Vietnam Market Outlook 2018 the Re Rating Time 20180104

4 January 2018

VIETNAM MARKET OUTLOOK 2018 The Re-rating time A MACRO OUTLOOK FOR 2018 & BEYOND This year, we want to view 2018 in the prism of a 3-year journey to 2020. The current favorable macro conditions are somewhat reminiscent of the nostalgic days when Vietnam was applying to join the WTO in 2006. However, as we know history is more apt to rhyme than it is to repeat. This time around, there is a sense of a positive outlook that dwarfed previous growth periods. Projected growth for the 3 years ahead reflects even stronger fundamentals than previous economic cycle, characterized by robust foreign inflows, low interest rates, a stable VND, strong demand growth, and an ongoing improvement in productivity. Vietnam’s macro performance improvements are due to no small effort from reform in the SOE sector. Growth projection evident across all sectors of the economy We expect 2018 GDP growth to be 6.7% YoY (considered the upper range of the government target of 6.5-6.7% YoY), retaining impressive growth from last year in relation to regional peers. Please note that growth should be high in 1H 2018 due to a low base effect; this anomaly is expected to normalize in the second half. Private investment will likely maintain its strong momentum exhibited so far, thanks to better demand recovery and a stable interest rate. Vietnam FDI continued to display an encouraging barometer of future growth, as 2017 foreign investment clocked in at a blazing $29.7 bn USD (+44.2% YoY). Furthermore, the proportion of locallymade components pumped out by foreign-invested FDI firms have been on the rise. In 2017, Vietnam has had three big FDI projects in thermal power (Nghi Son 2 – $2.79 bn USD, Van Phong 1 - $2.58 bn USD and Nam Dinh 1 – $2.07 bn USD). Other notable projects during the year include Samsung Display (additional investment of $2.5 bn USD), as well as the Block B – Omon gas pipeline project ($1.27 bn), Eco smart city Thu Thiem ($890 mn), and the Polytex Far Eastern factory (polyester yarn, $490 mn). For public investment, our chips are stacked towards the current cycle giving way towards a new beginning in 2018, as USD inflows become more abundant. See below for details. In addition beyond the torrential pace of the manufacturing sector, tourism has emerged to be the second star of growth. We are very bullish on Vietnamese tourism prospects and execution in the next 2-3 years for the following reasons: (1) a burgeoning middle class in Vietnam increasingly with penchant to spend far more on travel, and (2) Vietnam experiencing solid recurring double-digit growth figures for tourists to Vietnam from 2016 to the present. The positive aura of sustained tourist arrival growth forecasts is based on (1) the recent implementation of simplified “e-visa’ policy procedures, as well as an extension upon visa exemptions for tourists from the UK, France, Spain, Germany, and Italy until June 2018 to further boost tourism, (2) increasing tourism interest from neighboring countries such as China, South Korea, and Japan. In fact, during 2017 international tourists to Vietnam grew by 30% YoY, recording 13 mn arrivals, and tourists traveling by air recorded 8.9 mn arrivals, up 31% YoY. SOE IPO and divestment at its peak (in terms of deal size) Vietnam reforms started in 2011, with quite a bit of struggle and brought much distress to all those involved. A lot of lessons have been learned since then, and the slow but steady approach to development in 2016-2017 signals a new chapter in the development of the Vietnamese economy. The number of SOEs was slashed significantly over a 10-year period; from around 1500 in 2010 to 583 in

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2016. This will further be cut during the current period, and possibly reduced to as much as 100-120 SOEs by 2020. Although the amount of total firms up for divestment and/or IPO for the 2018-2020 period might not be as large as in previous years, the aggregate deal size for these offerings during this period is expected to be far more significant. The proceeds from 2018-2020 IPOs and divestment of SOE firms are estimated to be 2.75 times higher than the proceeds from the whole period 2011-2017 (i.e USD 26.3 bn vs USD 9.5 bn). Vietnam may very well end up being the only country in the world that embarks on a new wave of SOE reform in 2018, placing a lot of large and profitable SOEs on public offer.

Number of completed SOE equitization Total market value of equitized SOEs (VND trillion)

VND trillion Proceeds from SOE divestment Proceeds from SOE equitization Number of completed SOE equitization

2011 14 60.35

2012 26 5.75

2013 73 25.96

2014 175 45.52

2011-2015 17.74 36.52 499

2015 220 158.02

2016 56 39.12

2016 18.83 7.11 56

2017 45 213.7

2017 134.6 2.58 45

Source: MoF, HSX, HNX …led by a new powerful committee In the resolution 97/2017 issued in Oct, 2017, the government outlined a number of measures in the action plan to implement SOE reform. One of these is to finalize the proposal to create a ministerial-level committee to manage and supervise state capital in enterprises (both SOE or joint stock companies) in 2017, so that the committee would start operations in 2018. In fact, under the Laws on the organization of the government (effective from Jan 1st 2016), Ministries (or ministerial-level government bodies) no longer have the mandate to represent the state ownership in SOEs. Currently they need to transfer control of SOEs to the SCIC (State Capital Investment Corporation), but delays have been witnessed. In the initial draft of the proposal, SCIC will become the investment arm of the committee. Other arms will include back office support, the SOE management & supervision, and the research & strategic investment. We believe that this committee will be established shortly in 1Q18, as it’s reported the Chairman of the committee has been assigned to Mr Nguyen Hoang Anh, the former vice chairman of National Assembly Economic Committee. Many profitable SOEs are also in the pipeline According to the Ministry of Finance (MoF), by the end of 2016 there were 583 SOEs (with 100% state ownership), with total assets of $134 bn and owner’s equity of $61.4 bn. Total revenue in USD terms was at $66.5 bn (1% lower than 2015), and PBT was at $6.1 bn (mostly from Viettel – $1.71 bn, PVN – $1.16 bn, and SCIC – $360 million, while Vinachem and Gtel incurred losses). PVN profit before tax declined -38% YoY on decreased oil prices compounded by lower profits from Vietsovpetro (from a higher profit allocation to the Russian partner since 2016). Average ROE (i.e PBT/average owner’s equity) was just 10% (2015: 12%). Best performers have been RESCO (38%), Viettel (34%), Mobifone (30%), VEAM (24.69%) and SATRA (25%). Also, there are 273 other joint stock companies with state ownership status, containing total assets of $21.7 bn and owner’s equity of $7.4 bn in USD terms. Total revenue was $18.6 bn and PBT at $1.4 bn (+54% YoY). ROE for those companies are at 18.9% on average. We can see that SOE reform resulted in improving levels of profitability, as joint stock SOE enterprises outperformed fully state-owned enterprises in terms of ROE.

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Strong USD inflow is expected Given the plethora of IPOs and divestment opportunities, including flagship market leader firms by sector offering a high proportion of divestment, we hold the belief that this wave of IPOs will be greatly welcomed by investors. In our estimates, total IPO value during 2018-2020 could reach $9.7 bn, while the total value of divestment could reach $16.6 bn USD. Please find below table for a further overview. To be successful, a clear ownership structure with active participation of the private sector will help the SOEs to improve their profitability, which is a good reason for investors to make buy decisions. We might even see portfolio investment to come back to the heyday of the 2005-2007 period, during which time the SBV failed to sterilize fund inflows. We believe that the SBV is now more experienced in handling new capital inflows, adopting an expansionary but prudent approach to avoid any new bubble formations. Vietnam portfolio investment 2006-2020 7 6

Portfolio investment

5 4 3 2 1 0 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

-1

Source: IMF Capital inflows will tamp down interest rates, while fueling credit growth While interest rate hikes are simply not an option, as the government is keen on lowering the lending rate further from its current benchmark rates, a strong foreign inflow would be more than enough to lower short-term interest rates and keep medium and longterm interest rates stable at this low level. Such a low interest rate environment is likely to be quite conducive to further credit growth. Indeed, we see credit playing a major role in creating 2018 growth; not only being supplemented by way of a more dovish monetary policy stance, but also in allowing banks to transition their loan structuring by expanding their retail loan books, which in turn pushes domestic consumption to grow even more. We are seeing a shift towards a mix of more retail, less corporate loans. As individual credit cycle is still in early stage, we see that the overall risk profile might be more manageable and diversified in the next one or two years. Vietnam has a relatively unique opportunity to shine here, largely from its comparatively underbanked population that possesses a low penetration in retail loans, and we see that low and stable interest rates are fostering a higher degree of mortgage originations as well.

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Vietnam 5-year bond yields at lowest level in the last 5 years

Consumer lending still has room for growth

14.00%

30

12.00%

25

10.00%

20

26.6

14% 20.6

10

6.00%

12% 10%

15

8.00%

6.26

7.38

8.9

8%

10.5

6% 4%

5

4.00%

2%

0

2.00%

0% 2011

0.00%

16%

2012

2013

2014

2015

2016

3-Jan-12 10-May-12 29-Aug-12 19-Dec-12 18-Apr-13 13-Aug-13 3-Dec-13 3-Apr-14 29-Jul-14 19-Nov-14 20-Mar-15 15-Jul-15 4-Nov-15 2-Mar-16 24-Jun-16 14-Oct-16 10-Feb-17 6-Jun-17 26-Sep-17

Consumer Lending % Consumer Lending/ Loan Book % Consumer Lending/ GDP

Source: IMF IPOs and divestments expected to free up resources for fiscal expansion Given the wave of IPOs and divestments which started in 2017,the government’s fiscal balance is expected to be on ease in the next 3 years, freeing its hands for more flexibility in fiscal policy and project implementation. The proceeds from the Sabeco deal that came in during the last days of 2017 is an example of a significant burden lifted from the fiscal budget, as it is equal to 44% of the total expected proceeds from SOE divestment as detailed in the 2016-2020 plan for medium term public investment. This frees up resources for the government to act in regards to public investment, which has been comparatively lacking vs. expectations in the last 2 years. For the 2018 budget plan in USD terms, 2018 state revenue is projected to be $58 bn, while expenditures are estimated at $67 bn, resulting in a budget deficit at $9 bn or 3.7% of GDP (slightly higher than the 2017 level of 3.5% GDP) 

For development-related investments such as infrastructure, the 2018 plan is still high (at $17.6 bn USD). While the target only increased 12% against the 2017 plan, we noted that in 2017 disbursements for development-related investments may end up at just 80% of the original annual plan, so in sum the 2018 plan is 32% higher than the expected actual 2017 disbursement figure. If we assume that 20% of the 2017 plan would be carried over to 2018, and the 2018 plan is fully disbursed, YoY growth would be much higher, i.e about 65%.



For the government borrowing plan, it plans to borrow about $9 bn USD to finance its budget deficit, and about $7 bn USD to repay its debt principal.

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VND bn (1USD=22750 VND) State budget revenues and grants Taxes and Fees Capital revenues Grants Total state expenditures Investment and development expenditures Current expenditures Contingencies Budget deficit Budget deficit/GDP (%) Principal repayment

2018 plan 1,319,200 1,278,300 35,900 5,000 1,523,200 399,700 940,748 32,097 204,000 3.70% 159,744

2017 plan 1,212,180 1,144,631 63,949 3,600 1,390,480 357,150 1,004,030 29,300 178,300 3.50% 163,846

Source: National Assembly Banking system clean-up process on a realistic path, helping capital-raising activities to accelerate The banking reform roadmap for 2016-2020 stipulates 2017-2018 to be the deadline for the sector’s legal framework, kick off of Basel II across 10 commercial banks, SOE divestment from banks, and VAMC chartered capital rising to $5 trillion ($ 220 mn). For 20192020, Basel II compliance is to be implemented across 12-15 banks (standardized approach compliance), with all bank CAR ratios over Basel II prescribed levels. By then the VAMC will have a chartered capital of VND 10 trillion, and will need to complete the full resolution of its purchased bad debt. Banking system NPLs (including bad debt sold to the VAMC and restructured debt) need to be lower than 3%. (Please note that the IMF estimated that this NPL was 8.4% at the end of 2016). For 2018 specifically, we see 10 banks who have to comply with the Basel II deadline will start preparing for raising capital, including: BID, CTG, VCB, TCB, ACB, VPB, MBB, Maritime Bank, STB, and VIB. Our estimate for 14 SOCBs and JSBs to raise further capital in 2018 is set at $3.8 bn USD. Estimates on capital-raising of banks in 2018 Ticker CTG VCB BID STB MBB VPB EIB SHB ACB HDB LPB TPB VIB TCB Total

Charter capital (VND bn) 37,234 35,978 34,187 18,852 17,127 15,706 12,355 11,197 10,273 9,810 6,460 5,842 5,644 11,655 232,322

Increase in charter capital in 2018 Tier 1 (VND bn) Tier 2 (VND bn) 10,000 3,598 6,837.43 1,712 1,615 876.32 4,300

1,000

Estimated capital raise (VND bn) 10,000.00 14,391.07 13,674.86 7,703.91 3,261.00 2,103.16 34,400.00 85,534

Source: SSI Research estimate Last but not least, we believe that Resolution 42 and the revised Banking Law seen below will be the key tools to effect real change in order to clean up bank balance sheets in 2018-2020, which in turn will be useful for those banks who need to raise more capital.

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

Resolution 42, effective for five years from August 15th 2017, supports credit institutions and the VAMC in dealing with bad debt through a market mechanism, by granting to credit institutions and organizations that buy and sell bad debt the right of collateral asset seizure. This might help to clear the bottleneck, as VAMC has been able to resolve only 20% of its purchased bad debt since 2013. Resolution 42 also stipulates two more important issues: (1) permitting the VAMC and participating banks to sell bad debt at prices lower than book value and (2) allowing banks to allocate into expenses the receivable interest of unsold bad debt, within the duration period of 10 years maximum, and to allocate into expenses the difference between the book value of the bad debt and the transaction price, plus specific provisions made in relation to the debt within a maximum five year period. These accounting treatments will help banks avoid recording an accounting loss from selling bad debt lower than book value. Therefore, it will encourage banks to sell more bad debt.



The revised banking law, effective from Jan 15th, 2018, revolves around the so-called “special control regime”, in which the bank will be put under special control. There are five types of plans to restructure credit institutions classified under special control: 1) recovery plan; 2) consolidation and transfer of all shares; 3) dissolution plan; 4) transfer plan 5) bankruptcy plan. Regarding socalled zero-bill banks, in the event of a sale of said bank, the central bank will prepare the divestment proposal for the Prime Minister’s approval. The sale price will be negotiable, and not lower than the real value of chartered capital plus reserve funds (that are independently audited) and based on market mechanisms. In our opinion, the revision of the Law eliminates the common depositor belief that banks are by default guaranteed by the government against any crash. If the resolution for weak banks, especially zero-bill banks, is streamlined in a smooth fashion under the new regulation, the banking system clean-up process could accelerate.



Deeper integration into the global economy, along with an expected upgrade in the medium term

We expect that in 2018-2020, we are to see a milestone for Vietnam’s openness to the world economy, when the EU Vietnam FTA (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are likely to be signed and ratified. In addition, credit rating agencies might upgrade Vietnam sovereign ratings by one notch (from BB- to BB), granted after exhibiting vast progress in regards to Vietnam’s economic reform. At this gradual upgrade approach (one year, one notch), by 2020 Vietnam could be rated at investment grade (BBB-). Regarding market status, we do not expect for Vietnam to be in the 2018 MSCI review list for emerging market upgrade eligibility. 2019 might be a better bet, as the revised Law of Securities is set to be effective by then, and we could see more developments in the foreign ownership limit extension (even for sensitive sectors like banking). Risk We overall do not see major risks for 2018, though we do see a possible risk in terms of SOE reform failure. Expectations on SOE reform are running high, and failure in this regards (e.g. failed IPO, lower interest from foreign or local investors) might be damaging to widespread market sentiment as a whole. Aside from that, a peripheral risk exists in the form of inflation. Besides the impacts emanating from a gradual removal in education or healthcare subsidies, or the second-round impact from an electricity price hike, a spike in the oil price would compound the issue of controlling inflation. If this occurred, it would render the government’s target of 4% YoY quite challenging to attain.

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IMPLICATION FOR EQUITY MARKET 1.

Significant amount of money to be raised via Stock Market

Given the heavy calendar of new IPOs, a large amount of money will be raised via the Stock Market. Our rough estimate is $9.7 bn USD via SOE IPOs and USD 16.6 bn from SOE divestments for 2018-2020. Furthermore, banks are in need of raising capital to finance strong credit growth expectations, and 10 banks will need to kick-off Basel II compliance. Our capital raise estimate compiled from our banking industry sample set in 2018 comes to $3.8 bn. This has not yet taken into account new capital raises undertaken on behalf of other banks outside this sample set in order to prepare for Basel II. In total, the total amount of capital to be raised via the Stock Market in the next 3 years might add up to roughly $30 bn USD, which is equal to 19.6% of the HOSE market cap and 26.1% of the total market cap of HOSE, HNX, and UPCOM by the end of 2017. Exchanges HOSE HNX UPCOM Total

Market cap (bn USD, as of 29 Dec 2017) 115,064 9,779 28,580 153,423

Source: Bloomberg 2.

15 stocks could be added into the Top market cap in 2018

Listing after the IPOs has become not only a requirement, but is encouraging industry best practices to attract investor participation. The new Decree 126/2017, effective from 1 Jan 2018, requires that IPO documentation should be accompanied with depository and listing documents, plus a listing at the UPCOM 90 days after completing the IPO process. In case the IPO is executed and the listing occurs at the same time, a minimum bidding volume must be set in advance to meet the listing requirement. We anticipate that in 2018, 15 new stocks will be added into the Top market cap list with market cap of each stock being higher than USD 1bn as noted in the below table. Among this list, HDB will be the first large cap to be listed on January 5th. Investibility of the banking sector might improve with many new listings, but choices for foreign investors primarily are the most attractive with HDB and possibly TCB if they unlock a 30% allocation for foreign ownership and VPB if they unlock 7% allocation for foreign ownership. In total, the aggregate market cap might increase by a factor of 20% with these new listings.

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Top Market cap stocks with potential new listing (in red) in 2018 New Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Market cap (USD mn) 13,325 10,398 8,975 8,599 8,203 7,037 4,581 3,966 3,945 3,837 3,825 3,783 3,536 3,128 2,916 2,702 2,619 2,334

Free float (%) 35.00% 4.60% 25.12% 10.00% 5.00% 5.00% N.a 10.00% 49.10% 4.72% 5.10% 30.00% 20.00% 47.44% 51.53% N.a 30.00% 5.06%

Floating market cap (USD mn) 4,664 478 2,254 860 410 352 N.a 396.61 1,937.20 181.12 195.10 1,135 707.26 1,483.97 1,502.81 N.a 416.4 118

1Y Target price 222,000 115,000 94,400 58,000 115,000 N.a N.a N.a N.a N.a 89,200 N.a 80,000 60,000 168,100 N.a N.a 39,400

Materials

2,289

11.88%

271.93

N.a

Utilities Financials Energy Consumer Financials Consumer Utilities Industrials Real Estate Financials Consumer Utilities Information Technology Financials Utilities Real Estate Industrials Consumer Materials

2,220 2,030 2,002 1,982 1,956 1,826 1,804 1,799 1,785 1,601 1,588 1,500

13.00% 55.00% 8.00% N.a 10.00% 55.00% N.a N.a 26.40% 75.00% 2.00% 20.00%

288.6 1,116 160.16 N.a 196 1,005 N.a N.a 471 1,201 31.76 300

N.a 29,500 N.a N.a N.a 162,500 N.a N.a 67,000 42,200 N.a N.a

1,334

16.12%

215.08

70,000

1,296 1,263 1,123 1,112 1,013 1,000

85.00% N.a N.a 13.00% N.a N.a

1,102 N.a N.a 144.56 N.a N.a

N.a N.a N.a N.a N.a N.a

Company

Sector Consumer Industrials Real Estate Financials Energy Consumer Telecom Financials Real Estate Financials Energy Industrials Consumer Materials Industrials Financials Financials Industrials

20 21 22 23 24 25 26 27 28 29 30 31

VNM ACV (UPCOM) VIC VCB GAS SAB Mobifone CTG VRE BID PLX ROS MSN HPG VJC VPB TCB (OTC) HVN (UPCOM) Vietnam Rubber Group Genco 3 MBB Binh Son Refinery SATRA BVH MWG GENCO 2 Becamex (OTC) NVL ACB MCH (UPCOM) PV Power

32

FPT

33 34 35 36 37 38

HDB (HOSE) GENCO 1 RESCO VEAM (OTC) Saigon Tourist Vicem

19

Source: SSI Research estimates 3.

We believe private companies that display a strong execution capability will become dominant

Along with the IPOs and divestment, the market will accordingly classify the attractiveness of the companies. Those without competitive edges, or those that operate at weak efficiency will lose market share to their privately-own competitors.

Those with a

new, clear ownership structure will result in improved efficiency. We believe that the whole process will help improve the productivity of the overall economy.

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This has us more inclined to back the batch of top-notch private companies in the public market such as HPG, VIC, VJC, or FPT. Monopoly SOEs that might improve their efficiency are worth watching, including GAS and ACV. 4.

Market valuation is still low thanks to high growth, with an anticipated re-rating of the big cap towards regional level is anticipated

Our estimate for 2018 net earnings growth of 64 companies under our coverage list is 17.8%, driven by Consumer Discretionary, Financial, and the Energy sector. The 2018 PER level is at 16.25x on 22 December 2017. We don’t see the market valuation to be a particularly demanding factor given the background of high growth prospects. We also expect that valuation of large cap stocks with a sizable market share will be re-rated to that of regional level. This is the reason why we believe that large-cap, growth stocks will take the lead in 2018. Among top growth sectors, we see the banking industry as outstanding in 2018, and is expected to be the sector to garner the most attention for the coming year ahead.

Among the large market cap stocks, we like HPG, VIC, FPT, GAS, PLX, VJC,

MWG, ACB and MBB. Among the newly listed stocks with clear timeline we like HDB and keep watching the IPOs/listing of PV Power, Resco, TCB, Mobifone, Satra and Saigon Tourist among others. Net profit growth

2016A 27.80%

2017E 10.60%

2018E 17.80%

Source: SSI Research estimates

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NOTABLE IPO PLAN 2018-2019 Company Name Mobifone Agribank VNPT Vietnam Rubber Group GENCO 3 Binh Son Refinery SATRA GENCO 2 Becamex Vinacomin PV Power GENCO 1 RESCO Saigon Tourist VICEM Vinataba PV Oil Ben Thanh Group Sawaco HUD Khatoco Vinafood 2 Song Da Corporation

Sector Telecom Bank Telecom Commodities Utilities Oil and gas Retail Utilities Real Estate Mining Utilities Utilities Real Estate Hospitality Construction Material Consumer Oil retail Real Estate Utilities Real Estate Conglomerate Agriculture Construction

Market cap 4,581 3,436 3,084 2,291 2,255 2,021 1,982 1,804 1,799 1,648 1,486 1,263 1,123 1,013 1,000 881 610 458 344 330 264 222 218

IPO ratio 30.00% 30.00% 30.00% 25.00% 13.00% 7.79% 30.00% 13.00% 24.00% 30.00% 20.00% 13.00% 30.00% 30.00% 40.00% 49.00% 20.00% 49.00% 49.00% 49.00% 30.00% 49.00% 49.00%

IPO size 1,374 1,031 925 573 293 157 595 235 432 494 297 164 337 304 400 432 122 224 168 162 79 109 107

Timeline 2018 2019 2019 2018 2018 2018 2018 2018 2018 2019 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018


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DIVESTMENT PLAN 2018-2020 USD mil (price as of Dec 31st, 2017) VNM ACV SAB VEAM GAS BHN PLX HVN DHG VGC VCG TVN MBB DVN VGT NTP BMP FPT TRA BMI VNR DMC BVH VOC

Market cap 13,325 10,398 7,037 1,282 8,203 1,302 3,825 2,334 662 496 424 239 2,030 216 227 275 308 1,334 213 143 132 177 1,956 107

Divestment ratio 36% 30.40% 36% 88.50% 30% 82% 24.90% 35.20% 43% 56.70% 58% 93.90% 10% 65% 53.50% 37% 30% 6% 36% 51% 48% 35% 3% 36%

Divestment size 4,797 3,161 2,533 1,135 2,461 1,068 953 822 285 281 245 224 203 140 121 102 93 80 77 73 63 62 59 38

Timeline 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018-2019 2018 2018 2018 2018 2018-2019 2018-2019 2018 2018-2019 2018-2019


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SUMMARY OF VIETNAM MACRO FORECAST GDP growth (%- 2010p) Agriculture (%) Industry & Construction (%) Construction (%) Manufacturing (%) Service (%) Retail Sale (%) Industrial Production Index (%) CPI (average, % YoY) CPI (year-end, % YoY) Exports (USD bn) Imports (USD bn) Trade Balance (USD bn) % of Export Exchange rate (USD/VND) Current Account Balance (USD bn) Foreign reserve (USD bn) Foreign reserve/imports (weeks) Credit growth (%) Deposit rate (VND -%)

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2014 5.98 3.49 7.14 7.07 8.45 5.96 10.60 7.60 4.09 1.86 150.00 148.00 2.00 1.33% 21,250 9.36 34.30 12.05 14.00 6.00

2015 6.68 2.41 9.64 10.82 10.60 6.33 9.50 9.80 0.72 1.34 162.40 165.60 -3.20 -1.97% 22,520 1.00 28.40 8.92 17.29 6.00

2016 6.21 1.36 7.57 10.00 11.90 6.98 10.20 7.50 2.66 4.74 175.94 173.26 2.68 1.52% 22,790 9.60 36.70 11.01 18.80 6.00

2017 6.81 2.90 8.00 8.70 14.40 7.44 10.86 9.40 3.53 2.60 213.77 211.1 2.70 1.26% 22,750 4.00 50.00 12.29 18.00 6.00

2018F 6.70 3.00 7.90 8.90 12.10 7.50 11.70 9.10 4.30 4.95 253.35 248.47 4.88 1.93% 22,980 9.00 56.00 11.72 18.00 6.00

2019F 6.80 3.70 8.50 9.50 14.10 8.05 12.60 9.70 4.70 4.17 302.67 295.56 7.11 2.35% 23,200 9.00 65.00 11.44 17.00 6.00


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1. ANALYST CERTIFICATION The research analyst(s) on this report certifies that (1) the views expressed in this research report accurately reflect his/her/our own personal views about the securities and/or the issuers and (2) no part of the research analyst(s)’ compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report.

2. RATING Within a 12-month horizon, SSI Research rates stocks as either BUY, HOLD or SELL determined by the stock’s expected return relative to the market required rate of return, which is 18% (*). A BUY rating is given when the security is expected to deliver absolute returns of 18% or greater. A SELL rating is given when the security is expected to deliver returns below or equal to -9%, while a HOLD rating implies returns between -9% and 18%. In addition, SSI Research also provides a Short-term rating where the stock price is expected to rise/reduce within three months because of a stock catalyst or event. The short-term rating may be different from 12-month rating. Industry Rating: We provide the analyst’s industry rating as follows:  Overweight: The analyst expects the performance of the industry over the next 6-12 months to be attractive vs. the relevant broad market  Neutral: The analyst expects the performance of the industry over the next 6-12 months to be in line with the relevant broad market  Underweight: The analyst expects the performance of the industry over the next 6-12 months with caution vs. the relevant broad market. *The market required rate of return is calculated based on 5-year Vietnam government bond yield and market risk premium derived from using Relative Equity Market Standard Deviations method. Our rating bands are subject to changes at the time of any significant changes in the above two constituents.

3. DISCLAIMER The information, statements, forecasts and projections contained herein, including any expression of opinion, are based upon sources believed to be reliable but their accuracy completeness or correctness are not guaranteed. Expressions of opinion herein were arrived at after due and careful consideration and they were based upon the best information then known to us, and in our opinion are fair and reasonable in the circumstances prevailing at the time, and no unpublished price sensitive information would be included in the report. Expressions of opinion contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. This report also does not recommend to U.S. recipients the use of SSI to effect trades in any security and is not supplied with any understanding that U.S. recipients will direct commission business to SSI. SSI and other companies in SSI and/or their officers, directors and employees may have positions and may affect transactions in securities of companies mentioned herein and may also perform or seek to perform investment banking services for these companies. This document is for private circulation only and is not for publication in the press or elsewhere. SSI accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or its content. The use of any information, statements forecasts and projections contained herein shall be at the sole discretion and risk of the user.

WWW.SSI.COM.VN

SAIGON SECURITIES INC. Member of the Ho Chi Minh Stock Exchange, Regulated by the State Securities Commission

HO CHI MINH CITY 72 Nguyen Hue Street, District 1 Ho Chi Minh City Tel: (84-28) 3824 2897 Fax: (84-28) 3824 2997 Email: [email protected]

HANOI 1C Ngo Quyen Street, Ha Noi City Tel: (84-24) 3936 6321 Fax: (84-24) 3936 6311 Email: [email protected]

Page 13

4. CONTACT INFORMATION Institutional Research & Investment Advisory Phuong Hoang

Deputy Managing Director Strategy

409

[email protected]

Hung Pham

Associate Director

Macro

637

[email protected]

Giang Nguyen, ACCA Associate Director

Equity Research

430

[email protected],vn

Trang Pham

Research Manager

Consumer Goods & Services, Oil & Gas

537

[email protected]

Linh Nguyen

Research Manager

Fixed income & Banking

679

[email protected]

Anh Dinh

Senior Analyst

Real Estate

670

[email protected]

Thu Le

Senior Analyst

Consumer Goods & Services, Pharmaceutical

2154* [email protected]

Kim Nguyen

Analyst

Fisheries, Natural Rubber, Airlines


Giang Hoang Nguyen Analyst

Transportation & Logistics

676

Nga Nguyen

Analyst

Fertilizer


Chau Dao

Analyst

Steel, Cement

624

[email protected]

Huy Nguyen

Analyst

Banking

680

[email protected]

Ny Nguyen

Analyst

Real Estate


Bao Doan

Analyst

Real Estate & Construction


Phuong Nguyen

Analyst

Consumer

688

[email protected]

Viet Luong

Team Assistant

775

[email protected]

[email protected]

Those extension with (*) please dial (84-28) 3 824 2897 Those extension without (*) please dial (84-24) 3 936 6321

WWW.SSI.COM.VN

SAIGON SECURITIES INC. Member of the Ho Chi Minh Stock Exchange, Regulated by the State Securities Commission

HO CHI MINH CITY 72 Nguyen Hue Street, District 1 Ho Chi Minh City Tel: (84-28) 3824 2897 Fax: (84-28) 3824 2997 Email: [email protected]

HANOI 1C Ngo Quyen Street, Ha Noi City Tel: (84-24) 3936 6321 Fax: (84-24) 3936 6311 Email: [email protected]

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Vietnam Market Outlook 2018 the Re Rating Time 20180104

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