Vietnam fastest growing ASEAN economy: SCB

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Standard Chartered Bank continues to expect Vietnam’s robust GDP growth of 7 per cent in 2018, driven by strong FDI-supported electronics manufacturing and rising consumption.

Manufacturing and agriculture are likely to remain the primary growth drivers in the second half of the year.

The forecast is highlighted in the bank’s recently published Global Research report on Vietnam entitled “Vietnam – Fast, not furious, growth”.

Chidu Narayanan, Economist, Asia, Standard Chartered Bank, said: “Vietnam expanded 7.1 per cent in first half of the year, moderating mildly in the second quarter after a record 7.4 per cent growth year-on-year in the first quarter, in line with our forecast. This is the first year since the global financial crisis that the second quarter growth has been slower than the first one; we believe this is a sign of a focus on sustainable growth over the medium term. We expect the second half of the year growth to remain robust, albeit mildly slower than in the first six months of the year.”

“Vietnam is likely to remain the fastest-growing ASEAN economy in 2018 and 2019, as in 2017. We remain positive on Virtnam’s medium term growth on strong manufacturing activity, as FDI inflows to electronics manufacturing remain strong.”

According to the latest macro-economic research report, manufacturing is projected to record another year of double-digit growth and agriculture growth will continue its recovery in the second half of the year, even as construction slows down on more modest growth in the real-estate sector. At the same time, electronics export growth is likely to stay robust, albeit lower than in 2017, leading to a trade surplus and supporting overall growth. The Bank maintains its views that FDI inflows will stay strong in 2018 and 2019-20, with registered capital of close to US$17 billion each year, and FDI inflows to the manufacturing sector, particularly electronics manufacturing, will remain high in the medium term.

The study also expects steady growth in services to support overall growth in 2018, led by strong domestic trading activity. The services sector, which makes up close to 40 per cent of the economy, is likely to remain robust in the second half of the year after rising by a steady 7 per cent year-on-year in the first six months of the year. The rise of the business process outsourcing (BPO) sector, aided by a young, well-educated, low-cost labour force, should support services sector growth in the medium term.

On the foreign exchange outlook, Standard Chartered economists raise their USD-VND forecasts to 23,400 by end-2018 and expect a small đồng depreciation in early 2019, before ending 2019 mildly stronger against the US dollar as positive domestic and external factors support the currency.

Source: VNS

National forum seeks to promote girls’ rights, end child marriage

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Girls’ safety in public areas and child marriage problems were the main topics at a dialogue on October 7 between girl representatives and leaders of a number of National Assembly (NA) committees, ministries, sectors and central organisations.

The dialogue was part of the national forum of girls 2018 which is being held in Hanoi by the NA Committee for Culture, Education, Youth, Adolescents and Children, the Ministry of Labour, Invalids and Social Affairs, the Central Council of the Ho Chi Minh Young Pioneer Organisation, and Plan International Vietnam.

Through presentations and plays, participants delivered a message to call for efforts to protect girls in public places and end child marriage.

They gave proposals on how to ensure safety for girls, including the building of entertainment spaces and works designed exclusively for girls, the installation of security camera and lighting systems in entertainment areas, as well as the printing of addresses and phone numbers of support channels on the cover of notebooks, and the organisations of more forums for children to raise their voice.

During the dialogue, officials from NA committees, ministries, sectors and organisations listened and answered to questions raised by the girls regarding the building of safe entertainment areas for children, especially girls, measures to protect children from sexual abuse, along with issues related to nutrition and legal status for children of child marriage, and life skill training for children.

Chairman of the Central Council of Ho Chi Minh Young Pioneer Organisation Nguyen Ngoc Luong said that the council has set a goal to build an entertainment area for children in each commune, ward and town.

Head of the Vietnam Women Union’s Department for Family and Society Nguyen Thi Tuyet Mai pointed to high numbers of child marriage in mountainous areas across the country.

She said that the union has coordinated with relevant parties to implement communication programmes and models to raise public awareness, especially among ethnic minority groups, of problems from school dropout and child marriage.

Participants held that it is necessary to improve knowledge and self-protection skills of children, while parents must pay more attention to their kids.

Chairman of the NA Committee for Culture, Education, Youth, Adolescents and Children Phan Thanh Binh asserted that the most important thing is getting children to understand how to react in particular situations, who to contact when they need support, and what are their legal rights.

Binh held that along with backward customs, children’s poor awareness is also a reason behind child marriage; therefore, he stressed the need to help children improve their knowledge on the health consequences of early marriage and child bearing for both young mothers and their children.

At the forum, officials from NA committees, ministries, sectors and organisations and girls signed a commitment to act for the rights of girls.

Source: VNA

Lalamove officially enters Hanoi

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After more than one year of operations in Ho Chi Minh City, Hong Kong delivery firm Lalamove officially expanded its business to Hanoi, challenging Grab and Go-Viet.

October 3 officially saw the launch of Lalamove in Hanoi, after one year of operations in Ho Chi Minh City. Focusing on clients in urban areas and committing to deliver goods within 55 minutes, Lalamove is forecast to be a redoubtable opponent to Grab and Go-Viet, another newcomer.

Lalamove was established in late 2013 under the name EasyVan. The Hong Kong delivery service has been known for delivering goods within an hour, and was named as the “Asian Uber.”

Lalamove set the goal of reaching 10,000 drivers in Hanoi by the end of the first quarter of 2019. The firm stated that it takes 20 per cent commission from drivers, including tax and other fees. This rate is lower than other firms’ rates of 25-30 per cent.

As Go-Viet has been running for a month now, with the two services of Go-Bike (ride-hailing) and Go-Send (delivery). Grab is also boosting its GrabExpress and food delivery service Grab Food, preparing for Lalamove’s entry that promises heavier competition in the market.

Van Anh report on VIR

Bordier Partners in Vietnam

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Swiss private bank Bordier in Singapore will develop a new private banking service for the Vietnamese market with a partner in Hanoi.

Hanoi-based Military Commercial Joint Stock Bank (MB) and Swiss private bank Bordier Singapore (Bordier) have signed an agreement for a collaboration in wealth management, the two firms said in a media release on Monday.

The move is the latest by a private bank to push beyond wealth hubs Singapore and Hong Kong, mainly by partnering with local players. Julius Baer buddied up in Thailand recently, and Lombard Odier partnered in Indonesia.

Under the agreement, Bordier will share with MB best practices, processes and specialist training in both their Singapore office and Geneva headquarters. The collaboration will help MB to set up wealth management units in various offices within Vietnam.

Shaping the Value Proposition

MB will provide tailored services for a holistic private banking experience across different touch points including family office products and services, with the support of Bordier’s expertise.

This will enhance the overall infrastructure of MB’s private banking division, as Bordier will help to identify key areas needed to shape the value proposition for MB Private.

Source: Finewsasia

Foreign investors snap up prime office space in downtown Saigon

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Foreign investors currently own majority stakes in about 50 percent of high-end office buildings in downtown Saigon.
A newly-released Savills Vietnam report said investors from Singapore, Hong Kong, Japan, South Korea, Germany and Slovakia own stakes in nine Grade A office complexes in prime Saigon locations. Asian investors hold a bigger market share than that of European companies.

Given the scarce supply of Grade A office space in the nation’s commercial hub, current occupancy rates in this segment are above 95 percent, and monthly rents have reached their highest in nearly half a decade at $50-70 per square meter.

This has spawned many M&A deals in this property segment. Notable among these is the purchase of a 24 percent stake in Sun Wah Tower by Japan’s Nomura Real Estate Company earlier this year. The tower is located on the Nguyen Hue walking street in District 1.

With demand remaining high, many new real estate companies have entered the market.

Alpha King, a Hong Kong based real estate company, announced its plan to construct a 35 storied Grade A office building on Tran Hung Dao Street in District 1, close to the Ben Thanh Market. Work on this building is expected to completed by 2020.

Slovakian investors plan to build the Friendship Tower on Le Duan Street, also in District 1. Construction of the 21-story building began this May and is expected to finish by 2020.

When complete, both Alpha King and Friendship Tower will respectively contribute 72,000 and 19,000 square meters of Grade A office space.

Su Ngoc Khuong, investment director at Savills Vietnam, said there are many foreign investors in Group A projects because they are cash-rich while such projects require big investment capital.

The limited amount land available in prime Saigon locations has also led to great interest among foreign investors looking to make profits from renting space to both foreign and local companies.

Explaining why international corporations are boldly investing in grade A office buildings in Saigon in recent years and are likely to do so in the years to come, Khuong said that global economic integration will continue to increase demand for office space in the city, thus creating a sustainable and profitable cash flow for Group A office leasing projects.

Vu Le report on Vnexpress

Transfer pricing: cars sold in Vietnam three times more expensive than in the US

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Transfer pricing has always been a heady problem for the Vietnamese government and ministries since the country began attracting FDI (foreign direct investment).

At the 2018 WEF, Deputy PM Vuong Dinh Hue called on international auditing firms to give advice on how to prevent and deal with transfer pricing conducted by foreign invested enterprises (FIEs) in Vietnam.

A report from the Ministry of Finance showed that 44-51 percent of FIEs report losses each year. The proportions were 51 percent in 2015 and 50 percent in 2016.

Some enterprises have been expanding their investment in Vietnam, though they have been taking losses for tens of years.

Experts pointed out that FIEs conduct transfer pricing right when they arrive in Vietnam. In most cases, foreign conglomerates contribute capital to joint ventures in Vietnam with technologies, machines and equipment, and tend to overvalue the technologies. Meanwhile, the Vietnamese side is not capable of conducting asset valuations

During operation, FIEs declare prices of input materials higher than the real value and provide wrong information about the expenses on ads and promotions to fabricate profits which are lower than real profits. This allows them to reduce their owed corporate income tax.

During operation, FIEs declare prices of input materials higher than the real value and provide wrong information about the expenses on ads and promotions to fabricate profits which are lower than real profits. This allows them to reduce their owed corporate income tax.

The Vietnam Chamber of Commerce & Industry (VCCI) and USAID in 2014 conducted a survey in Vietnam and found that 20 percent of FIEs admitted transfer pricing.

The survey also found that enterprises in finance and insurance, textiles & garments, and automobile manufacturing lead in transfer pricing.

The number of enterprises considering Vietnam as a part of a global supply chain to conduct transfer pricing were 13-20 percent of those surveyed.

At least 37 percent of FIEs that came from countries with lower corporate income tax rates than Vietnam tended to conduct transfer pricing.

Around 65 percent of FIEs with profits higher than 20 percent committed transfer pricing, while 44.5 percent of FIEs with profits of 10-20 percent conducted the behavior.

Cars

In automobile manufacturing, foreign partners not only conduct transfer pricing by declaring the value of assets contributed to joint ventures, but also do this through technology transfer and royalty collections.

Car parts are imported from multi-national conglomerates and their prices are fixed by the holding companies.

The overvaluation of imported car parts leads to higher production costs, thus reducing profits and taxes that FIEs in Vietnam have to pay. But this brings high profits to holding companies.

Car prices in Vietnam are 70 percent higher than in Europe and the US, and 30 percent higher than in other regional countries.

Source: Vietnamnet

Vietnam keeps on tightening monetary policy

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The State Bank of Vietnam, the central bank, wants to keep inflation below 4 percent this year, while also ensuring the exchange rate is stable.

Local daily newspaper Vietnam News on Monday quoted Ho Chi Minh City Securities Corporation as reporting that, central bank will likely continue its tightened monetary policy in the fourth quarter of this year after its decision to strictly control lending to high risk sectors in the third quarter did not adversely affect the country’s economic growth, according to local experts.

The corporation’s analysts said the main tool to achieve the targets is to actively restrict credit growth and the central bank will be confident to continue its policy at least until the end of 2018 as the tightened policy did not seem to have a negative impact on Vietnam’s economic growth in the third quarter.

In contrast to some concerns that the central bank’s regulations on requiring credit institutions to limit loans to high risk sectors such as real estate, securities and consumption in the third quarter of 2018 could slow down the gross domestic product (GDP) growth, GDP in the period still grew well, helping the indicator in the first three quarters expand 6.98 percent, the highest nine-month growth since 2011.

With the high growth, GDP will need to increase by only 6.1 percent in the last quarter to meet the top legislature’s 6.7-percent GDP growth target set for 2018. Economists forecast the target is easily achievable as the annual growth rate of Vietnam’s GDP in the fourth quarter averaged 6.87 percent over the past five years.

According to the corporation, this result will help reinforce the central bank’s policy of tightening credit growth in the third quarter and it will likely continue the policy in the remaining months of this year. In fact, although the official growth target is set at 17 percent in 2018, the credit growth limit assigned to commercial banks was only 14 percent.

Total loans of Vietnam’s banking system grew 8.5 percent in the first eight months, compared to 11.5 percent in the same period last year, according to the State Bank of Vietnam. Last year, the banking system posted credit growth of 18.17 percent, surpassing the target of 18 percent.

 

Featured image: A branch of Vietnam International Bank (VIB)

Now you can fly to Bangkok, Thailand from Danang, Vietnam with Vietjet

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Vietnam’s ‘Bikini Airline’ VietJet will launch its newest international route connecting the Danang, a central city of Vietnam and Bangkok on October 15.

According to the announcement last week, the new international route emphasizes Vietjet’s goal of increasing the number of destinations for the convenience and enjoyment of its flyers, the carrier said in a statement.

Daily flight service from Danang to Bangkok departs Danang at 1.35pm and arrives at 3.15pm, while the flight leaves Suvarnabhumi airport at 11.10am and arrives in Danang at 12.50pm. VNS, a local news channel reported.

Taking just one hour and 40 minutes, the flight connects two vibrant cities together. Bangkok is the capital of Thailand, the land of smiles, with popular tourist attractions such as the exotic grand palace and weekend market shopping paradise. From Bangkok, passengers can also connect to other Thai destinations such as Chiang Mai, Chiang Rai, Phuket and Krabi, according to Vietjet.

Currently, Vietjet operates 60 A320, A321 aircraft with more than 385 flights daily, carrying more than 60 million passengers to date, with 95 routes covering destinations in Việt Nam as well as international destinations such as Japan, Hong Kong, Singapore, South Korea, Taiwan, mainland China, Thailand, Myanmar, Malaysia and Cambodia.

The airline said it will continue to expand its flight network across the Asia-Pacific region and has signed contracts to buy new-generation aircraft from prestigious global plane manufacturers.

Vietjet, is an international low-cost airline from Vietnam. It was the first privately owned new-age airline to be established in Vietnam.  According to Customer Reviews on airlinequality.com – the comprehensive Airline and Airport customer review site for airlines and airports across the world – as of Oct 08, 2018, Vietjet gets 4/10 on average of customer rating from 191 reviews.

‘Tap Box’ and ‘Cougar Queen’ of BHD Reflect Contrasts in Vietnam Industry

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Vertically-integrated local studio BHD | Vietnam Media Corp. is launching international sales on two of its biggest titles at Busan’s Asian Film Market.

According to a report by Patrick Frater, Asia Bureau Chief of  Variety. “The Tap Box” (aka “Song Lang”) is an odd couple drama set in 1980s Saigon. It pitches a cold-hearted debt collector from the gangster milieu together with the main actor from a Cai-Luong (Vietnamese traditional opera) company. Despite the gulf between them, they discover that they are kindred spirits.

Directed by Leon Le, and produced through Studio 68, the film has already enjoyed a theatrical run in its home territory, and is now looking for international releases to follow a high-profile festival berth in the first quarter of 2019. “This is absolutely classical, high-quality art house cinema,” said Bich Hanh Ngo, VP of sales and acquisitions at BHD.

From a completely different vein, the company is also pitching “The Cougar Queen 2.” The romantic comedy kicks off with a famous TV hostess who is inadvertently dumped by her boyfriend live on air. The film’s imminent release is expected to be a major box office draw.

Fueled by a multiplex building scramble between four big players, of which BHD is one, Vietnam is one of Asian cinema’s key growth markets. The contrasts within BHD’s production and distribution slate neatly reflect the current state of the Vietnamese cinema market, in which a variety of local titles jostle for position against a still-dominant Hollywood sector, imported Chinese titles and remakes of high-concept Korean films.

Read full article on Variety here.

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VDSC Weekly Market Recap: Webinar Invitation, Strategy Report, VJC, MWG, VNM, CTG, PAC, PVB

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Vietnam’s markets got off to a solid start following the announcement that the Trump administration had finalised negotiations with Canada and that there would be a revised North American Free Trade Agreement.

Investors were positive on the news as it seemed to indicate that the US is willing to make deals, and therefore there may be a chance that the US-China trade tension could ease sooner than we think.

However, enthusiasm quickly faded as the more important U.S. – China trade worries appeared to intensify. Tensions with China appeared to escalate after a 24-hour-cycle which saw a Bloomberg report that Amazon and Apple network servers may have been compromised by Chinese spy microchips, a Reuters report warning of attacks by a Beijing-linked hacking group, a CNN story about the U.S. Navy proposing a show of force in the Pacific, and a speech by Mike Pence accusing China of trying to undermine President Trump.

Therefore, we should expect more companies to begin shifting their supply chains to other countries as a result, and Vietnam should continue to be a key beneficiary of this trend. From conversations with buyers of manufactured goods in Vietnam, we are hearing that Vietnamese vendor have been lengthening delivery schedules because they have been swamped with orders that used to be filled in China prior to Trump’s trade war.

The VNIndex closed the first week of the 4th quarter down 1.15% on heavy trading worth VND42,891.76bn (USD1.86bn). Total trading value increased 70% from the previous week, supported by two massive trades in Masan (HSX: MSN). The first trade was on Tuesday and was worth VND10,990bn (USD478mn), while the second, worth VND5,328bn (USD232mn), happened Friday. SK Group and GIC were the buyers of the blocs.

In other news, according to the amended Securities Law draft, FOL in a public company is 100%, excepting for special cases in which Vietnam signed an international pact regarding FOL lower than 51%. In June 2018, as MSCI’s Market Rank Report, the Vietnamese market needs to improve five issues, including FOL and equality rights for foreign investors. FOL expansion will allow many Vietnamese companies to meet the MSCI Emerging Markets Index of Emerging markets.

Also Vinfast, Vingroup’s subsidiary, and Vietnam’s first automaker, unveiled its new sedan and SUV earlier this week. Instead of engaging Vin Diesel for the debut, Vinfast chose Miss Vietnam and David Beckham to launch its first two cars at the Paris Motor Show. Most commentators seem quite impressed with the new models, which will be on sale in Vietnam in the fall of 2019.

Webinar Invitation

On the back of our October Strategy Report we are organizing our Monthly Strategy Webinar on Mon, Oct 8, 2018 4:00 PM – 5:00 PM WIB.

Mr. Bernard Lapointe, Head of Research at Rong Viet Securities, will present the Equity Research Team’s most up-to-date views on Vietnam’s stock market, present some of their favourite stocks and answer investors’ questions.

Join the event to receive our top investment ideas and to learn how our strategy will help your investment decisions.

Registration URL: https://attendee.gotowebinar.com/register/3673054226449671692
(if the link doesn’t work, copy & past it in your browser)

 

Monthly Strategy Report

October 2018 Strategy – Keep Defensive Status

  • Factors that influence the flow of capital to emerging markets are still mixed. The Fed’s intention to raise interest rates three times in 2019 is quite unexpected. Meanwhile, US 10-year Treasury bond yields reached 3.2% this past week, breaking through a 37-year downward slopping trend line.
  • Vietnam was added to the FTSE watch list is very positive news. In addition, liquidity gradually increased. Fears of ‘missing out’ may encourage investors to return to the market.
  • Q3 business results will likely determine the trend for the market. We think that there will be more diversion between companies’ stock price movements. Positive results overall will support the market. However, the amplitude of share price movements will not be as big as what happened in the beginning of 2018.
  • Stable macro factors continued to support investors’ sentiment. As a result, large cap stocks drove the market in recent weeks.
  • We believe that stocks with high dividend yields should remain a safe place for risk-averse investors. Our list includes 23 stocks which have expected cash dividend for 2018 from 9% and ROE from 11%. Stocks which investors can consider are SJD, NNC, CIA, HAH, SFG, HTI, TVT, PLC, and AAA.
  • Our model portfolio is up 11.7% since inception in late June 2018 while the VN Index is up 6.6%. We reduced by half our position in Vinh Hoan because the stock has gone up 67% since early July. As a result cash has risen to 20%.
  • Our target range for the main Vietnamese Index is still 960-1040.
  • As we get into November we will reduce the cash position to benefit for, what we expect, a December end of the year ‘exhaustion’ move.

Company Reports

Vietjet Aviation (HoSE: VJC) – Growth Speed to Watch Closely (Initiation, ACCUMULATE, VND170,000, UPSIDE 19%)

1H18 performance: maintains impressive growth

  • Core revenue and net profit grow by 53% and 23%, respectively.
  • High efficiency and improved ancillary revenue are key elements to counter rising fuel price.
  • Increasingly dependent on international flights is something to monitor closely.

2018-2019: golden time for the fleet

  • The number of passengers will likely grow well in 2018 and 2019, ensuring high frequency for VJC flights
  • Operating A321 aircrafts (220-230 seats) in place of the A320s (180 seats only) will improve VJC’s efficiency.

Valuation

  • 2018-2019 is the time when VJC’s fleet can operate at its highest efficiency.
  • The stock is trading at 14x current EPS of VND11,356. Furthermore, at its current price, it is trading at ~6.5x P/B. Cash dividend is expected at VND3,000.

Mobile World Investment Corporation (HoSE: MWG) – Bach Hoa Xanh Improvements on the Way (Update, BUY, VND160,000, UPSIDE 25%)

  • Bach Hoa Xanh is expected to show a lot of positive developments, especially since MWG adjusted its expansion strategy in 2Q18.
  • Although more adjustments still need to be done, we believe that with the experience as a leading retailer and a responsive management, MWG can successfully expand this model beyond HCMC in the next two to three years.
  • By 2022, in the base scenario, we believe that Bach Hoa Xanh could reach 4,500 stores and VND93tn sales, contributing to 50% of MWG’s total sales.
  • Presently, The Gioi Di Dong is contributing steady revenue, while Dien May Xanh is remaining a pillar of short-term growth due to the organic strength of the consumer electronics market.

Valuation

  • The stock is trading at 12x current EPS of VND7,162. Furthermore, at its current price, it is trading at ~5.5x P/B. Cash dividend is expected at VND1,500.

Analyst Pinboard

Viet Nam Dairy Products JSC (HoSE: VNM) – Seeking Opportunities in New Export Markets

  • In VNM Result Update that Rong Viet Securities published recently, VNM is looking for opportunities to expand sales in markets such as Myanmar and Indonesia through the establishment of Joint venture with local companies.

Myanmar – Early stage of dairy market development with low consumption per capita

  • The dairy industry in Myanmar is still in its early stage of development, with nearly 85% of its milk consumption coming from dairy farms with small processing facilities.
  • The major dairy products include fresh milk, condensed milk, yogurt and ice-cream, in which fresh milk and condensed milk are more commonly consumed.
  • The challenge for VNM is to raise public awareness, especially to move from home-made products to the ones that have been certified for quality.

Indonesia – A potential market under the domination of foreign corporations

  • Revenue of dairy products has increased 12.5% in the past 5 years. The growth rate will continue and the yogurt sector will lead its growth rate in the following years with CAGR of around 10.3%.
  • Indonesia is considered as a potential market with high growth but it is undergoing a major difficult to access.
  • Although VNM has experience in competing with large multinational companies, the company will not have many advantages facing with others in foreign markets as on its “own turf”.

Shrimp Sector: the SIMP Program May Affect Exports from Vietnam in Early 2019

  • The final anti-dumping (AD) tax on Vietnamese shrimps in POR 12 (1st Feb 2016 to 31st Jan 2017) has been announced on the 10 of Sep 2018: all companies are taxed at 4.58%.
  • As we mentioned in a note posted recently, shrimp exported to the US must comply with a set of new rules on an origin traceability basis.
  • At first, the program looks simple to abide by while the fee charged by the NOAA is small at USD 30 per application.
  • Nevertheless, looking more closely, we see that the following requirements may be a large hindrance for applicants:

o First, the NOAA requires the US importer to act on behalf of the Vietnamese exporter to provide the information.

o The second and largest obstacle is the requirement that the exporter has evidence of the origin of the raw shrimps purchased from the farmer/fisherman if the amount of the purchase is larger than 1,000 kg per day.

  • What the NOAA request is “unusual” for Vietnamese companies because they usually only care about anti‑biotic residual, sizes, types, etc. and do not ask growers for farming permits.
  • However, after communicating with MPC, we think that their exports to the US will not be affected. MPC’s subsidiary, Mseafood in the US, will help with the paper work with the NOAA.

Vietnam Joint Stock Commercial Bank for Industry and Trade (HoSE:CTG): High Provision Charges Likely to Undermine Earnings

  • CTG’s 1H18 PBT and NPAT were VND5.3tn (+9.4% YoY) and VND4.2tn (+8.5% YoY) respectively.
  • Fast growth of retail loan but NIM slightly contracted.
  • Contribution from service income keeps increasing.
  • Process to clear on-balance sheet bad debt still ahead but making asset quality to be healthier.
  • New hope for capital is raising
  • Following the phase of reorganizing its operating model as well as launching new modern core-banking, CTG’s services income is starting to show positive results.
  • At the trading multiple of 1.7x 2018f BV, our unchanged target price of VND31,900, plus VND 700 per share in cash dividend offers an ETR of 20%.

Dry Cell And Storage Battery JSC (HoSE: PAC) – Short Term Outlook Remains Stable

  • Over the first eight months of 2018, revenue was up 15% YoY to VND2.324tn, but profits went down 30% YoY to VND85bn.
  • Prices of input materials such as lead and zinc are expected to continue falling in 4Q 2018.
  • PAC’s products are facing strong competition with those of FDI companies and imported products. GS, a Japanese company, is a direct competitor.
  • Bien Hoa factory will be moved to the An Phuoc industrial park, Dong Nai before 2022 due to environmental requirements. Even if it was on schedule, total capacity could temporarily down.
  • No agreement has yet been reached with Furukawa Battery (FB)
  • We forecast that the 2018 performance will improve slightly despite the challenges that we mentioned above. However, in the long term, we have yet to see any clear signs of a significant improvement in the outlook for PAC.

PetroViet Nam Coating JSC (HNX: PVB) – Remove the Obstacles

Rely on other income

  • The main business mainly relies on the oil & gas projects, leading to a negative impact if most of these projects are delayed.

Positive profit for core business from 2018

  • From 2018, PVB began to record revenue from the Ca Tam project after two difficult years.
  • Moreover, PVB has also delivered pipeline coating services for underground gas piping O2/N2/H2 – a project of Viet Nhat Gas as well as anti corrosion coating service for Nippon Steel.

Remove the obstacle

  • It can be said that 2018 is a turning point in PVB’s activities in the context of restarting the main oil & gas projects while oil prices are reaching a high level.
  • However, there are still some “bottlenecks”, making the potential of PVB unclear.
  • With the approval from the government, PVB ‘s “problems” have been removed.

Positive information for downstream ports in Hai Phong

  • The Ministry of Transport (MoT) is drafting a circular regulating prices for a range of services at seaports in Vietnam to replace old decisions, expected to come into effect in January 2019.
  • The notable changes are the price of container handling services at seaports in Zone I, including Quang Ninh, Haiphong, Thai Binh and Nam Dinh, as follow:

o Changing the price range for domestic container handling services: The ceiling and floor price for popular container size, 20ft and 40ft will fall sharply.

o The service charges for loading and unloading international containers will be adjusted in two options:

– Option 1: service prices increase 10% for seaports not located in Lach Huyen. For ones in Lach Huyen, the charges remain the same.

– Option 2: service prices are adjusted gradually every year, up to 2021.

  • In addition, the tariff for container handling services at Cai Mep – Thi Vai area’s seaports will also be increased by 10%.

Analyst’s opinion

  • The adjustment will raise the price of container handling services in Vietnam, gradually approaching the common price in the region and the world.
  • In the short term, ports in Dinh Vu, with ​​listed companies such as DVP, PHP, VSC, GMD will benefit. However, if we look more closely, in the long term, the circular will help to improve Lach Huyen’s competitive position by narrowing the handling charges gap between Lach Huyen and other ports in Dinh Vu area.

Tightening monetary policy: strong message from central bank

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The State Bank of Vietnam (SBV) has requested commercial banks to control disbursement in risky business fields such as real estate, consumer credit and securities investments.

The move, in the eyes of analysts, continues to tighten lending in the last months of the year.

Monetary policy won’t affect GDP

The GDP grew by 6.98 percent in the first nine months of the year, the highest growth rate since 2011.

To obtain the 6.7 percent growth rate for the whole year of 2018, Vietnam needs to have 6.1 percent growth rate in Q4, which is within reach if noting that the Q4 average growth rate in the last five years was 6.87 percent.

If the growth rate in Q4 this year is between 6.1 and 6.8 percent, the GDP growth rate in 2018 would be 6.7-6.9 percent, or reach 7-7.1 percent.

The HCM City Securities Company (HSC) commented that Vietnam’s GDP did not grow well in Q3 though SBV was cautious with credit growth.

While the official credit growth rate limit was set at 17 percent, the real limit granted to banks was 14 percent only.

In previous years, SBV granted more ‘credit growth quotas’ to certain banks in the final months, after considering their asset quality.

However, it hasn’t taken similar moves this year. It has reminded commercial banks not to increase lending to risky business fields, including real estate.

Some analysts and associations have expressed concern that the monetary policy tightening will affect the GDP growth rate in Q3.

The HCMC Real Estate Association asked SBV to delay the implementation of a new regulation on lowering the proportion of short-term capital that banks can use for long-term loans.

HSC believes that the results of the tightened monetary policy will only be reflected in GDP growth rate after several quarters.

HSC commented that the central bank is very likely to continue to curb credit growth in upcoming months because it wants to keep inflation below 4 percent and the dong/dollar exchange rate stable.

Bank profits to go down?

HSC still predicts that pre-tax profits of listed banks will rise by 45.2 percent in 2018. The credit growth slowdown would only have mild impact on banks’ operations, because the NIM and non-interest income are on the rise.

The General Statistics Office (GSO) announced a CPI increase of 0.59 percent in September compared with the month before.

Mai Lan report on VNN

Standard Chartered: Vietnam remains among fastest-growing ASEAN economies

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Bank positive on growth medium term on strong manufacturing activity and electronics FDI, according to latest research publication.

Standard Chartered Bank forecasts robust GDP growth for Vietnam of 7 per cent in 2018 and 6.9 per cent next year, driven by strong FDI-supported electronics manufacturing and rising consumption with manufacturing and agriculture likely to remain the primary growth drivers in the second half of the year.

The forecast is highlighted in the bank’s recently-released Global Research report on Vietnam entitled “Vietnam – Fast, not furious, growth”.

“Vietnam expanded 7.1 per cent in H1, moderating mildly in Q2 after a record 7.4 per cent growth year-on-year in Q1, in line with our forecast,” said Mr. Chidu Narayanan, Economist, Asia, at Standard Chartered Bank. “This is the first year since the global financial crisis that Q2 growth has been slower than Q1. We believe this is a sign of a focus on sustainable growth over the medium term. We expect H2 growth to remain robust, albeit mildly slower than in H1.”

“Vietnam is likely to remain the fastest-growing ASEAN economy in 2018 and 2019, as in 2017. We remain positive on Vietnam’s growth medium term on strong manufacturing activity, as FDI inflows to electronics manufacturing remain strong.”

According to the latest macro-economic research report, manufacturing is projected to record another year of double-digit growth and agriculture growth will continue its recovery in the second half, even as construction slows down on more modest growth in the real estate sector. At the same time, electronics export growth is likely to remain robust, though lower than in 2017, leading to a trade surplus and supporting overall growth.

The bank maintains its views that FDI inflows will stay strong in 2018 and the next two years, with registered capital of close to $17 billion each year, and FDI inflows to the manufacturing sector, particularly electronics manufacturing, will remain high in the medium term.

The study also expects steady growth in services to support overall growth in 2018, led by strong domestic trading activity. The services sector, which makes up close to 40 per cent of the economy, is likely to remain robust in the second half after rising by a steady 7 per cent year-on-year in the first half. The rise of the business process outsourcing (BPO) sector, aided by a young, well-educated, low-cost workforce, should support services sector growth in the medium term.

On the FX front, Standard Chartered economists raise their USD-VND forecasts to 23,400 by end-2018 and expect a small VND depreciation in early 2019, before ending 2019 mildly stronger against the USD as positive domestic and external factors support the currency.

Hong Nhung report on Vneconomictimes

HCMC office rents soar to five-year high

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High-rise buildings in downtown HCMC have seen monthly rents rocket to $70 per square meter, the highest in five years.
A report on the Ho Chi Minh City office market in the third quarter of 2018 said the main reason for rising prices is that office supply is not able to meet current demand.

The report, prepared by real estate service firm Jones Lang LaSalle (JLL) Vietnam, noted that in the past three months, the average gross rent of Grade A office towers rose to about $50/sq.m per month, up by nearly 7 percent over the same period last year.

However, the highest gross rents of towers in prime locations in HCMC soared even higher to $70/sq.m per month. This marks a record high for nearly half a decade.

Similarly, rents for Grade B rental properties located in Districts 1 and 3 of the city have surged over the $30/sq.m per month threshold.

Rental office space occupancy rates for Grade A properties are now over 95 percent while Grade B offices have been filled up 96.5 percent.

Office occupancy has accelerated as a result of the boom in information technology, e-commerce and co-working space industries. The demand for HCMC office space could increase by 10 percent every year for the next 10 years, according to JLL Vietnam.

As of the third quarter of 2018, the total office space for lease in HCMC was approximately two million square meters: Grade A buildings totaled 250,000 square meters; Grade B, 900,000 square meters; and Grade C, about 810,000 square meters.

The JLL report also forecasts that in the next three months, office rents in HCMC will continue to rise quickly due to the lack of new premises to meet the huge demand.

Grade A and B office space will continue to be in short supply in the fourth quarter of 2018, as the next 11 buildings planned are only to be completed by 2019-2020 at the earliest, it said.

Vu Le report on Vnexpress

Southern routes to HCM City increasingly congested

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HCM City’s southern gateway is struggling with severe traffic jams as infrastructure has failed to match population increases and rapid urbanization.
Traffic congestion for kilometres on local streets, including at Nguyen Huu Tho-Nguyen Van Linh crossroads is an everyday experience.

Traffic in the area around the construction site of Kenh Te Bridge has worsened over the past four months because of its surrounding fences.

Tran Van Bien in District 7 said that these days, since Kenh Te Bridge’s construction was started, it has taken him up to 1.5 hours to travel 6.2 kilometres from his home to his office compared to just around 30 minutes previously. So, he has to leave home before 6:30 am.

Over the past decade, the southern area in the city has seen a boom in real estate projects. For instance, a 4-km section on Nguyen Huu Tho Street alone which runs through District 7 and Nha Be District is home to a range of projects.

Despite the rising population, transport infrastructure from the southern area to the city centre mostly depends on Kenh Te, Nguyen Van Cu and Khanh Hoi bridges. Hundreds of thousands of workers from Tan Thuan Export Processing Zone, Hiep Phuoc Port and Industrial Zone have added more to the traffic in the southern gate.

Dr Phạm Sanh, an expert on urban transport, said that Nguyen Tat Thanh-Huynh Tan Phat and Khanh Hoi-Nguyen Huu Tho routes linking the southern area with the city centre are seriously overloaded. Along the roads are lots of residential areas and supermarkets.

He suggested that the city’s Department of Transport should consider expanding roads and building more bridges to ease traffic congestion.

Source Dtinews

A man skips work for 6 years, and no one notices

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While half the battle of a successful career is showing up, for Joaquín García, not going to work was actually more lucrative. Only when the 69-year-old Spanish civil servant was expected to receive an award for two decades of loyal service did anyone notice that he had not gone to work for at least six years, according to a report by The Guardian.

García was employed as an engineer by the municipal water board in Cádiz, Spain, where his job was to supervise a waste water treatment plan.

“He was still on the payroll,” said the deputy mayor who had hired him, Jorge Blas Fernández, to The Guardian. “I thought, where is this man? Is he still there? Has he retired? Has he died?”

After the former manager of the water board, whose office was across from García, told Fernández he had not seen his employee for several years, the deputy mayor decided to question García and called him in.

“I asked him: What are you doing?” Fernández said. “What did you do yesterday? And the previous month? He could not answer.”

A court this week finally slapped García with a fine of €27,000 (VND630,000,000), the most his former employer could legally reclaim, after finding that the engineer did not occupy his office for at least six years and had done no work between 2007 and 2010.

In his defense, García told the court that he had gone to the office, although he did concede he may not have kept a regular schedule. He also added that he was the victim of workplace bullying because of his family’s socialist politics.

Still, García supposedly made the most of the confusion and became an avid reader of philosophy during his time away from work. The Spanish media even dubbed Garcia “el funcionario fantasma” (the phantom official) due to his elusiveness, a title that is now ill-fitting thanks to the significant media attention he has recently received for his attendance record.

Read the full report here.

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