg Data. Source: Bloomberg Data.

Source: CEIC Data. Source: SalaryExplorer.com

Conosumer Travel &

Figure 34: Vietnam Industrial Production

Vietnam’s strong industrial production and customs

and 6.8% in 2019 as the continued benefits of the

Table 14: Vietnam macro forecasts

IP likely has peaked Figure 36: Vietnam Customs Exports

Customs exports fell again in October

The payback is more evident in the foreign-invested

Incoming FDI maintains robust trend

Source: GSO and J.P. Morgan

Source: Government of Vietnam, GSO, MOF.

Source: Government of Vietnam, Bloomberg.

Figure 42: CPI Basket

Source: Vietnam GSO.

15.0% Goods, 13.4%

Source: Vietnam GSO, CEIC data.

Figure 45: Consumer confidence index

leading the regional average by 125

Source: Tradingeconomics.com, Nielsen.

10M19 growth of visitors from 50.0%

Source: Vietnam GSO, CEIC data.

Figure 47: Tourists by origin

China South Korea Japan USA Others

Source: Vietnam GSO, CEIC data.

Table 19: Purchasing Manager Index

Figure 49: Vietnam total volume of cargo transported

Total cargo volume (thousand tons) Growth (%y/y)

slow due to several mega real 7,000

meaningfully in the last 12 4,000

Source: Vietnam Ministry of Planning & Investment, CEIC.

30% Total, 27%

Source: Vietnam Ministry of Planning & Investment, Bloomberg.

China Japan Korea Singapore Others Total

Source: Vietnam Ministry of Planning & Investment, Bloomberg.

Figure 53: Countries' share of new FDI capital registration

Source: Vietnam Ministry of Planning & Investment, Bloomberg.