The global shipping industry continues to be in dire straits and this is sparking an arms race among shippers to build scale through acquisitions and alliances. Meanwhile, heavy losses and mounting debts are forcing them to cut costs. Vietnamese port operators are therefore expected to lose pricing power with their global customers.
Financial institutions (“FI”) under our coverage have traded in a fairly lackluster fashion YTD with BVH and VCB at one end and STB at the other as marking the bookends of outperformance and underperformance, respectively. Trading performance aside, we see two fundamental questions in the FI space as holding interest for investors outside of the FI space because of their ramifications for the broader economy:
With consumption of 3.8 billion liters in 2015, Vietnam is one of the largest beer markets in Asia. According to industry researcher Canadean, in 2015, Vietnam consumed 41 liters of beer per capita, which only trails South Korea and Japan in Asia, after recording a volume CAGR of 6.4% and 5.7% in the last ten and five years, respectively.
Global oil prices have likely bottomed… After plunging to under USD30 per barrel earlier this year, Brent crude oil prices have since staged a smart recovery to hit USD40 per barrel, which is seen as a psychological barrier of sorts. High volatility notwithstanding, prices continue to climb as OPEC production freeze discussions gather pace and the US economy continues to show signs of strength.
Our second banking sector report side-steps a focus on ratios and minute details and instead takes a more aerial view to focus on four themes we think are most important in shaping the banking sector in the years ahead: Draft Circular (defined later) representing Vietnam’s take on Basel II, the remaking of Vietnam’s interbank market, monitoring movements in real estate lending, road-testing bank’s IT system and VCSC’s estimate of normalised ROE.
The Prime Minister recently approved the divestment plan for Vinalines, a state-owned enterprise operating in the maritime industry, under which it is required to reduce ownership in Hai Phong port JSC and Sai Gon port JSC to 20% of total charter capital of these companies.
Vietnam’s USD 50-60 billion logistics industry is growing fast but is still in the early stages of development. The sector has been growing at ~20% per year and is expected to sustain double-digit growth for at least the next 5-10 years. Most Vietnamese logistics players are 2PL (secondary party logistics) providers in unlike more developed markets where 3PL providers and integrated supply chain management vendors dominate.
"SBV released Circular 14/2015/TT-NHNN on 28 August supplementing and amending Circular 19/2013/TT-NHNN regarding the purchase, sale and resolution of acquired impaired loans. In addition to special bonds issued in the past, this new circular lays out new regulations regarding VAMC bonds issued to acquire debt below book value (we term these as “VAMC Second Generation Bonds”),
Since our mid-year review of the real estate sector back in June, the sector has continued to recover strongly. Much as we predicted, price growth seems to have accelerated on average across all segments and sales launches are witnessing record absorption rates.
Demand for electricity continues to rise as the country develops. Electricity consumption per capita in Viet Nam is just 1,104 kWh, one fifth of the average in Asia Pacific. MOIT’s guidance on electricity consumption growth, underpinned by certain GDP growth assumptions, is forecasted grow at 10.0% p.a. to 2020. For the first 6 months of 2015, electricity consumption grew by 11.6% vs YE14.