Download - Vietnam 2014 - Macro updates
PUBLIC
Vietnam 2014Will the Tiger roar again?
October 2013
Sumit Dutta
Chief Executive Officer
HSBC Vietnam
• Young, educated, and hardworking
population.
• 63% of the population under 35, median
age of 27. Below China (35) and Thailand
(34).
• 94% literacy rate. Ahead of Indonesia
and Malaysia.
• Official poverty rate reduced from 58%
(1993) to single digits today
• Trend towards urbanisation with 30% of
the population now live in cities.
Expected to grow to 40% by 2020.
• Young banking industry – opened up only
since 1995.
A young country with significant upside potential
PUBLIC
Vietnam labour cost
% of population with access to banking system
How Vietnam has progressed over the years
• GDP growth consistently over 5%
• Exports has grown from USD72B in 2010 to USD114B in 2012 and reached USD 96B in 3Q13.
• Trade balance reasonable and on an improving trend
• FEX reserves grew 200% over a two year period
• VND was stable against the USD
• 3 month VNIBOR decreased from double digit of over 13% to c.5% in 2013.
Vietnam 2010 2011 2012 Q3 2013
GDP (%) 6.8 5.9 5.03 5.1
CPI (y-o-y,%) 9.1 18.6 6.8 6.3
Exports (%) 26.4 33.3 18.3 15.7
Imports (%) 21.2 24.7 7.1 15.5
Trade balance (USD bln)
-12.6 -9.5 0.3 -0.1
FEX reserves (USD bln)
12.9 11.5 20 30
Key data
Vietnam’s progression over the years
PUBLIC
Not much to cheer about in 2013
PUBLIC
• Credit growth between 35%-55% per annum from 2007-2001
• Much of which went into speculative industries
• Real estate bubble
• Volatility in gold and the stock market
• High inflation
• Excessive interest rates leading to companies going bust
The fallout is still being experienced today
The ramifications of unbridled growth
PUBLIC
• Drop in customer confidence
• Decreased domestic consumption
• Reduction in investment
• Interest rates low but corporates reluctant to borrow
• Bad debts in the banking system
• Not much progress on SOE reform
The recent environment
PUBLIC
Credit growth on a downward trend
PUBLIC
• Vietnam’s growth historically driven by credit• Credit growth in 2013 at 6.5% versus target at 12% (2012: 9%)
Source: KPMG Vietnam Banking Survey 2013
NPLs on the rise
PUBLIC
• True picture could be worse• Causes include lack of corporate governance, transparency and poor credit models
Source: KPMG Vietnam Banking Survey 2013; SBV’s Official Data
2.9%
3.2%3.0%
2.0%
3.5%
2.2%
2.6%
3.4%
4.08%
4.67%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
Dec2004
Dec2005
Dec2006
Dec2007
Dec2008
Dec2009
Dec2010
Dec2011
Dec2012
Apr 2013
NPL Rate
Vietnam real estate – an example of condominiums
PUBLIC
• Average selling prices for condos in HCMC and Hanoi on downward trend• New launches have slowed significantly since 2010
Source: CBRE
Ho Chi Minh City
Hanoi
Average selling price (USD/sqm) Condominium Launch, HCMC
Secondary Price Change New Launch Supply (Units)
Vietnam stock market 2009-2013
PUBLIC
• Still below September 2009 high• Improvement seen during the last nine months
Source: Bloomberg
Consumer confidence dropped in 2012 – major concerns are the economy, inflation, job security, and health
Source: AC Nielsen 2013
2010-2012 Vietnam Consumer Confidence Index Major concerns over the next six months
PUBLIC
What are consumers spending their money on?
Source: AC Nielsen 2013 PUBLIC
How to utilize spare cash after covering essential living expenses (as of Q4 2012)
30% 29% 28% 27%24%
15%
6% 5%
11%
0%
10%
20%
30%
40%
50%
60%
70%
60%
But Vietnam looks rosier from afar<
PUBLIC
VND stability vis a vis USD
20,200
20,400
20,600
20,800
21,000
21,200
21,400
22-Aug-11 22-Nov-11 22-Feb-12 22-May-12 22-Aug-12 22-Nov-12 22-Feb-13 22-May-13 22-Aug-13
Official Floor Ceiling Market
PUBLIC
Third best performing currency in Asia (YTD August 2013)
CountryBest Performing Currency vs USD YTD
August 2013
China 1.79%
Hong Kong -0.07%
Vietnam -1.5%
Taiwan -3.22%
Korea -4.71%
Singapore -4.81%
Thailand -5.43%
New Zealand -6.27%
Philippines -7.92%
Malaysia -8.83%
Japan -11.17%
Indonesia -12.68%
Australia -14.50%
India -15.47%
Source: Bloomberg PUBLIC
Other positive macroeconomic trendsI
PUBLIC
Inflation is expected to stay contained in the
next 3 monthsFalling interest rates (3 month VNIBOR)
Source: HSBC, Markit
Vietnam five year CDS at all-time low
PUBLICSource: Reuters
FDI – Strong and sustainable flows to Vietnam
PUBLICSource: HSBC, Markit
PUBLIC
Top 10 active FDI by business sector (Over last 4 years)
Source: Foreign Investment Agency
Manufacturing56%
Real Estate17%
Acommodation & Food Service
2%
Construction4%
Electricity, Gas, and AC Supply
8%Others13%
PUBLIC
(USD bio)
Top FDI by country (Over last 4 years)
Source: Foreign Investment Agency
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
Japan Singapore SouthKorea
HongKong
BVI Taiwan China US Malaysia Others
Competitive and attractive to overseas investors
PUBLICSource: Internet
In Vietnam’s current development stage who is thriving?
Source: AC Nielsen 2013 PUBLIC
• Beverages
• Favorable demographic shifts and rising affluence provide significant scope for growth
• Alcoholic drinks value sales CAGR, 2012 to 2017: +13.5%.
• Soft drinks value sales CAGR, 2012 to 2017: +13.7%.
• Pharmaceutical
• Local market valued at US$2.4bn in 2011
• Expected to grow to US$5.4bn by 2016, equating to a compound annual growth rate (CAGR) of 17%
• Education
• Rapid growth of private, technical, linguistic and secondary education
• Number of students has risen 95% from 2006-2011 and per capita spending has increased 33%
Who is thriving?
PUBLICSource: BMI
• Agriculture and commodity
• Coffee production growth to 2016/17: 28% to 29.1mn bags
• Poultry production growth to 2016/17: 27% to 954,000 tonnes
• Milk production growth to 2015/16: 24% to 398,000 tonnes
• Personal Care
• Consumers, especially those living in urban areas, are gaining exposure and have increasing demand for beauty and personal care products. Value growth and product availability are both expected to be strong.
• Segment growth of 60% from 2006-2010
Who is thriving?
PUBLICSource: BMI
25PUBLIC
Top export locations
2010 USDb 2011 USDb% Growth
(YoY) 2012 USDb % Growth (YoY)
1 US 14.2 US 16.7 17.5 EU 20.3 22.5
2 EU 11.3 EU 16.5 45.4 US 19.6 15.6
3 ASEAN 9.1 ASEAN 13.6 31.5 ASEAN 17.3 27.2
4 JAPAN 7.7 CHINA 10.8 47.6 JAPAN 13.1 21.4
5 CHINA 7.3 JAPAN 10.6 37.8 CHINA 12.2 10
Top import locations
2010 USDb 2011 USDb% Growth
(YoY) 2012 USDb % Growth (YoY)
1 CHINA 17.9 CHINA 24.6 37.4 CHINA 28.9 17.6
2 ASEAN 14.5 ASEAN 20.9 44.1 ASEAN 21.0 0.3
3 KOREA 8.7 KOREA 13 49.4 KOREA 15.6 18.4
4 JAPAN 8.1 JAPAN 10.2 25.9 JAPAN 11.7 12.2
5 EU 5.5 EU 7.5 36.36 EU 8.8 13.3
Top trade partners
ASEAN Economic Community (AEC)
PUBLICSource: AC Nielsen 2013, ASEAN Org.
• Accelerate regional economic integration by 2015
• Nine countries include: Brunei, Cambodia, Indonesia, Laos, Philippines, Malaysia, Myanmar, Singapore, Thailand, and Vietnam
• Objectives:
• A. Single Market and Production Base
• Competitive Economic Region
• Equitable Economic Development
• Integration into the Global Economy
“The AEC will transform ASEAN into a
region with free movement of goods,
services, investment, skilled labour, and
freer flow of capital”
-ASEAN Organization
• ASEAN seen as a regional/single market of c.600 million people
• Increased investment and funds from within ASEAN
• Enhanced focus on SMEs
• Greater tourism opportunities
• Hard and soft infrastructure development are priorities
• Businesses may pursue sales opportunities across the region
• Focus on cost efficiencies by integrating/centralizing operations
• M&A activity within SEA – e.g. Siam Cement Group, CP Group acquiring businesses in Vietnam
IMPACTS OF AEC
PUBLICSource: Business in Asia
Trans-Pacific Strategic Economic Partnership (TPP)
PUBLIC
• Proposed regional FTA under negotiation between US and 10 other countries
• So far 11 countries included: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, US, and Vietnam
• Objectives:
• A. Achieving a comprehensive and high standard regional FTA that eliminates/reduced trade barriers and increases opportunities for US trade and investment
• B. Allowing US to play a role in developing a broader platform for trade liberalization in Asia-Pac
• C. Providing US with an opportunity to establish new rules on emerging trade issues
“Vietnam, given its significant population
and quickly growing economy, may hold the
greatest potential for increasing economic
relations with the US moving forward”
-US Congressional Research Service
Source: US Congressional Research Service
IMPACTS OF TPP
PUBLIC
• Contribute to Vietnam’s GDP growth
• Strong trade with US
• Capturing greater exports in manufacturing industries where China’s comparative advantage in fading
• Overall boost to exports
• Higher income enabling reinvestment and more rapid growth
Source: Amcham Vietnam, The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment
Peter A. Petri, Michael G. Plummer, and Fan Zhai
HSBC Forecast for 2014
PUBLICSource: Business in Asia
HSBC's key Vietnam Economic Forecast 2013F 2014F
GDP (%) 5.2 5.4
GDP per capital (USD) 1,750 1,971
CPI (end year, %) 6.7 8.3
Trade balance (USD bn) +0.6 -0.7
Int’l FX reserves (USD bn) 30 35
USD/VND (end of period) 21,250 21,500
Policy rate (OMO, end year, %) 6.0 7.0
The way forward – what does this mean to me?
PUBLIC
• SOEs will continue to be a drag on growth
• Banking system’s NPLs will take time to resolve
• Real estate market will improve slowly
• Inflation is expected to remain contained
• VND expected to remain stable though small devaluations might happen
• FDI inflows should continue
• Exports expected to flourish and grow
Key issue is customer confidence – if sentiment improves, the recovery will be quicker.
Do not expect miracles in 2014
PUBLIC
• Liquidity is key – there could be opportunities for cash rich companies
• Continue to grow market share – when the tiger wakes up, you need to be ready!
• Review your business model and be flexible to cope with changing trends
• Great opportunity to restructure to become better/stronger
• Actively managing market (fex and interest rates) and counterparty risks
• Choose the right banking partners
Surviving and thriving in 2014
PUBLIC
Disclaimer
HSBC Bank Vietnam Limited (“HSBC”) has prepared this document (the “Document”) for information purposes only. This
Document does not constitute a commitment to underwrite or purchase or subscribe for all or any portion of the securities
mentioned herein. Any such commitment shall be evidenced only by a fully executed subscription agreement, purchase
agreement or similar contractual document. This Document should also not be construed as an offer for sale of or subscription for
any investment, nor is it calculated to invite/solicit any offer to purchase or subscribe for any investment.
HSBC has based this Document on information obtained from sources it believes to be reliable but which it has not independently
verified. HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability for the contents of this
Document and/or as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the contents of this Document. HSBC and its affiliates and/or its or their
respective officers, directors and employees may have positions in any securities mentioned in this Document (or in any related
investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and/or any of its affiliates
may act as market maker or have assumed an underwriting commitment in the securities of any companies discussed in this
Document (or in related investments), may sell them to or buy them from clients on a principal or discretionary basis and may also
perform or seek to perform banking or underwriting services for or relating to those companies. As HSBC is part of a large global
financial services organisation, it or one or more of its affiliates may have certain other relationships with the parties relevant to
the proposed activities as set out in this Document, and these proposed activities may give rise to a conflict of interest, which the
addressee hereby acknowledges.
No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient.
This Document, which is not for public circulation, must not be copied, transferred or the content disclosed to any third party and
is not intended for use by any person other than the addressee or the addressee's professional advisers for the purposes of
advising the addressee hereon.
HSBC Bank (Vietnam) Limited
Level 6 Saigon Metropolitan building
235 Dong Khoi Street, District 1
Ho Chi Minh city, Vietnam
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank (vietnam)
Limited.
PUBLIC
PUBLIC
Thank you!