Published Date: 01/07/2024
- The 2Q24 performance of Vietnam ‘s economy exceeded most market forecasts (about 6.1%-6.5%), accelerating from an upwardly revised 5.87% yoy rise in 1Q24. Vietnam’s exports and FDI inflow in 1H24 are outliers which reaffirmed our view that global demand recovery likely to bolster domestic consumption in near term. The surprising 2Q24 performance prompted us to upgrade our 2024 GDP forecasts to 6.5% from previous 6.3%. We expect the economy growth upturn will getting stronger with 6.6%-6.5% yoy in 3Q-4Q, respectively, fueled by bouncing-back export growth and manufacturing expansion and more effective public investment disbursement.
- However, risks are tilted toward the upside. Having depreciated by 4.7% year-to-date vs the USD, the VND is among regional second worst performer. Vietnam’s negative interest rate differential with the US has been a key factor. Though the DXY is expected to lose it strength in the 2H24, following the FED ‘s rate cuts, but a prolonged weak VND will pose upside risks to inflation that is already near the central bank’s 4.5% target.
- The VN-index ended the Jun 2024 at 1,250 (+10.2% ytd), still among top performer in regional markets. The strong rally thus far has led some investors to question if the market has peaked. However, we believe it has not yet reached its limit. As at 21 Jun, VN-Index was trading at 14.5x trailing 12-month P/E , which is 6% premium to the 3-year average PE (13.8x) and 14% discount to the 3-year peak (16.7x in 4Q21). We expect the VN-index will extend further its uptrend toward 1,350 – 1,380 into 2H24, bolstered by a robust recovery in market earnings growth, low interest rate environment and stronger confidence in Fed’s rate cut. Our index forecasts are based on a 20% FY24F earnings growth and P/E target of 12-12.5x.
