Macroeconomic Outlook November 2019

Long Nguyen Vietnam Outlook

Analyst
Long.nguyenphi@mbs.com.vn

Tuan Hoang  Export in 11M 2019 is estimated at USD241.4 bn (+7.8% yoy) as

Head of Macro export of domestic sector surges 18.1%
Tuan.hoangcong@mbs.com.vn
 Industrial production index (IIP) in November declines 1.6% MoM,
November IPP still increases 5.4% yoy, the lowest pace ytd

 Vietnam’s PMI Manufacturing in November rebounces to the 51

level from the brief tiptoe into the neutral territory of 50 in October,
thanks to the recovery of the ouput growth

 Total registered FDI in 11M rises 3.1% yoy to USD31.8 bn,

disbursed FDI at USD17.6 bn (+6.8% yoy)

 Retails of goods and services in November climbs 12.6% yoy, the

highest November in 6 years thanks to high demand for goods and
services during the end of the year

 In 11M 2019, state’s revenue completes 92% of 2019’s plan,

estimated at VND1,299 tn

 Price of pork soars +18.1% MoM because of African Swine Fever,

November CPI surges 0.96% MoM as a result

 Interbank exchange rate in November moves sideways while free

market rate rises 50 dong to 23,240 VND/USD
 Trade Activity

Export in 11M 2019 is estimated at USD241.4 bn (+7.8% yoy) as export of

domestic sector surges 18.1%

In 11M 2019, export is estimated at USD241.4 bn (+7.8% yoy), of which foreign invested
sector accounts for almost 70%, or USD166.7 bn. Export of goods in November rises 3.8% yoy,
to USD22.6 bn. Mobile phone and parts account for one-fifth of Vietnam’s export, exported
USD48.7 bn (+5.4% yoy). Export of electronic devices and pcs worths USD32.4 bn (+19.4%
yoy), while apparels and clothing export value is USD29.9 bn (+7.8% yoy), footwear at USD6.5
bn (+9.8% yoy).

In 11M 2019, the United States is our largest export market, valued at USD55.6 bn (+27.9%
yoy), followed by EU at USD38 bn (-2.3% yoy) and China at USD37.4 bn (makes up 14.9%
total export).

Import in 11M 2019 is estimated at USD232.3 bn, rising 7.4% yoy, in which 91% of total
import is the import of capital goods (USD212.1 bn, increases 7% yoy). As the Vietnam’s
economy grows robustly since year-start, the demand for production materials and equipment
is higher. Export grows positively results in an estimated USD9 bn trade surplus, which makes it
easier for SBV to buy USD and raise its forex reserve to stabilize the exchange rate, isolating
the impact of RMB’s rapid depreciation.

Figure 1. Export – Import as share of GDP Figure 2. Vietnam’s main exports ($bn)

-150% -100% -50% 0% 50% 100% 150% 60.0 Mobile phones

and parts
Vietnam 50.0
Luxembourg PCs and parts
Hungary Export 40.0
Thailand Apparels, clothing
Ireland 30.0
Germany
Footwear
Norway Import 20.0
Russia
South Africa Machinery,
10.0
China equipment
Brazil - Seafood
USA 2014 2016 2018

Source: Bloomberg, MBS. Source: GSO, MBS.

Figure 3. Vietnam’s main export products Figure 4. Vietnam’s major export markets

0% 5% 10% 15% 20% 25%

Mobile phones & parts 20% USA 23.0%

PCs & parts 13% EU 15.8%

Apparels, clothing 13%
China 15.0%
Footwear 7%
ASEAN
Machinery, equipment
Japan
Wood & wood products

Transport, vehicle South Korea

Aquacultural products 0% 5% 10% 15% 20% 25%

Source: GSO. Source: GSO.

Figure 5. Vietnam’s main import products Figure 6. Major partners Vietnam import from

0% 5% 10% 15% 20% 25%

0% 10% 20% 30% 40%
PCs & parts 22.8%
China 29.5%
Machinery, equipment 15.9%
Mobile phones & parts South Korea 18.8%
Textiles ASEAN
Oil, petro, natural gas
Japan
Iron, steel
Plastics, plastic products EU
Automobiles
USA 5.7%

Source: GSO. Source: GSO.

Industrial Production

Industrial production index (IIP) in November declines 1.6% MoM,

nevertheless, IPP increases 5.4% yoy, at the lowest pace ytd

Industrial production decreases 1.6% MoM in November, rises 5.4% yoy, the lowest pace since
year start as mining sector declines 5.3% (crude oil extraction falls 10.4%, coal mining
decreases 6.6%). Manufacturing sector grows at slower pace of 6.5% due to coke and refined
petroleum production’s plunge of 46.4%. In 11M 2019, IIP is estimated to increase 9.3% yoy,
slower than the 10% expansion of 2018, of which manufacturing expands 10.6% yoy.
 Products contribute to the expansion of industrial sector in 11 months: production of metals
increases 31.7% yoy, electronics and PCs (+6.9% yoy), cellphones (+12.3% yoy), plastics and
rubber (+14.4%) and oil & petroleum (+24.6%).

Vietnam’s PMI Manufacturing in November rebounces to the 51 level from

the brief tiptoe into the neutral territory of 50 in October, thanks to the
recovery of the ouput growth

According to IHS Markit, the health of Vietnam’s manufacturing sector has recovered to
expansionary territory, as the country’s November PMI reading increases to 51, from the
neutral level of 50 in October. The rebounce in November is the result of picked-up new orders,
including export orders, which experiences faster pace of growth than in October.

Production output expands the first time in three months as orders increase, firms recruit more
staff as the workload rises. Input cost inflation slows to the lowest rate in a year, make it easier
for manufacturers to purchase more production materials and increase their inventory. Lack of
pressure on input prices allows companies to offer discounts to their customers. Business
confidence falls from October level, however, managers believe output will continue to grow
positively in the coming year.

Figure 7. Industrial Production Index Figure 8. Vietnam’s PMI manufacturing

30.0% Expansion
IIP YoY 58
25.0% 56
IIP Mfg YoY
54
20.0% 51.00
52
50
15.0%
48
Contraction
10.0% 46
44
5.0%
42
0.0% 40

Source: GSO. Source: Nikkei – IHS Markit.

 Figure 9. PMI of selected countries in the region

58
56
54
Thailand
52
Singapore
50
Taiwan
48
Hongkong
46
Malaysia
44
Indonesia
42
India
40
China
38

Source: Nikkei – IHS Markit.

Figure 10. FDI by sectors Figure 11. FDI investors by nationals

0% 20% 40% 60% 80%

0% 10% 20% 30% 40%
Manufacturing 68.1%
Greater China 37.3%
Real Estate South Korea 19.0%
Singapore
Wholesale, retail
Japan
Science & Technology Virgin Islands
Electricity, water, gas Thailand
production & distribution
Samoa
Construction USA 1.1%

Source: FIA. Source: FIA.

Investment

Total registered FDI in 11M rises 3.1% yoy to USD31.8 bn, disbursed FDI at
USD17.6 bn (+6.8% yoy)

Up to Nobember 20, 2019, total registered FDI is estimated at USD31.8 billion, increases 3.1%
yoy. There are 3,478 new projects that have received investment certificates with registered
capital of USD14.68 bn, a 28.2% increase yoy in the number of projects. In 11M 2019, M&A
activity surges 47.1% yoy to USD11.24 bn, accounted for 35.4% of total registered capital.

Disbursed FDI in 11M is estimated at USD17.62 bn, increased 6.8% yoy. Among sectors,
manufacturing takes the lead with USD21.56 bn of FDI inflows, accounted for 68% of total
registered investment. Real estate attracts USD3.31 bn of FDI, made up 10.4% total registered
capital. We expect the foreign capital inflow will continue to increase in medium term as the
government is improving the investment environment to attract FDI and benefits from more
FTAs coming into effects.

Consumption

Retails of goods and services in November climbs 12.6% yoy, the highest
November in 6 years thanks to high demand for goods and services during
the end of the year

Retail sales of goods and services in November is estimated at VND425.5 tn according to GSO,
an increase of 12.6% yoy. Revenue from retails of merchandise totals VND321 tn (+13.2%
yoy), while revenue from catering and food services is 49.9 tn dong (+9.7%) and the revenue
from tourism is VND4.1 tn (+11.8% yoy).

In general in 11M 2019, the total revenue from retail sales of goods and services increases
11.8% yoy to VND4,482 tn, if price rise not accounted for, is 9.3% (compared to the 8.7%
increase in 2018).

Government Expenditure

In 11M 2019, state’s revenue completes 92% of 2019’s plan, estimated at

VND1,299 tn

In 11M 2019 up to November 15th, state’s revenue is estimated at VND1,299 tn, completed
92% of 2019’s plan. Government’s expenditure is estimated at VND1,211 tn, equivalent of 74%
plan.

State’s revenue in 11M is up to projection, as revenue from crude oil export exceeds
expectation thanks to the increase in oil price, worthed VND49.5 tn; domestic revenue is
VND1,051 tn, completing 89.6% plan, revenue from trade rises to VND194.5 tn, 102.8% of
2019’s plan.

Government’s regular expenditure is VND858 tn, accounts for 85.9% plan, investment
expenditure only completes 53.3% plan, equivalent of VND228.9 tn, interest payment is
VND93.4 tn.
Figure 12. Retail sales growth Figure 13. Government’s tax revenue
14 Retail Sales US$ bn (RHS) 20
18 Commerce, service, mfg
12 %YoY Growth (LHS) 15.5%
16
10 14 FDI firms 13.4%
8 12
10 SOEs 10.7%
6 8
4 6 Land use rights 8.7%
4
2 Personal Income Tax 7.7%
2
0 0
Environment protection tax 4.0%

0% 4% 8% 12% 16% 20%

Source: GSO. Source: GSO.

Figure 14. State budget (til Nov 15, 2019) Unit: US$ billion

Billion USD 2019 Estimate H1/2019 11M2019 % 2019 Plan

Revenue 60.83 28.47 56.01 92.1%
Domestic 50.58 22.62 45.31 89.6%
Oil and gas 1.92 1.13 2.13 110.9%
Export-import 8.16 4.70 8.38 102.7%
Official aid 0.17
Expenditure 70.40 26.4 52.20 74.1%
Investment 18.50 4.83 9.87 53.4%
Current expenditure 43.08 19.01 37.00 85.9%
Interest payment 5.38 2.41 4.03 74.9%
Principal repayment 8.48 8.77 0.0%
Budget Balance -9.57 2.06 3.81
Budget deficit 3.60%
Budget loan 18.33

Source: MOF, GSO.

Figure 15. Contribution to CPI Source: IMF.

Food and non-alcholic beverages 36.12%

Housing, water, electricity, gas, fuels 15.73%
Transport
Furnishings, household equipment
Clothing and footwear
Education 5.99%
Health
Recreation and culture
Alcoholic Beverages, Tobacco
Miscellaneous goods and services
Telecommunication

0% 5% 10% 15% 20% 25% 30% 35% 40%

 Macro Indicators

Price of pork soars +18.1% MoM because of African Swine Fever,

November CPI surges 0.96% MoM as a result

Headline inflation in November climbs 0.96% MoM, the largest increase of CPI in November in
9 years. CPI in November increases 3.52% yoy as ASF reduces the supply of pork significantly
and results in the escalation of prices of pork and pork products (+18.1% MoM). Rocketing
pork price also raises the prices of pork alternatives as consumers switch to other meat
products: price of beef increases 1.29% MoM, chicken price rises 1.57% MoM, fish and shrimps
increase 0.89%-1.36%. The rise in price of meat directly impacts food and catering services,
this group increases 2.74% MoM. Transportation group decreases 0.73% MoM as the oil and
petro index declines 1.7%, this group makes up 9.4% of the consumer price index. Housing
and building material group increases 0.13% as gas price index rises 0.99% from November
1st. Core inflation in November rises 0.3% MoM and 2.18% yoy. We expect inflation will
continue to be under pressure due to high demand for goods and services before Tet holidays.

Interbank exchange rate in November moves sideways while free market

rate rises 50 dong

Inflation pressure and import demand increasing at the end of the year leads to a 50 dong rise
in free market exchange rate to 23,240 VND/USD. Meanwhile, exchange rate at commercial
banks moves sideways around 23,200 VND/USD throughout November. We expect the
pressure on the exchange rate will not be substantial as the SBV still has plenty of room to
stabilize the market and prevent excess volatitlity.

Figure 16. VND/USD Exchange rate Figure 17. Selected currencies against USD

24,000 8.0% CNY IDR 6.74%

SBV Central Rate Free Market Interbank PHP VND
23,600 6.0% THB SGD
23,200 4.0%
22,800
2.0%
22,400 0.03%
0.0%
22,000
21,600 -2.0%

21,200 -4.0% -2.31%

20,800 -6.0%

Source: Bloomberg. Source: Bloomberg.

 GDP (billion USD) GDP and CPI growth 2018 (%)
0 1,000 2,000 3,000 0 2 4 6 8

China 13,417 Vietnam

Japan 4,800 PRC
India India
South Korea Philippines GDP Growth
Indonesia Indonesia
CPI
Singapore Malaysia
Thailand Thailand
Philippines Singapore
Malaysia S.Korea
Vietnam
Japan

Source: Bloomberg, MBS. Source: Bloomberg, MBS.

25 CPI growth (%)

8.0% GDP Growth (%)
Advanced Economies
7.0%
20
Emerging and
6.0% developing markets
5.0% 15 World

4.0% Vietnam
10
3.0%

2.0%
5
1.0% Indonesia Singapore Thailand
0.0% Vietnam World 0
2011 2012 2013 2014 2015 2016 2017 2018 2007 2010 2013 2016 2019F

Source: Bloomberg, MBS. Source: IMF.

30,000 Import - Export (million USD) Brent Crude price (USD)

140
25,000
120
20,000
Export 100
15,000
Import 80 62.43
10,000
Trade 60
5,000
Balance
0
40

-5,000 20
0
Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19

Source: Bloomberg. Source: Bloomberg.

 Figure 18. Vietnam’s economic indicators

Economic indicators 2014 2015 2016 2017 2018 2019F 2020F

1. GDP, population and income
Nominal GDP (bn USD) 185.8 191.3 201.3 220.4 241.4 257.6 274.3
Real GDP growth (%) 6.0 6.7 6.2 6.8 7.1 6.7 6.5
Private consumption (% yoy) 6.1 9.3 7.3 7.4 5.9 5.5 5.4
Government spending (% yoy) 7 7 7.5 7.3 6.6 6.5 6.5
Exports of goods and services 11.6 12.6 13.9 8.8 8.2 7.1 6.4
Imports of goods and services 12.8 18.1 15.3 10.9 6.9 6.9 6.7
Population (mn people) 92.5 93.6 94.6 95.5 96.5 97.4 98.4
GDP/capita (USD by PPP) 5,675 6,053 6,430 6,928 7,482 8,060 8,665
Unemployment (%) 2.1 2.33 2.33 2.2 2 2 2
2. Fiscal indicators (%GDP)
Government debt 46.4 49.2 52.6 51.8 52.1 52.2 52.2
Public debt 58 61 63.6 62.6 61.4 61.3 60.8
Foreign debt 38.3 42 44.8 48.9 49.7 49.9 49.9
3. Financial indicators
USD/VND Exchange rate 21,373 22,485 22,740 22,690 23,180 23,440 23,300
Inflation (%) 4.1 0.6 2.7 3.5 3.5 3.6 3.7
Credit growth 14.2 17.1 18.7 18.2 13.9 14.6 14.2
12-month lending rate 8.8 8.5 8.5 8.5 8.5 8.5 8.5
Trade balance (million USD) 12,126 7,396 14,013 11,427 16,539 8,267 7,302
Goods: Export (million USD) 150,217 162,112 176,632 214,628 243,697 253,483 261,021
Goods: Import (million USD) 138,091 154,716 162,619 203,201 227,157 245,216 253,719
Current account (million USD) 9,359 906 8,235 5,207 5,899 2,998 1,403
Foreign reserve (million USD) 34,575 28,616 36,906 49,497 54,491 59,938 60,310

Source: IMF, IMF Financial Statistics, EIU, Bloomberg, NFSC, MBS.

PRODUCT

This product covers the latest information about Vietnam macroeconomics. Reports focus on important issues such as inflation,
economic growth, trade balance, exchange rate and macro policies. The product also forecasts figures which have impacts on stock
market.

MBS RESEARCH CENTER

We offer economic and equity research. The Economic Research Team offers periodic reports on macroeconomics, monetary policies
and fixed income markets. The Equity Research Team offers reports on listed firms, private equities and sector reviews. MBS Research
Center also offers regular market commentaries - The Investor Daily.

MB SECURITIES (MBS)

Established since May 2000, MBS was one of the first 5 securities firms operating in Vietnam. After years of continuous development,
MBS has become one of the leading securities companies in Vietnam, providing a full range of services including: brokerage, research
and investment advisory, investment banking and capital markets underwriting. MBS’s network of branches and transaction offices has
been expanded and operated effectively in many major cities such as Hanoi, Ho Chi Minh City, Hai Phong and other strategic areas.
MBS’s clients include individual investors and institutions, financial institutions and enterprises. As a member of the MB Group,
including MB Bank, MB Land, MB Asset Management, MB Capital and Viet R.E.M.A.X (Viet REM), MBS is able to leverage substantial
human, financial and technological resources to provide its clients with tailored products and services that few securities firms in
Vietnam can match.

MBS is proud to be recognized as:

 A leading brokerage firm – ranked No.1 in terms of brokerage market share since 2009;
 A renowned research firm with a team of experienced analysts that provides market-leading research products and
commentaries on equity markets and the economy; and
 A trusted provider of investment banking services for corporate clients.

MBS HEAD OFFICE

MB Building, 3 Lieu Giai, Ba Dinh, Hanoi
Tel: + 8424 3726 2600 - Fax: +8424 3726 2601
Website: www.mbs.com.vn

DISCLAIMER

Copyrights, ALL RIGHTS RESERVED. Authors have based this document on information from sources they believe to be reliable but
which they have not independently verified. The views expressed in this report are those of the authors and not necessarily related, by
any sense, to those of MBS. Neither any information nor comments were written for advertising purposes or recommendation to buy /
sell any securities. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any
means, electronic, mechanical, photocopying recording, or otherwise, without the prior written permission of MBS.