MONETARY MARKET UPDATE JULY 2025: SUPPORTING LIQUIDITY AND CREATING CONDITIONS FOR CREDIT EXPANSION

• Our three main observations regarding monetary policy operations over the past month are: 1. The State Bank of Vietnam (SBV) is ready to provide liquidity to the system through open market operations, 2. The SBV gradually adjusts the central exchange rate within the permitted band, and 3. It paves the way for phasing out the credit allocation mechanism by issuing Circular 14.
• The outstanding loan balance under the SBV's collateralized lending channel is currently at a record high since 2017 (~VND 187 trillion as of July 24).
• The central exchange rate has been adjusted upward by 3.4% since the beginning of the year, reaching VND 25,166/USD, corresponding to the upper limit of the exchange rate band at VND 26,424/USD, approximately VND 300 higher than the average interbank exchange rate as of July 24.
• Circular 14/2025, issued on June 30 and effective from September 15, includes the following key points: 1. Introducing an internal rating method alongside the standard method, with the internal rating method imposing more detailed requirements on capital adequacy ratios, aiming to align these ratios with Basel III standards, and 2. Outlining a phased implementation roadmap, including testing and transition periods, until full adoption by January 1, 2030, allowing commercial banks to choose their method for calculating capital adequacy ratios.

U.S. tariffs rise, but inflation fails to respond as expected

• In the first half of 2025, US inflation did not accelerate as previously feared, despite the effective average import tariff rising to 8.85% (USITC). Core CPI in June increased only 0.23% MoM and remained around 2.9% YoY, while core PPI was largely flat.
• Pricing pressures were mainly concentrated in import-heavy categories such as home appliances, electronics, and furniture, which saw notable price increases in June (home appliances +2.3%, audio equipment +2.9%). In contrast, service sectors such as accommodation and air transportation recorded sharp price declines, partially offsetting the inflationary impact of higher imported goods prices.
• Front-loading of imports ahead of new tariff implementation drove a surge in inbound shipments from late 2024 to early 2025, which helped to temporarily alleviate near-term price pressures. Consumer spending rebounded sharply in June (+0.6% MoM), primarily due to anticipatory buying and expectations for new fiscal stimulus, rather than a direct impact from higher import costs.
• Looking towards the end of 2025, inflation risks from higher tariffs remain, particularly for product groups with a high import share.

TCB – 2Q25 Business Results Update and Analyst Meeting Notes

• In 2Q25, PBT reached VND 7.9 trillion (+1% YoY, +9% QoQ). For 6M25, cumulative PBT amounted to VND 15.1 trillion (-3% YoY), achieving 48% of the full-year forecast.
• Total operating income declined by 5% YoY, driven by a 4% YoY decrease in net interest income and a 14% YoY reduction in fee income. However, operating expenses and provisions for credit risks decreased by 3% YoY and 38% YoY, respectively, resulting in flat PBT for 2Q25 compared to the prior year.
• The NPL ratio slightly increased to 1.26% (1Q25: 1.17%) due to the impact of CIC adjustments. Excluding CIC effects, the NPL ratio remained stable at 1.05% QoQ.
• TCB demonstrated robust credit growth of 10.6% in 2Q25, leveraging its comprehensive ecosystem within the real estate value chain. However, the NIM still faced pressure, declining to 3.8% (-86 bps YoY). Having said that, NIM is expected to stabilize at current levels, supported by stronger credit demand in the second half of the year.
• BVPS at the end of 2Q25 was VND 22,310. At the closing price on July 23, 2025, TCB traded at a P/B ratio of 1.59x.
• PBT projections for 2025F and 2026F are VND 31.7 trillion (+15% YoY) and VND 38.9 trillion (+23% YoY), respectively. The target price for TCB (currently VND 34,000 per share) is under review and will be updated in the forthcoming report.

Telecommunication services: Domestic saturation spurs global expansion amid challenges

• Vietnam’s telecoms service revenue reached VND 147 trillion in 2024 (+3.49% yoy), the growth rate has slowed down and with little indication of significant breakthroughs. Evidence of this can be seen in the stagnant subscriber growth since 2011, 4G penetration reaching 99.99% by 2023, and mobile subscriptions exceeding 90% of the population in 2024.
• Several recent policies and decisions have been issued to strengthen the management of telecom subscriptions, aiming to further reduce the number of fake or inactive SIM cards. These include Decision No. 06/QD-TTg approving the scheme on developing the application of population data, and Decree No. 163/2024/ND-CP detailing certain articles and measures for implementation of the Telecommunications Law in Vietnam.
• The main growth driver of carriers is no longer expected to be the growth in the number of new subscribers, on the contrary, it requires new network technologies such as 5G and later 6G to be deployed more widely to retain users – meeting the demand for data upgrades, transmission speed and network stability.
• In addition, market share volatility reflects intensifying competition among major players such as Viettel, FPT, VNPT, and MobiFone. Viettel maintains its leading position in both revenue market share and subscriber market share in the mobile telecommunications segment. VNPT holds the leading position in the fixed telecommunications segment, however, they witnessed a decline in revenue despite gaining subscribers.
• In that context, many countries and regions in the global market still have room to exploit when telecom infrastructure and network technology have not yet developed strongly (especially in Africa), which is expected to become a “new breeze” for network operators. We believe this is a necessary direction for major telecoms to sustain long-term growth, though it requires time, strong capabilities, and substantial resources to manage risks and challenges.

HDG – Recovery expected in project development

• During the 2023-2024 period, HDG faced legal challenges that prevented project implementation from aligning with expectations. However, in the first half of 2025, we observe the progressive resolution of key bottlenecks, positioning the company to ramp up investments in new projects from the second half of the year onward. 
• We project that HDG's 2025 business performance to exhibit relative positivity against the subdued 2024 baseline, with forecasted revenue and gross profit reaching VND 3,097 billion (+14% YoY) and VND 2,188 billion (+71% YoY), respectively. Net profit attributable to the parent company is estimated at VND 1,025 billion (+80% YoY), though issues regarding the resolution of matters tied to the Infra 01 project. 
  

Result changes in the HOSE – Index for Q3/2025

• DGC will be officially added to the VN30 index, while BVH will be removed. Based on our estimates, ETFs tracking the VN30 index are expected to accumulate over 1.2 million DGC shares and divest more than 200,000 BVH shares during this rebalancing period.
  
• The new VN30 index basket will take effect on August 4, 2025. Accordingly, related ETFs are expected to complete portfolio rebalancing by August 1, 2025, the final trading session prior to the effective date.
  

The need to expand and upgrade the national power grid.

• According to the revised Power Plan VIII (RPP8), by 2030, 44% of the entire system’s installed capacity will come from renewable energy, concentrated in the Central region. Meanwhile, electricity consumption demand is in the North and South, creating a phase difference between supply and demand.
• To ensure capacity evacuation and system balancing, RPP8 aims to double the current 220kV and 500kV transmission infrastructure.
• Businesses with experience in consulting and constructing power grids such as PC1 and TV2 will directly benefit from this investment trend.

TRADE UPDATE JUN 2025: Reaching the Finish Line Early in Trade Negotiations with the US

The front-loading effect in export orders ahead of tariff deadlines appears to be cooling down. In the first 6 months of 2025 (6M2025), exports increased by 15.3% year-over-year (YoY), while imports rose by 18.6%. The front-loading effect was strong among FDI enterprises.

During 6M2025, electronics recorded the highest export growth (+20.5%), and imports of electronic raw materials also saw the largest increase (+34.3%).

Exports to the US peaked in May and plateaued in June. Vietnam posted a trade surplus of approximately USD62 billion with the US in 6M2025, up 29.2% YoY.

Besides traditional export markets, Vietnam's exports to other markets were robust (+13.5% YoY).

The demand for front-loading exports ahead of the tariff deadline remained strong in electronics, toys, chemicals, plastics, and rubber. Meanwhile, this demand has declined in seafood, footwear, and wood products.

The results of the Vietnam-US trade negotiations were announced on July 2, with a reciprocal tariff rate of 20% and a 40% tariff on transshipped goods, although the details of the agreement remain unclear.

There may be no significant differences in the final reciprocal tariffs imposed by the Trump administration on Asian countries, except for China.

Fishery industry – Pangasius exports in the 5M2025 is positive and expected to grow in 2H2025

• The export value of the pangasius industry in 5M2025 grew by 6% YoY, reaching USD 805 million as a 5% YoY increase in selling prices and a slight increase in consumption volume of 1% YoY. The main growth driver came from the Brazilian market with an impressive increase of 71% YoY, while the US and EU markets recorded growth of 7% and 3% respectively. In contrast, the Chinese market fell 10% YoY. In terms of selling prices, the main markets all recorded growth, with the US (+5%), China (+3%), Brazil (+7%) and the EU (+1%).
• The export value of pangasius in 2H2025 is expected to growth 15% YoY as volume growth of 10%, with selling prices maintaining an upward trend of about 5% YoY due to the short-term pressure from tariffs. Factors supporting output growth include:
  1. Regaining tilapia market share as (1) the US will reduce tilapia imports after the US reciprocal tariffs on China take effect from August 12th, 2025 and (2) Vietnam's price of pangasius after reciprocal tariffs is about 50-60% lower than Chinese tilapia.
  2. The trend of consumers in the US shifting from expensive salmon to affordable white fish products, in the context of a decline in the consumer confidence index.
  3. Strong growth from other markets such as Brazil and Mexico will support the entire industry.
• The gross margin of the pangasius industry in 2H2025 is expected to improve compared to 1H2025 as the expected growth of 5% in pangasius selling prices and the gradual decrease in pangasius raw material prices. In particular, ANV's gross margin is expected to outperform VHC’s, as ANV's increase in the proportion of exports to Brazil (high gross margin) and decrease in the proportion to China (low gross margin).

Airport terminal retail market – Taking off on an "increasingly favorable runway"

• The retail model at airport terminals is a commercial framework targeting goods and services for passengers before, during, and after check-in at airports. This distinct retail segment is typically overseen by specialized firms or public-private partnerships (e.g., SASCO in Vietnam). Site allocations require competitive bidding with airports, with revenue-sharing ground fees imposing greater cost pressures than the prior fixed-fee model.
• As customers are deemed potential only upon airport arrival, the airport terminal retail model's prospects hinge entirely on the growth of "international & domestic" air travel, which holds substantial long-term potential.
• AST and SAS emerge as the most promising stocks in the airport terminal retail sector, capitalizing on dual advantages from the expanding air travel market and robust internal resources honed over years of operation, trading at a compelling valuation (EV/EBITDA 9-11x). We will refine the thesis and investment recommendations for related stocks in upcoming reports.

VIB – Earnings outlook supported by bad debt recoveries

• We expect VIB’s bad debt recovery activities to deliver positive results in the coming period thanks to (1) Resolution 42 being codified into the Law on Credit Institutions and effective from October 15, 2025, and (2) the recovery outlook of the real estate market. In particular, income from recovered bad debts previously written off in 2025F is projected to reach nearly VND 1.6 trillion (+26% YoY). In addition, the resolution of on-balance-sheet bad debts presents an opportunity to improve NIM as well as the bank’s profit, as interest income and credit costs are reversed.
• For 2025, we forecast the bank’s PBT to reach over VND 10.5 trillion, equivalent to a 17% YoY increase. This result is lower than VIB’s previously announced target (PBT growth of 22%), mainly due to net interest income growing modestly by 4% YoY as NIM comes under significant compression pressure, narrowing by approximately 50 bps YoY.
• We assign a target price of VND 21,900 per share for VIB, implying 2025F and 2026F P/B of 1.4x and 1.2x, respectively. This equates to an ACCUMULATE recommendation, offering a 17% upside compared to the closing price on July 11, 2025 (including VND 700 in dividends over the next 12 months).

Trade – Tariff agreements give Vietnam an advantage in the US market

• Tariff risks have significantly decreased after Vietnam and the US agreed to apply a 20% tax rate on goods manufactured in Vietnam and 40% on transshipped goods.
• However, Vietnam and the US have not yet announced a common definition of transshipped goods, leaving uncertainty in how tariffs will be applied to specific sectors.
• According to international practice, Vietnam’s processing industries with high localization rates are likely to be subject only to the 20% reciprocal tax rate.
• The US applies higher tariff rates to 14 countries that have not reached agreements, which allows Vietnam to continue benefiting from the “China +1” shift and to expand its role in the global supply chain.