August exports decreased less than initially estimated

• FDI sector remained resilient despite of harsh Covid-19 restrictions.
• Tech exports were in the spotlight amid the pandemic headwinds.
• Are FDI companies moving out of Vietnam? Not really!

FDI sector remained resilient despite of harsh Covid-19 restrictions

According to Vietnam Customs, August’s export growth only dropped by 1.7% yoy and 2.3% mom compared to the previous estimate of 5.4% yoy decline by GSO. The FDI sector maintained positive export growth of 3.3% yoy in the face of pandemic headwinds. In contrast, exports of the domestic sector fall by 13.3% yoy due to the impact of the fourth outbreak. Imports continued to outpace exports, growing at 20.4% yoy but decreasing by 6.1% mom. The trade deficit narrowed to US$109mn, from US$1.2bn a month earlier. In 8M21, total exports and imports grew at 21.8% yoy and 33.5% yoy, respectively. The accumulated trade deficit was about US$2.3bn, compared to a surplus of US$13.7bn in the same period last year.

BID – Maintaining stable short-term outlook

• We expect BID to have stable credit growth momentum in the third quarter, reaching 8.0-8.5% YTD. The nationwide network helps the bank to survive the impact of social distancing in several regions.
• The 2021 annual provisions plan is adjusted upward to VND 24.3 trillion (USD 1.1 bn), up over VND 1 trillion from the previous forecast due to the latest pandemic outbreak. We also revise up credit costs for 2022 to factor in the additional provisions following the potential restructured loans and NPL. Therefore, we revise down the 2021-2022 PBT to VND 16,844 bn (USD 732 mn, +83% YoY) and VND 21,596 bn (USD 939 mn, +28% YoY) respectively.
• We maintain our conservative view regarding medium and long term prospect of the bank. However, BID is expected to have top-tier growth in 2H2021, which might drive the share price in short term. Book value per share is expected to reach VND 21,498 at the end of 2021. We adjust our target price to VND 40,500/share, down -2% from our prior valuation. This translates to an upside of +3% from the closing price of September 16, equivalent to a NEUTRAL recommendation.

Real estate market – Awaiting for excitement in a post-Covid-19 period.

• Market squeezed in Q3 2021 from strict lockdown given the escalation of Covid-19.
• Developers utilized online channel to sell their products.
• Market previously recovered quickly in post-Covid period, but the timing is strongly dependent on vaccination progress.

Equity market correction?

• The S&P 500 Index closed below 4500 on Friday (Sep 10). We look for a 31.8% Fibonacci retracement to 3750 (Figure 1) in the next few months. US stocks are overdone.
• The bond market is telling us that inflation is not a ‘transitory’ phenomenon, as various central banks are trying to say. It is a sticky issue.
• South Korea’s central bank raised its base interest rate late August after 15 months of keeping it at a record low. Brazil and Russia have already raised interest rates three times this year. China has been in a tightening mode while Mexico, the Czech Republic and Hungary have all just made their first moves in years.

GEG – Capacity expansion while earnings slightly increase because of oversupply

• Revenue and NPATMI are estimated to be VND 1,550 billion (or USD67 mn) and VND 273 billion (or USD12 mn), +4% and 6% YoY, respectively in 2021. EPS and book value in 2021 are forecasted to be VND 982 and VND 12,950, respectively.
• The three-wind power will commercially operate in 4Q2021 and will boost the company’s earnings in the medium term.
• The supply-demand imbalance in the power industry has curbed the company’s growth in 2021. Both current and incoming renewable energy farms continue being cut volume in this year. In 2022, the full-year utilization of wind power plants will drive the company’s earnings.
• We adjust our target price for GEG at VND 18,200 because of stock dividend (4%) and existing shareholders’ public offering (6%). It comes down to a 3% upside from the closing price on Sep 13^th.  Thus, we rate NEUTRAL for this stock.

FMC: Brighter outlook in 4Q21 driven by production recovery

• We revise up our target price by 16% from latest valuation to VND 47,000/share as we increase our 2021F-2022F NPAT-MI by 22% owing to positive shrimp demand and increasing selling prices, and a rollover of our TP to mid-2022. With an expected cash dividend in the next 12 months of VND 2,000/share, the total return will reach 10% based on the closing price of September 08^th, 2021. We recommend to ACCUMULATE.

Banking sector – Flattened credit growth sees short-term lending as the driver

• Credit growth was almost flat in July as well as in the first half of August. It picked up in the second half due to short-term lending. After a weak performance in July, deposit growth seemed to gain its momentum back in August.
• Credit and deposit growth were more resilient in Hanoi, contrary to the development in Ho Chi Minh City.
• Deposit growth is lagging our forecast while credit expansion is still on track. We standby until witnessing an unclouded prospect of the reopening strategy to revise our projections.

Inflation expectations

• Inflation expectations in the US have risen steadily.
• 10-year real Treasury yields are now negative.
• Big tech stocks have benefited from the recent rally in bond prices.

The latest University of Michigan survey showed a rise in long-term inflation expectations in the US. The survey’s 5-year inflation expectations rose from 2.8% in July to 3.0% in early August, matching the recent high reached in May (Figure 1).

PVS – Hit by gloomy upstream activities in the short term

• Q2021 revenue of VND3,063bn (-43.6% YoY) while NPATMI of VND152bn (-42.8% YoY).
• PVS recorded VND10bn for provisions in 2Q2021, translating to total provisions of VND20bn in 1H2021.
• JV profit was VND151 bn in 2Q2021, compared to VND129bn in 2Q2021.
• For 2021, revenue and NPATMI are anticipated at VND13,289bn (-34.1% YoY) and VND796bn (+27.5% YoY), respectively. 2021 EPS of VND 1,499 and 2021 book value of VND26,256.
• We recommend NEUTRAL for the stock with the target price of VND 24,400/share.