Favorable macro conditions continue to drive residential market forward. Vietnam’s rising income growth, with 2010-2016 CAGR of 8.8%, has outpaced most regional peers, even low base countries (i.e., Cambodia and India). As one of Asia’s top spenders on infrastructure, Vietnam’s road network has significantly improved, reducing traffic times and fuelling more housing demand.
We carry out a lending conditions survey to assess market rates and pricing in the banking sector products. The current trends reflect on the six-month period of April – October 2017. SBV cut rates but market rates move on competitive pressures
In the short-term rate market, we saw a flurry of rates movements with some banks reducing rates in the unsecured market (MBB, TPB) from uncompetitively high levels while most others increased rates ranging by c 50 – 150 basis points.
Vietnam’s electricity consumption is expected to continue growing at 10.0% p.a. over the next five years as FDI into the manufacturing sector (which accounts for 50% of total electricity consumption) has doubled over the past four years to reach USD63.1 billion compared to the previous four-year period.
Vietnam’s ice cream market is underpenetrated. Per Euromonitor, between 2013 and 2016, consumption grew 15% per annum in value, including a 6% volume expansion per annum, to reach a market size of roughly VND2.6 trillion (USD115 million). Yet, per capita consumption remains relatively low at 0.4kg/year vs the Philippines (0.6kg/year), Indonesia (0.7kg/year), Thailand (1.0kg/year) and Malaysia (1.9kg/year).
Vietnam’s e-commerce market is poised to skyrocket in the next three to five years, thanks to (1) the emergence of Generation Z (16% of population), who grew up with smart devices and live online, complementing Millennials (30% of population), who are the main online shoppers in Vietnam at the moment, (2) busier consumer lifestyles, and (3) wide adoption of smartphones (65%-70% penetration), which in turn drives mobile e-commerce. Per Vinagame, gross merchandise value (GMV) is forecast to rise 5
State Bank of Vietnam (SBV) has reduced both policy rates (discount rate and refinancing rate) by 25bpsto 4.25% and 6.25%, respectively. The key questions are; 1. Why a rate cut? Does it boost consumer/corporate credit demand? Subdued inflation and market rates below policy corridor give the SBV room to cut rates. Considering prime corporate credit growth is at 6% and consumer credit growth at 21%, a 25bps rate cut would not impact credit uptake materially (Figure 1).
Short-term challenges and structural issues drive us to cut our 2017-2018 base case by 5.5% and 8.3%, respectively. A supply glut is expected to continue, driven by continually rising US production. However, a geopolitical risk premium is always there. Uncertainties regarding when OPEC members will end their output cuts or whether they will slash production more severely still materially impact supply side.
Vietnam is seeing a sustained boom in domestic tourism driven by rising discretionary income. With steady growth in GDP per capita, Vietnam has breached the threshold level of around USD2,000 (see Figure 6) beyond which countries typically see a boom in discretionary spending across branded food products, white goods and consumer durables as well recreational experiences and vacations. We believe this is just the tip of the iceberg and that growing wealth
Vietnam’s FMCG posted strongest growth in years in Q1 2017. Per Nielsen, FMCG consumption across Vietnam rose 9.6% YoY, including 8.5% volume growth, in Q1 2017 vs 5.3% in Q1 2016 and 6.9% in Q4 2016. This was driven by robust consumption during this year’s Tet holiday and a rebound in rural areas. This is particularly encouraging since Tet came early this year in January and demand typically peaks one to two months before Tet.Broad-based momentum. Strong performance was seen across categories,
NIMs – There is sector-wide pressure on NIMs with some banks chasing retail deposits and consequently faced with rising cost of funds. The average NIM decreased by 10 bps to 2.8% QoQ in Q1 2017. MBB’s and VCB’s current high CASA ratios of 33% and 27% help these banks enjoy low funding cost at 3.7% and 3.3%, respectively, offering opportunities to improve NIMs. MBB has the highest NIM among listed banks at 4% in Q1 2017 (+10 bps QoQ and +70 bps YoY).