Vietnam Daily Market Recap June 25, 2024 – VCB, VRE Updates & GMD AGM Notes

Market Commentary: Cautious sentiment prevails

After yesterday’s plunge, the VN-Index continued to struggle in cautious trading today. The market ended the session up slightly by 0.2%, or 2.4 points, to 1,256.56 points. The HNX also jumped, rising 0.2%, or 0.5 points, to 240.19 points. Overall, market liquidity today halved compared to yesterday’s trading session, down to VND15.6tn (USD58.3mn).

Real estate (+1.0%), Travel & Leisure (+2.1%) and Basic Resources (+0.3%) were sectors that closed in the green, led by VRE (+6.7%), HVN (+4.0%) and HSG (+4.2%).

VRE hit its ceiling price amid news it plans to open three malls in Bac Giang, Dien Bien Phu, Ha Giang on June 28, and to re-open a renovated Vincom Plaza 3/2 mall in HCMC with over 90% occupancy and a completely refreshed tenant mix by the end of June 2024. In addition, VRE has launched a soft opening at Vincom Mega Mall (VMM) Grand Park (Thu Duc city, HCMC) and occupancy reached 92% by June 2024.

HVN increased by 4% after dropping to its floor price yesterday. It closed at VND34,000, an increase of 152% in the past three months, as Pacific Airlines, which is a subsidiary of HVN, announced the resumption of its operations after restructuring. Specifically, from June 26, 2024, Pacific Airlines will resume domestic flights with a fleet of Airbus A321 aircraft.

In contrast, Banks (-0.2%) and Technology (-1.9%) closed in the red today, led by BID (-1.8%) and FPT (-1.6%) as foreign investors continued to net sell with a total value of VND289bn (USD34.4mn).
While Industrials & Goods Services (-2.0%) closed down, including ACV (-1.6%) and MVN (-14.9%), the sector had some bright spots, such as HAH (+6.9%) and GMD (+1.2%).

We believe HAH hit the ceiling today due to positive momentum of freight rates as: 1) the World Container Index increased 7% to USD5,117 per 40ft container this week; and 2) charter rates for 1,700 containers increased to USD20,000/day. In addition, foreign investors returned to net buying with a total transaction value of VND44.2bn (USD92.7mn).

Macro note: A look inside FX pressures

As of this morning, the central bank’s exchange rate fell VND9 as the VND strengthened to VND24,253/USD. Commercial banks followed suit, with Vietcombank’s selling rate dropping to VND25,465/USD. This decline coincides with a weakening US dollar DXY index, which fell 0.31% to 105.49. Previously, the DXY had reached an almost eight-week high last week.

While the central bank rate slid today, it’s worth noting that the VND has depreciated almost 5% YTD, due to: 1) a strong US dollar as the DXY hovers near 105, putting upward pressure on the USD/VND rate. This is likely due to expectations that the Fed will keep interest rates higher for longer; 2) rising imports: early 2024 saw a significant increase in imports, requiring more foreign currency and putting pressure on the exchange rate. Even as Vietnam has a trade surplus of USD8.4bn in 6M24, this might not fully offset the 25.7% YoY import surge in May; 3) year-end repatriation: some foreign-invested companies tend to repatriate their profits toward the end of the fiscal year, further increasing demand for foreign currency and impacting the exchange rate.

On the positive side, the pick up in the USD/VND rate is expected to be leveling off in the near future, especially after the SBV’s efforts to sell roughly USD5.0bn and raising reverse repo rates to 4.5%/year. While there’s speculation about the SBV monetary policy pivoting via raising policy interest rates, we believe that scenario is currently unlikely, since such an aggressive approach would help alleviate exchange rate pressure but at the expense of lowering economic growth.

However, if exchange rate pressure persists, a moderate increase in first market interest rates could be a reasonable solution, especially if the Fed doesn’t cut rates as anticipated. Overall, we believe raising policy rates is a last resort as the SBV may prioritize protecting economic growth.

Read our full report: HERE