2024 VIETNAM OUTLOOK WEBINAR

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Past performance is not a guarantee of future returns.

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 Looking Back: Our Forecasts At The Start Of 2023
What We Got Right

 Modest inflation

 Large trade surplus

 Manufacturing production weak

 Stock market finishing higher than 2022

 Weaker domestic consumption

 Weaker GDP growth

 Robust infrastructure spending

 Increase in stock market liquidity

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 Looking Back: Our Forecasts At The Start Of 2023
What We Got Wrong

 VND appreciation

 Stock market volatility

 Full recovery of Chinese tourists by year-end

What We Did Not Foresee

 VN-US Comprehensive Strategic Partnership

 Significant net foreign outflows from equity market

 Open discussion and transparency regarding push towards EM Status

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 2024 VIETNAM OUTLOOK WEBINAR

Michael Kokalari, CFA

Chief Economist

Classified: Public
 Summary
Vietnam’s GDP Plunged:
What Do We
8% in 2022, to 5.1% in 2023
Expect in 2024?
Strengths:

– Tourism Rebound • Manufacturing Recovery

– Fiscal Stimulus /
Infrastructure Spending • Modest Consumer Recovery

Weaknesses:
• Government Stimulus
– Manufacturing & Exports ?
Measures
– Domestic Consumers’
Sentiment & Spending
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 Key Forecasts for 2024

2023 2024F Pre-COVID

Average*

GDP 5.1% 6.0 - 6.5% 7.0%

Real Retail Sales 7.1% 7.5% 9.0%

Manufacturing 3.6% 8.0% 12.0%

Export Growth -4.4% +7.0% 12.0%

VND Depreciation 2.7% 0.0% 1.6%

Source: GSO, Bloomberg, VinaCapital * Average over 2015-19

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 Interest Rates in Vietnam to Remain Stable in 2024

Lower Interest Rates* Higher Credit Growth (yoy)

9.0% 18.0%

The 2022-23 16.0%

8.0%
Surge is Over

14.0%
7.0%

12.0%

6.0%
10.0%

5.0%
8.0%

* Average 1Y Deposit Rates Source: SBV

4.0% 6.0%

The SBV Hiked Policy Rates in 2022 to Protect the VN Dong

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 VND Depreciation Monetary Tightening

SBV Tightened
25,500
Here Monetary Policy
25,000

24,500

24,000

And
23,500
Here
23,000

22,500

22,000
Feb-22

Feb-23
Jun-22

Jun-23
Jan-22

Mar-22

Sep-22
Oct-22

Nov-22

Sep-23
Oct-23

Nov-23
Dec-23
May-22

Jul-22

Aug-22

Dec-22

Jan-23

Mar-23

May-23

Jul-23

Aug-23
Apr-22

Apr-23
Source: Bloomberg

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 Vietnam’s Exports & Manufacturing are Recovering

35%

30% Exports (yoy)

by Month
25%

20%

15%

10%

5%

0%

-5%

-10%

-15%
Source: GSO
-20%
2M22

2M23
Dec-22
Jun-22

Aug-22

Sep-22

Nov-22

Jun-23

Aug-23

Sep-23

Nov-23

Dec-23
Oct-22

May-23

Jul-23

Oct-23
Mar-22

Apr-22

May-22

Jul-22

Mar-23

Apr-23

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 Manufacturing Recovery Driven by PCs & Consumer Electronics

Global PC Sales are Recovering… … So are Vietnam’s PC Exports

60%
25%
50%
20%
40%

30% 15%
Bottom Bottom
20% in Q1 10% in Q1
10%
5%
0%
0%
-10%
-5%
-20%

-30% 30% Plunge ! -10%

-40% -15%
1Q20

1Q21

1Q22

1Q23

2024F

2025F
2Q20

3Q20

4Q20

2Q21

3Q21

4Q21

2Q22

3Q22

4Q22

2Q23

3Q23

4Q23

2M23
Oct-22

Oct-23
May-22

May-23

Nov-23
Dec-23
Apr-22

Jun-22

Nov-22
Aug-22

Dec-22

Mar-23
Apr-23

Jun-23

Aug-23
Jul-22

Sep-22

Jul-23

Sep-23
Source: Canalys Source: GSO

Note: Smartphone & Garment Exports Still Falling

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 This is an Asia-Wide Phenomenon

Tech Manufacturing In Asia, Electronics Exports

Recovering Across Asia Lead Overall Exports

JP Morgan Index
of Tech Mfg

Source: Standard Chartered

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 A Reliable Leading Indicator

VN Imports of Electronics Components Tech Companies in VN are

Ramping up Production…
60%
… So Imports of
50% Electronics Components
Surging 40-50% !
40%

30%

20%

10%

0%

-10%

-20%
05-2023 06-2023 07-2023 08-2023 09-2023 10-2023 11-2023 12-2023

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 Vietnam Consumer Sentiment & Spending are Recovering

• Two Factors Depressed Consumer Sentiment in early-2023

― Factory Layoffs

― Frozen Real Estate Market

• The Employment Situation is Recovering

― Factories Started Re-Hiring Workers in Q3

― Exports Started Recovering in Q3

• The Real Estate Market Started to Thaw

― Lower Interest Rates

― Regulatory Relief

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 Consumer Sentiment & Spending Recovering (cont.)

Consumption Bottomed in Mid-2023 Sentiment Bottomed in Mid-2023

14.0% 90

85
12.0%

80
10.0%

75

8.0%
70

6.0%
65

4.0% 60
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23

Vietnam Retail Sales (yoy) Source: Kantar Worldpanel

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 Government Measures to Support Economic Growth
• Fiscal Stimulus
― VAT & Petrol Tax Cut (~0.5%/GDP in 2023)

― Government Salary Increase (~1%/GDP in 2024)

― Infrastructure Spending: 4%/GDP in 2022 → ~6% in 2023

• Policy Measures
― Increased Urgency to Fix the Issues Impeding
Real Estate Development in Vietnam

― The Government Reportedly Expects Revenues from

New Real Estate Projects to Increase Well Over 50% yoy

― Steps to Support Corporate Bond Market

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 Vietnam’s FDI Story Keeps Getting Better-and-Better

1) Vietnam is a Clear Winner From Geopolitics

2) Vietnam Continues to Move Up the Value Chain

3) FDI Commitments +32% to 9%/GDP in 2023 !

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 FDI: Geopolitics More Important Than Geography
Global FDI Flows Between:

Source: IMF

Vietnam is the Only Country Both

Biden & Xi Jinping Visited in 2023
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 FDI: We Are Not Worried About Global Minimum Tax

• Big FDI Companies To Pay 15% Tax Rate from 2024

― Some Companies Previously Paid ~5% Tax Rates

― GMT’s Total Tax Burden Equates to ~4% of FDI Profits

― The Government Likely to Rebate GMT Taxes to FDI Firms

• Some Analysts Incorrectly Expect GMT to Impede Vietnam’s FDI

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 FDI: We Are Not Worried About GMT (cont.)
• GMT Will Not Impede Vietnam’s FDI Because:

1) Tax Incentives Not the Main Criteria for FDI in EM

(Workforce, Infrastructure, etc, More Important Factors)

2) Vietnam’s Competitors for FDI Also Implementing GMT

3) GMT’s Total Tax Burden Only Equates ~4% of FDI’s VN Profit

• GMT Will Impede FDI to Ireland and Other DM’s:

Apple’s Tax Rates in 2014
In Ireland 1%
In US 26%

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 2024 VIETNAM OUTLOOK WEBINAR

Linh Vu
Head of Research

Classified: Public
 VN-Index: 2023 Market Performance Review
 Best performer in ASEAN: VN-Index grew 12.2% in 2023 in VND term (9.3% USD term)
o Average daily trading volume1: US$738mn (-15% YoY)
o Foreign net sell2: -US$941mn (vs. 2022: +US$1,180mn)

 Market leaders: Brokers, IT, Materials and Industrials vs. Laggards: Consumers Staples, Insurance and Real Estate

Sector Weight (%) Sector performance (%) Sector contribution to the VNI performance (%)
2.9% Brokers 95.6 Brokers 2.0
2.6% IT 46.7 IT 1.0
7.9% Materials 46.0 Materials 3.1
8.2% Industrials 27.3 Industrials 2.1
1.7% Energy 21.3 Energy 0.3
37.0% Banks 19.9 Banks 7.1
0.8% Health Care 15.6 Health Care 0.1
- VNI 12.2 VNI
3.2% Consumer Discretionary 6.1 Consumer Discretionary 0.1
7.0% Utilities 2.4 Utilities 0.2
17.0% Real Estate -4.2 Real Estate -0.6
1.0% Insurance -8.2 Insurance -0.1
10.6% Consumer Staples -11.7 Consumer Staples -1.4

Source: Bloomberg, data as of 31 December 2023

Notes: 1Total of 3 stock exchanges (HSX, HNX and UpCom), 2Total of 3 stock exchanges (HSX, HNX and UpCom) and including ETFs 22
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 Earnings Growth Outlook: increase 10-15% in 20241
Earnings growth YoY
35% 31.6% 2
30%
25%
20%
15% 13.0%4
10%
5% 0.4% 0.6%3
0%
-5%
-10%
-8.0%
-15%
-20%
-13.5%
Q1-23 Q2-23 Q3-23 Q4-23 2023E 2024E

Notes: 1 VinaCapital’s coverage earnings forecast, representing 90% of HSX by market capitalization. 2 4Q23 earning growth if excluding one-off items (of GMD) is 29.5% YoY. 3 2023E
earning growth if excluding one-off items (of GMD) is 0.2% YoY. 4 2024E earning growth if excluding one-off items (of GMD) is 13.5% YoY

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 Which Sectors Will Have The Best Earnings Growth?
Net Profit Growth (%)
109.2

52.8
37.7
32.6
23.9
18.2 13.8 13.0 10.6 10.02 8.0
2.9

(9.9)

Industrial
Healthcare

Utilities

Parks

Oil & Gas

VinaCapital’s
Consumers
Property1

&Cyclicals
Materials

Coverage
Brokers

Banks

Insurance
IT

(44.3)
(52.2)
Ports & Property:
Logistics VIC Family
PER
17.4 11.6 14.7 14.1 15.2 7.0 11.7 10.0 12.6 17.42 11.7 11.0 14.8
2024
PEG
0.2 0.2 0.4 0.4 0.6 0.4 0.8 0.8 1.2 1.72 1.5 3.8 -1.5
2024
Source: Bloomberg, VinaCapital’s coverage
Note: 1VIC family is excluded as bulk sale at VHM and large shophouse sale at VRE creating high base effect, 2Valuation of Ports and Logistics if excluding GMD’s one-off item in 2023 and 2024

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 Investment Themes for 2024
Digital transformation System Integration, AI, data service

Banking

Brokerage
Benign interest rate environment
Industrial Parks

Real Estate

Infrastructure spending Construction Materials

Domestic demand recovery Retailers

Global demand recovery Port/Logistics

Energy Oil & Gas

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 VN-Index Valuation Remains Very Attractive
VNI 12M P/E forward (x) 20% Premium
21

19 10%

17
16.1 0%
15
14.0
13 -10%
12.0
11
9.9 -20%
9.6
9
7.9 -30%
7
Discount
-40%

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023E
2024E
-2std -1std 12M fwd PE
+1std +2std Mean Discount/Premium vs. ASEAN (%)

Source: Bloomberg, VinaCapital; Data as of December 31, 2023

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 Appealing Valuation from Earnings Yield Spread Perspective
Widening gap between VNI’s earnings yield and 12M deposit rates
E/Y and deposit rate (%) Gap (%)
14 8

13 7

12 6
5
11
4
10
3
9
2
8
1
7
-
6 (1)
5 (2)
4 (3)
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
Gap (RHS) E/Y (LHS) Avg. 12M deposit rates (LHS)

Note: “12M Forward Earnings Yield” is based on VN-Index’s consensus estimates; “12M Deposit Rate” is based on public quote rates of Vietcombank, BIDV, Vietinbank and Agribank
Source: Bloomberg, VinaCapital. Data as of 31/12/2023

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 Going to 2024, Headwinds Still Persist
 Geopolitical uncertainties (Red Sea attacks; Israel–Hamas, Russian–Ukraine)

 Risks of El Nino on agriculture outputs and prices

 External demand moderates

o China growth slowing in 2H24
o Possibility of a US recession

 Domestic demand picking up slowly

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 Key Catalysts for Market Growth in 2024
 A remained supportive stance in both monetary and fiscal policies
o Interest rates remain low
o Increase public investment spends
o Continuation of VAT reduction in 2024
o Earnings recovery (13% YoY earnings growth in 2024E)

 Implementation of KRX system

o Expected in 1Q24

 Potential to be included into FTSE Russell (Secondary) Emerging Market Index

o Next preliminary review: Mar. 2024 / Official review: Sep. 2024

 New Regulations on Property Markets

o Speed up legal process of pending projects
o Three main laws to take effect from 2025

 Fed may start cutting rates in 2024

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 Banking Outlook for 2024
o
 Credit growth
o Expect stronger credit growth in 2024 at 14-15%

 Interest rate trend

o Deposit rate trend to stay low at the current level
o Still have some room to lower lending rate further

 NIM trend: to stay flat or recover slightly from the trough

 Asset quality: to be improved, stable credit cost

o NPL formation trend to ease
o Circular 02 that allows debt extension to June 30, 2024, may be extended
further

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 Credit Growth Gained Momentum in Q4 2023
2023 Credit Growth
16%
YTD growth

13.5%
14%
12%
10% 9.2%

8% 7.4%
6.9%

6% 5.3%
4.7% 4.4%
4% 3.0% 3.4%
2.6%
2% 0.9%
0.1%
0%
Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Source: SBV, VinaCapital

Classified: Public
 Interest Rates to Stay Low At Current Levels
Still have room to lower lending rates
%
12

10 H1 H2

0
1/2017

1/2018

1/2019

10/2020

12/2021

12/2022

10/2023

10/2024
10/2017

10/2018

10/2019

4/2020
7/2020

4/2021
9/2021
4/2017
7/2017

4/2018
7/2018

4/2019
7/2019

3/2022
6/2022
9/2022

4/2023
7/2023

4/2024
7/2024
1/2020

1/2021

1/2024
Avg. Deposit Rate Avg. Lending Rate Policy rate (Refinancing)

Source: Policy rate: SBV. Average deposit and lending rates (volume-weighted average interest rates): IMF.
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 Banks Are Trading At a Discount
+2sd -2sd
+/-2sd band 10Y mean PBR 2024E (exc. PP) PBR 2024E (inc. PP)

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
CTG

HDB

TCB

VPB
VCB

Sector
ACB

LPB

VIB
MBB

MSB

OCB

STB
BID

TPB
Source: Bloomberg, VinaCapital. Data as of December 31, 2023
Referring to the planned private placement of 6.5% stake ($1bn) at VCB and 8.5% stake ($1bn) at BID

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 Mortgage Rates
% Average Mortgage Rate By Months (%)
16
15
14
13
12 11.6%
11 10.8%

10
9 8.3%
8 7.6%
7
6

Preferential Post-preferential
Banks Surveyed: VPB,TPB, MBB, OCB, SC,HLB, UOB, OceanBank, VCB, VIB, MSB

Source: Fina
Classified: Public
 Challenges and Solutions for Real Estate Markets

Past events Current Developments

 Speed up legal process by solving conflicts in regulations

(Apr., 2022)
 Issued revised Housing Law (Effective 01 Jan 2025)
 Issued revised Real Estate Business Law (Effective 01 Jan 2025)
 To be approved: revised Land Law (expected in 1H24)

(Oct., 2022)

 Maintain supportive interest rate environment

 Credit crunch
 Liquidity crunch

High interest rate  Established stricter requirements for bond issuers, protect legitimate rights of bondholders

 Real estate
companies
unable to pay  Offer credit programs for social housing; loan restructuring for real estate developers
debts

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 Beginning Of A New Cycle
25
System average* Offering
Price Price Price
Transactions Transactions Transactions
Mortgage rate*

20
Primary supply Primary supply Primary supply

15
Price
Transactions
10 Primary supply
200
2014 2020 2022 2023 2025
8

 Banking crisis  GDP growth: strong  Credit crunch More favorable macro conditions:
 Inflation: 12-18%  Mortgage rates: 8-10%  Liquidity crunch • Abundant liquidity in banking system
 Mortgage rates: 18-24%  Mortgage rates: • Mortgage rates back to pre-Covid level
10-16%
New Legal Frameworks:
• Revised Housing Law (2023)
• Revised Real Estate Business Law (2023)
• New Land Law (2013)  1st wave Covid-19 • Revised Land Law (1H24E)
• New Housing Law (2014)  Money shifting to property
market

Source: SBV, IMF, VinaCapital, Notes: (*) Average system lending rate plus 3.5%

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 17th Floor, Sun Wah Tower
115 Nguyen Hue, District 1, Ho Chi Minh City, Vietnam
P: +84 (0) 28 3821 9930 F: +84 (0) 28 3821 9931
Email: ir@vinacapital.com
Website: www.vinacapital.com

Ho Chi Minh City | Hanoi | Singapore

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