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Vietnam Daily Market Recap Nov 10 – Economic Update

Daily Market Recap 10/11/2020    321

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Dear Valued Clients,

We would like to send you our Daily Market Recap for today

Market Commentary: The VN-INDEX edged down 0.01% due to the profit taking activities in late trading

The VN-INDEX lost 0.1pts as selling pressure against Consumer staple large caps. Following the 3% rise of Dow Jones Industrial Average yesterday, the VN-INDEX kicked off the morning session in the green and quickly rose to its intraday high of 963.5pts (+1.2%) due to investors’ positive sentiment on coronavirus vaccine news. VJC was the largest supporter, rising 7.0% to VND113,400 and contributing 1.1pts to the index’s move. Other large caps also joined the rally including HVN (+5.8%), GVR (+2.6%), GAS (+1.1%), VRE (+2.3%), and BID (+0.4%). However, profit – taking activities emerged at late trading and erased all the morning gain, thus pushing the VN-INDEX below the reference price level. Notably, VNM and SAB from the Consumer Staple sector fell 1.2% and 0.9%, respectively and wiped a combined 1.1pts off the index. Other bearish stocks included VHM (-0.8%), VIC (-0.5%), VCB (-0.5%), and CTG (-1.1%). At the end of the session, the VN-INDEX closed at its intraday low of 951.9pts (-0.01%), and the HNX-INDEX also slid 0.2% to 141.4pts.

Industrials (+2.5%), Energy (+0.9%), and Health Care (+0.7%) rose, while Consumer Staples (-0.8%), Materials (-0.5%), and IT (-0.4%) lost ground today. Top index movers included VJC (+7.0%), HVN (+5.8%), GVR (+2.6%), GAS (+1.1%), and VRE (+2.3%). Top index laggards consisted of VNM (-1.2%), VHM (-0.8%), VIC (-0.5%), VCB (-0.5%), and CTG (-1.1%). Top three major put-through transactions were VJC with 3.8m shares (VND410.1bn), CII with 8m shares (VND135.2bn), and SVC with 1.6m shares (VND109.1bn).

Foreigners net sold on HOSE to the amount of VND753.7bn, while net bought on HNX to the amount of VND14.1bn. They mainly bought VRE (VND133.2bn), VHM (VND127.9bn), and HPG (VND47.7bn); and mainly sold HPG (VND234.3bn), MSN (VND136.1bn), and VHM (VND135.9bn).

Market News

Oil rises above US$40 with vaccine buoying demand recovery hope

Oil extended gains, following Monday’s rally on optimism that a potential Covid-19 vaccine could boost a recovery in transport demand. Crude futures in New York approached US$41/barrel, after advancing more than 10% at one point on Monday. It comes after early findings showed that a vaccine developed by Pfizer Inc. and BioNTech SE protects most people from the virus. While headline prices are gaining, there have also been sharp moves in the structure of the curve. Brent futures for six months ahead were at their strongest versus 12 months out since March, a sign that traders are growing more positive on supply and demand balances for the second half of the year. In another sign of strength, the Middle Eastern Dubai benchmark was trading in a bullish backwardation structure. (Bloomberg)

Vietnam Government Inspectorate proposes PM stop licensing new condotel projects

As many localities have granted licenses to a series of condotel projects that may pose high risks of disputes and lawsuits, the Government Inspectorate has proposed the prime minister stop licensing these new projects. Besides, the Government Inspectorate also proposed the Government leader direct the relevant ministries and localities to temporarily suspend licensing tourist villas and resort villas, Thanh Nien Online reported. The suspension of granting licenses to condotel projects should stay until a legal framework for these projects is completed in line with the prime minister’s directive, according to the Government Inspectorate. To complete the legal corridor, the Ministry of Construction has been told to cooperate with other ministries and departments to study and present obstacles facing condotel projects to the prime minister to eliminate the difficulties. The construction of and investment in condotels have created some positive effects, including attracting a strong cash flow, promoting the development of tourism, creating jobs and increasing local budgets. However, the development of these projects has posed multiple obstacles, mainly related to legal issues such as land use rights and the condotel ownership of secondary investors. Condotels are not recognized as residential apartments, so buyers are not issued ownership certificates. No prevailing regulations governing condotels are found in the Land Law, the Law on Real Estate Business or the Civil Code. (vietnamnet.vn)

Economic Update

Vietnam dong likely to strengthen in 2021F

Dollar slumps on the back of the Fed’s unprecedented moves

Since the Covid-19 outbreak in Jan 2020, the US Federal Reserve (Fed) has lowered its benchmark rate to 0.0-0.25% (lower bound-upper bound) and restarted an unconventional programme of bond purchases known as quantitative easing (QE), in an effort to save the US economy from the fallout of the pandemic. The unprecedented loosening of monetary policy combined with the negative outlook of the US economy in 2020 has caused the US$ to depreciate. As per data on Nov 2, the Bloomberg Dollar Index slid 2.4% YTD.

We expect exchange rate to remain stable till year-end

As per data on 30 Oct, the Vietnam central bank-set exchange rate for the VND/US$ stood at VND23,201/US$, widening only 0.2% YTD, while the exchange rate on the free market rose at a similar pace. The VND was strongly supported by the higher trade surplus and foreign reserves. Vietnam’s exports increased 4.7% yoy to US$229.3bn in 10M20, while imports rose at a slower pace of 0.4% yoy to US$210.6bn, raising the 10M20 trade surplus to US$18.7bn (vs. US9.3bn in 10M19). Meanwhile, the country’s foreign reserves rose to US$92bn in late-Aug 20, from around US$80bn at end-FY19. Therefore, we expect the VND to remain stable at current level towards the end of 2020F.

We see more upside risk for the VND in 2021F

We expect the US$ to remain weak in 2021F as the Fed could maintain a loose monetary policy to support growth. In addition, the Chinese yuan’s (Rmb) surge in recent months could reduce the trade deficit of Vietnam against China. As per 2 Nov data, the Rmb has appreciated 3.9% YTD vs. US$. As we see more upside risk for the VND, we now expect the VND to move within a razor range of +/-0.5% vs. US$ next year (vs. our previous forecast of a 0.5-1.5% depreciation).

VND strength could be a double-edged sword

We see several positive impacts of the stronger outlook for the VND in 2021, including: 1) more consistent capital flow into Vietnam, 2) easing of US$-denominated debt payment burden, and 3) the tempering of arguments over trade imbalance and currency manipulation with the US. On the other side, the appreciation of the VND will slightly soften the competitiveness of Vietnamese exports, especially its agriculture products, raw materials and unprocessed goods. However, we believe this impairment of a strong VND will partially be offset by a stronger Rmb.

Brighter trade outlook thanks to the appreciation of the Rmb

As China is the largest trade partner of Vietnam, the movement of the Rmb has a large effect on Vietnam’s exports and imports. We expect the Rmb to appreciate further by 2.0- 3.0% vs. the US$ in 2021F, while the VND should appreciate at a slower pace. Hence, we believe that Vietnam’s exports will remain competitive against Chinese goods next year. However, the appreciation of the VND will slightly reduce Vietnam’s export competitiveness vs. Indonesia, Thailand and India, due to the depreciation of their local currencies. Nevertheless, we believe that the positive effects of the Rmb appreciation on Vietnam’s exports will overcome the negative effects of the VND appreciation.

Read the full report: HERE

Notable Corporate Events

PetroVietnam Technical Services Corporation (PVS VN, HNX) – Dividend payment: PVS has set 23 Nov to be the record date for paying the 2019 cash dividend of VND1,000/share. The payment will be made on 24 Dec (ndh.vn)

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