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Navigating Vietnam 2019 – Time to double down on quality

Strategy Note 24/01/2019    182

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  • Vietnam’s GDP acceleration and currency stability in 2018 made it a standout in a maturing global economic cycle.
  • US-China trade tensions and a slew of trade pacts have put Vietnam firmly on the global sourcing map.
  • A slowing global economy, trade headwinds and a more hawkish monetary policy imply that Vietnam’s GDP growth will decelerate to 6.6% this year.
  • External risks are lurking in the shadows.
  • We expect the VN-Index to end the year at around 990 points, up 11% from 2018 year-end levels.
  • An upgrade to emerging market status is still two years away but a new securities law in the pipeline is likely to boost the perceived likelihood of MSCI EM inclusion.
  • We like earnings-driven stories for 2019 and advocate a shift away from cyclical names into more defensive stocks in the consumer and consumer-related, automotive and power sectors.
  • We like textile and fishery exporters and industrial park developers as they are likely to be direct beneficiaries of US-China trade tensions and a slew of new trade pacts.
  • The Oil and Gas sector could see a sentiment makeover from a possible recovery in oil prices.

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