NAVIGATING

VIETNAM 2H24

MANUFACTURING PROPELS
GROWTH

July 2024

The slogan "Make in Vietnam" was created by the Ministry of Information and
Communications to emphasize the initiative in the creation and design of high-tech
products by Vietnamese.
Table of Contents
• Excutive Summary – Page 3

• Macro Overview – Page 11

• Market Overview – Page 35

• Banking – Navigating hardships, Awaiting brighter skies – Page 50

• Financial Services – Sector valuation has been fully priced in – Page 65

• Residential Property – From slow to steady: Market poised for a gradual rebound – Page 76

• Steel – Exports bolster Earnings – Page 87

• Industrial Property – Supply will gradually improve – Page 94

• Logistics – Peak season coming – Page 107

• Exports – Valuations fully reflect outlook – Page 119

• Power – Hydropower returns to its favorable phase in 2H24 – Page 129

• Oil & Gas – Upstream outlook remains positive, mid-downstream to lean on policies – Page 140

• Aviation – Open skies for international travel – Page 156

• Technology – Primed for substantial growth in the long term – Page 164

• Consumer – Sustainable recovery being tested – Page 169

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 Executive summary
Macro: Trade is leading the way
Vietnam recorded impressive economic performance in 1H24. Outstanding trade results fueled strong growth in manufacturing
and continued strength in FDI. The benefits of this growth have not yet fully impacted consumers as inflation and currency
concerns weigh on their minds. But we believe these concerns will be alleviated by the end of the year.
➢ Trade - Strong exports due to continuing US strength: Vietnam’s 1H24 exports increased 14.9% YoY, driven by USD55bn Key Forecasts
of exports to the US (+24% YoY) as US consumption remained stronger than expected. We expect US exports, 29% of
Vietnam’s total exports, to continue to grow because: 1) the Fed seems to be engineering a soft-landing; 2) The US is
imposing tariffs on Chinese goods; and 3) the US is expect to upgrade Vietnam to Market Economy Status. We compare our current forecasts
against those we made in our January
➢ Manufacturing - May trade deficit was actually a positive indicator: Vietnam recorded a USD407mn trade deficit in May.
2024 Navigator report.
However, this happened because imports grew 19% YoY in April and 26% YoY in May, largely due imports of raw materials
and components. Manufacturers seemed to know that growth was coming. This was reflected in June’s impressive PMI of 54.7
Made in Revised
as new orders accelerated.
2024 Forecasts Jan-24 July-24
➢ FDI – Record high investment supports long-term manufacturing outlook: 8.2% 1H24 growth of implemented FDI will GDP Growth 6.3% 6.5%
support manufacturing in the coming time. 13.1% registered FDI growth indicates a strong longer-term outlook. Furthermore, Export Growth 7.0% 11.0%
much of the FDI is going into higher-tech industries like solar panels and circuit boards as the Vietnam government focuses on Trade Balance (USDbn) 22.5 23.1
attracting high-quality FDI. Implemented FDI (USDbn) 24.5 24.6
➢ GDP - Manufacturing strength drove higher than expected growth: Vietnam recorded 6.9% 2Q24 GDP growth (6.4% for FX Reserves (USDbn) 106.0 92.0
1H24) causing us to increase our FY24 forecast to 6.5%. Industry & construction regained its traditional leading role 8.3% CPI YoY (year-end) 3.1% 3.6%
growth that surpassed 7.1% growth from the service sector. Credit Growth 15.0% 14.0%
➢ Consumption – Retail is still in recovery mode: Gross retail sales of consumer goods and services grew a mere 8.6% YoY VND/USD (Interbank) 23,850 24,950
in 1H24 (5.7% adjusted for inflation), well below pre-pandemic levels, even though tourism has completely recovered.
➢ Inflation – Higher than desired levels should ease: June’s 4.3% YoY inflation is already within the SBV’s target range of 4.0
– 4.5%. However, we expect inflation to moderate in 2H24 because much of the current inflation comes from high MoM CPI
increases in August and September 2023, implying that 2024 results will start to look better once we get past Q3.
➢ FX – Strong US dollar weighs on many currencies: As the Fed implemented its higher-for-longer polices, the DXY hovered
around 105 for much of 2Q24. The VND depreciated ~5% in 1Q24 but held stable during Q2 as the SBV sold off USD6bn of
foreign reserves and implement monetary polices to support the currency. The dollar should weaken once the Fed begins to
cut, which we believe will happen in September, which would avoid the need for further SBV support.

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 Executive summary
Equity Market: Ready to build on a strong first half
➢ Vietnam far outperformed regional peers: The VN-Index increased a respectable 10.2% (in local currency) during 1H24. It
considerably outperformed the Bangkok SET (-8%), Jakarta JCI (-3%) and Philippine PCOMP (-1%) indices.
Market Forecast
➢ Gains were widespread: 90 of the nearly 400 stocks in the VN-Index rose more than 20% during the half. The simple
average of the gains was 9.1% and the median gain was 6.0%. Base case forecast
VN-Index @ YE2024 1,330 - 1,350
➢ FX concerns dragged on the market: Foreign investors net sold USD2bn during 1H24 due largely to FX concerns. They VN-Index YoY 2024 +19%
net-sold every month as they watched the VND devalue ~5% vs the USD during Q1. Their strongest net selling came in June
VNI P/E @ YE2024 14.2
(USD600mn), after the currency had already stabilized. The Index had peaked at +13.6% YTD during Q1 before the SBV
VNI EPS growth YoY 18%
sold USD6bn of foreign reserves, which supported the currency but reduced liquidity in the economy.
VN-Index @ YE2025 1,580 - 1,600
➢ Nearly every sector gained: 20 of the 22 sectors gained. Travel & Leisure (+93%), was the strongest performer as tourism
recovered. Vietnam Airlines (HVN) recorded the largest gain of any stock, rising 171% after nearly being delisted last year. Stock Picks
Technology (+53%) was the second strongest performer amid multiple news headlines about FDI into Vietnam’s tech sector.
Banks, which make up 38% of the VN-Index, rose a more modest 11%.
Sector Picks
➢ We target 1,330 – 1,350: Our base case forecast is for the VN-Index to close 2024 with a ~19% gain at 1,330 – 1,350 at a Sector Picks
14.2x P/E ratio. This forecast is based on the parameters that the US Fed cuts one time during 2H24 which pushes the DXY Banks MBB, VPB, VCB
index below 102. Domestically, our market forecast is based on exports growing 10-12% and credit growing 14%, which Real Estate KDH
would support EPS to grow 18% for the year. Furthermore, we expect continuing Fed cuts and recovering global economic Steel HPG
growth to push the VN-Index to 1,580 – 1,600 by the end of 2025. Consumer PNJ, BAF
Aviation ACV
➢ Bottom-up sector picks: Residential real estate has the highest simple-average upside to target price (+38.7%) of any
sector in our coverage list after underperforming in 1H24. We believe the new Land Laws coming into effect in August will be Tech FPT
a major catalyst. This will also boost steel stocks (+35.1% upside to TP) which are already benefitting from strong exports. Ports & Shipping HAH
Strong property development and strong FDI will also support banks (+19.5% average upside to TP) to reach their credit IP KBC, BCM
growth targets. Furthermore the bank sector average P/B of 1.7x does not seem to have fully priced in the resulting returns Power HDG
on equity. O&G PVD

4
 Executive summary
Report card: Our January forecasts were mostly on target
➢ We are tracking our January VN-Index forecast fairly well: In our January Navigator report, we forecasted two scenarios.
Our positive scenario was for the VN-Index to reach 1,430 this year based on the parameters of: 1) three Fed cuts, the first
one in March; and 2) export growth exceeding 8%. Our negative scenario forecasted 1,280 based on: 1) No Fed cuts in 1H24 Previous Stock Picks
(less than three this year); and 2) export growth below 6%. So we are tracking our negative case on Fed cuts but our positive
January Sector Picks' Performance
case on exports. Our current forecast of 1,330 – 1,350 is therefore still very much in-line.
1H24 Price
Sector Ticker Change
➢ Our stock picks outperformed the Index: The top stock picks that our sector analysts made back in January gained a
Aviation ACV 90.8%
simple average 16.7% during 1H24, outperforming the VN-Index by 6.1 percentage points. We are still confident that several
Banks MBB 19.0%
of these tickers will outperform in 2H24 once we see the US dollar weaken and consumer confidence return.
Banks HDB 13.3%
➢ Status of our macro themes: In January, we made five top-down theme recommendations. Here is the status of each: Banks VIB 7.1%
Consumer QNS 16.8%
Consumer PNJ 11.0%
Theme Status Consumer VNM -3.1%
Exports VHC 13.1%
Recovery in trade Trade has recovered even more strongly than we expected. Ports, which we IP PHR 21.9%
recommended have done very well, as has steel.
IP KBC -8.7%
Improving consumer demand Consumer demand has improved more slowly than expected, in large part, due O&G PVT 27.5%
to higher than expected inflation and a weaker currency. However, these O&G PVS 19.2%
obstacles should fade in 2H24. O&G PVD 1.8%
Gradually improving real estate market We said in January that real estate’s recovery would be slow in 1H24 but would Ports & Shipping HAH 38.4%
pick up with the new Land Laws in August. This seems to be playing out. Ports & Shipping GMD 17.7%
Power POW 32.4%
Recovery in private investment While banks clearly have benefited from lower interest rates, there seems to be
Power PC1 -0.2%
more room for improvement as real estate recovers.
Real Estate KDH 17.5%
National initiatives to build semiconductor Vietnam continues to attract strong investment for semiconductors and other Real Estate VHM -12.8%
industry high-tech manufacturing. We still view this as a strong long-term opportunity. Steel HPG 11.4%