Weaker IIP recorded in 2M 2019. The Index of Industrial Production (IIP) increased 9.2% YoY in 2M 2019 vs 13.7% YoY growth recorded in 2M 2018. The lower growth rate was mainly attributed to a decline in IIP of the mining sector (-4.7% vs 2.8%) and slower growth of the manufacturing sector (11.5% vs 16.0%), in which electronics and PCs posted an IIP of only 5.2% vs 38.3% recorded in the same period last year.
Production recorded moderate growth in January. The Index of Industrial Production (IIP) slid by 3.2% MoM and grew 7.9% YoY vs 22.1% YoY growth recorded in January 2018 after accelerating in December to meet Tet holiday demand. Production activity could be distorted by the long Tet holiday in February. However, given rising new orders, according to the Nikkei report, we expect production to recover in the second half of this month.
Further industrialization and urbanization underpin our outlook for continuing rapid GDP growth of close to 7% in 2019 and 2020, despite our expectation of slowing global growth and potential softening in demand for exports. We believe momentum from pre-existing FDI commitments and increased focus on the ‘plus one’ in multinational corporations’ ‘China plus one’ overseas investment strategy will sustain inbound FDI. Relatively elevated debt levels, an evolving banking system
PMI reached second highest level in survey’s history at 56.5. Output growth and job creation were both at the fastest rates ever, encouraged by strong increases in new domestic and export orders. This should ensure strong production activity in December. In 11M 2018, IIP of the manufacturing sector surged 12.2% YoY, contributing 9.5 percentage points to overall IIP growth of 10.1% YoY. Consumption to accelerate ahead of the New Year’s holiday. Total retail sales of consumer goods and services hi
During our macro team’s recent global marketing trip, one of the hottest topics for discussion was FX risk for a foreign investor in Vietnamese equities. In this report, we discuss why the VND/USD exchange rate has remained remarkably stable in 2018, in contrast to substantial depreciation in other emerging market (EM) currencies, and our outlook for continuing relative stability in the VND in 2019.
Vietnam’s manufacturing PMI rebounded on rising domestic and overseas demand. Vietnam’s PMI rebounded from a 10-month low of 51.5 in September to reach 53.9 thanks to strong demand, reflected by rising new orders, especially new export orders, which increased at the fastest rate in three months. This should point to strong production activity in the coming months. The index of industrial production (IIP) increased 10.4% YoY in 10M 2018, of which manufacturing IIP grew 12.7% YoY, contributing 9.8
GDP: Despite rising global uncertainties, Vietnam’s economy expanded 6.88% YoY in Q3 and 6.98% YoY in 9M 2018, the highest levels for those periods since 2011 (Q1 2018: 7.45%, Q2 2018: 6.73%). The upbeat results were attributed to all three sectors of the economy: agriculture, industry & construction and services. These results are in line with our forecasts, and we continue to expect FY2018 GDP growth will surpass the Government’s target of 6.7% to reach 7.0%.
Manufacturing saw a strong expansion. Overall IIP rose 11.2% YoY in 8M 2018, up from 8.2% in 8M 2017. Manufacturing IIP increased 13.3%, contributing 10.2 percentage points to overall IIP growth. The opening Nghi Son refinery in June, higher production capacity at the Formosa steel plant and strong PMI should help secure a solid expansion of production in the remaining months of year.
Tighter financial market conditions required as SBV prioritizes FX stability. Transitory CPI pressure also provides domestic reason to reduce system liquidity. Further marginal pressure on equity market P/E multiple may be in the cards. Changes in conditions may have a limited immediate impact on real economy.
Manufacturing IIP accelerated. Overall IIP rose 10.9% YoY in 7M 2018 (vs 7.1% growth in 7M 2017). Manufacturing IIP increased 13.1%, contributing 9.9 percentage points (or 90.8%) of overall IIP growth, of which, the manufacturing of petroleum products recorded the strongest growth of 64.1% YoY, thanks to Nghi Son refinery, which started production in June, and Binh Son refinery, which was down for maintenance this time last year.