FOREIGN INVESTORS: Vietnam Macro Weekly_2019.01.07 

bigmoneyvietnam - Ngày : 07/01/2019 04:29 - Lượt xem: 138
Vietnam Macro Weekly- 2019.01.07 FOR FOREIGN INVESTORS
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Fixed income market review
Last week, interbank rates cooled down after banks met their reserve requirement as of the end of last month. Interest rates closed out the week at 4.80% p.a at -20 bps WoW for the overnight tenure, and at 4.85% p.a. at -15 bps WoW for the one-week tenure.
The central bank net withdrew a large amount of VND 46.78 tn via open market operations. No bills were issued or went expired. At the same time, VND 30.64 tn was lent out via 7-day reverse repo transactions at 4.75% p.a, while VND 77.42 tn of reverse repo contracts expired.
In the primary bond market this week, the VST was the only issuer in the market. The VST originally offered a total of VND 6.5 tn of bonds, with VND 1 tn for the 5Y tenure, VND 3 tn for the 10Y tenure, VND 2 tn for the 15Y tenure, and VND 500 bn for the 20Y tenure. After that, an additional VND 1.5 tn was offered for the 10Y tenure, and an additional VND 1 tn was loaded into the 15Y tenure offerings.
Demand for the 5Y recorded the strongest among all tenure offerings, with a bid-to-coverage ratio oversubscribed at 2.95x. However, the lowest bid interest rate was 4.5% p.a, which was +30 bps higher than in the latest issuance 7 weeks ago. Finally no 5Y bonds were issued for the 7th consecutive week in a row.
Demand for 10Y and 15Y tenures continued to remain strong, with bid-to-coverage ratios oversubscribed at 1.2x and 1.07x. As a result, 62.8% of the amount offered, or VND 3.65 tn of the 10Y tenure, was issued at the interest rates of 5.10% p.a, unchanged WoW. VND 2 tn of 15Y bonds were issued at 5.30% p.a, unchanged WoW.
This week, the VST will continue to be the sole issuer, offering a total of VND 6 tn of bonds with VND 500 billion for the 7Y tenure, VND 3 tn for the 10Y tenure, VND 2 tn for the 15Y tenure, and VND 500 bn for the 30Y tenure.
In the secondary government bond market, there were only 3 trading days in the first week of the calendar year compared to 5 days as usual. Daily average liquidity continued to weaken by -16.7% WoW, with total transaction value dropping to VND 19.56 tn. In which, transaction value of repo transactions rose to VND 13 tn, +13.3% WoW on a daily average; and the value of outright transactions dipped to VND 6.56 tn, a fall of -45.4% WoW on a daily average. Trading bond yields dipped at shorter tenures (contrary to last week), while mostly staying unchanged at longer tenures, closing the week as follows: 1Y (3.90%, -8 bps WoW), 2Y (4.03%, -9 bps WoW), 3Y (4.13%, -9 bps WoW), 5Y (4.37%, -10 bps WoW), 7Y (4.68%, unchanged WoW), 10Y (5.08%, +1 bps WoW) and 15Y (5.31%, unchanged WoW).
Last week issuance results
Auction Date
Issuer
Tenure (Year)
Offered volume (VND bn)
Registered volume (VND bn)
Registered yield (%pa)
Winning volume (VND bn)
Winning yield (%pa)
2-Jan-19
VST
5
1,000
2,951
4.50-5.20
n/a
2-Jan-19
VST
10
4,500
5,400
5.09-5.50
3,650
5.10
2-Jan-19
VST
15
3,000
3,200
5.30-6.00
2,000
5.30
2-Jan-19
VST
20
500
200
6.10-6.20
n/a
Last winning yield
Tenure
Winning yield
(year)
VDB
STV
VBSP
0.25
 
3.90%
 
0.5
 
4.60%
 
1
N/A
4.59%
N/A
2
8.00%
5.08%
6.00%
3
5.05%
5.25%
4.94%
5
5.30%
4.20%
5.05%
7
5.53%
3.90%
 
10
5.80%
5.10%
5.60%
15
6.10%
5.30%
6.00%
20
 
5.22%
 
30
 
5.42%
 
This week issuance plan
Auction Date
Issuance Date
Maturity Date
Issuance Method
Issuer
Tenure (Year)
Volume (VND bn)
9-Jan-19
10-Jan-19
10-Jan-26
Auction
VST
7
500
9-Jan-19
10-Jan-19
10-Jan-29
Auction
VST
10
3,000
9-Jan-19
10-Jan-19
10-Jan-34
Auction
VST
15
2,000
9-Jan-19
10-Jan-19
10-Jan-49
Auction
VST
30
500
Source: HNX, and SSI Research (2018)
Inflation
With a lower gasoline price and a flat pork price, inflation pressure is not high at all for January. All eyes are on the next upward adjustment for healthcare services coming on Jan 15th, as well as the electricity price hike.
Exchange rate
Given a shortened trading week, the USD/VND exchange rate showed no big movement, and stayed at 23155/23245. It should be noted that the central bank raised the bid rate for USD. This signaled that they are ready to buy USD, which is normal as the first quarter should be always the month for large inflows.
Other
The government issued a flurry of documents at the cusp of the new year, aimed not only on how to implement the 2019 plan, but also aimed towards addressing the deadlock in property/infrastructure related projects (i.e. Build-Transfer projects). Here are the key takeaways:
First, on the 2019 action plan (besides targets like CPI <4%, export +8-10%, retail sales +12%, public debt/GDP at 61.3%, budget deficit at 3.6% GDP, urbanization rate of 39.2%, etc.) here is the government base case scenario for GDP growth.
No
Q1 2019
Q2 2019
Q3 2019
Q4 2019
1H 2019
9M 2019
2019
GDP growth
6.93%
6.7%
7.03%
6.63%
6.8%
6.89%
6.8%
1
Agriculture
2.97%
2.56%
3.12%
3.36%
2.69%
2.84%
3%
2
Industrial and construction
8.87%
8.89%
9.01%
7.84%
8.88%
8.93%
8.57%
2.1
Industrial
9.31%
8.91%
8.85%
7.2%
9.09%
9%
8.43%
2.1.1
Mining
-1.8%
-4.8%
-5.2%
-5.04%
-3.46%
-4.05%
-4.4%
2.1.2
Manufacturing
12.7%
13.05%
12.2%
10.86%
12.89%
12.63%
12.09%
2.2
Construction
6.18%
8.78%
9.7%
10.21%
7.73%
8.56%
9.2%
3
Service
6.57%
6.88%
6.85%
6.92%
6.74%
6.78%
6.83%
Source: Government resolution 01.2019 
To start things off, during the extended government meeting, it’s reported that the President stated a level for GDP for 2019 that eclipses 2018 growth (> 7.08%). However, if we interpret that as an official target, it might raise concerns on macroeconomic stability. The PM later iterated that the President’s statement might be merely a suggestion on achieving the best that the government can do in regards to GDP growth, and not a specific target per se.
We note that the government forecast is showing that the growth path ahead is not likely to be as smooth as it used to be, with forecasts to achieve a high level during Q1 and Q3, while expected to be a bit lower in Q2 and Q4. The fourth quarter target is quite low, but it reflects earlier patterns seen in 2018. During this time, actual growth outperformed the government target for the last quarter of the year by a wide margin (7.31% vs 6.25-6.46%). So it’s more of an indicator to watch, rather than a fixed target.
The second high note of the meeting was sounded on the construction sector, where the government believes that it could experience a strong resurgence from the low season of the first quarter right to the end of the year. Implications might be that better infrastructure investment is in the cards (not just public investment, but also PPP projects or FDI disbursement) that make this scenario possible.
On monetary policy, besides boosting forex reserves or keeping the VND stable, the government announced an explicit target for reported bad debt to trend lower than 2%, and actual NPL (reported bad debt plus VAMC bonds and restructured debt) to lower than 5% in 2019. In fact, it’s not an overly ambitious target, as the central bank plans to lower actual bad debt to 3% by 2020. We also noted that the government requested the central bank to consider allowing topping up e-wallets without the prerequisite of a bank account. This might be a measure to boost fintech development for cashless payment solutions, and a government decree might be issued during 2019 to further provide governance.
On legal framework, amongst other things, the Ministry of Finance might submit a proposal on Securities Law revision to the government by Feb and May 2019, just in time for the first consideration from the National Assembly.
On Build-Transfer projects, which have been delayed in 2018 after the Laws of Public Asset Management came into effect (which we discussed in the Daily Call dated Oct 9th 2018), the government approved a resolution that allowed payment to BT investors if the contracts have been signed before Jan 1st 2018.
For BT projects signed in 2018 or later, it might need to be under further review in order for the projects to be compliant with the Laws of Public Asset Management and other existing laws. In actuality, it’s a kind of temporary resolution to break the current deadlock for existing projects, while waiting for the new government decree on paying BT investors by public asset.
For detailed Vietnam macro data, please click here
The week ahead
As the macro development is quite positive at this point in time, focus might center upon how the government accelerates the deadlock in infrastructure/property projects, and the plan for the electricity price. Also, the central bank guideline for 2019 is expected to also attract attention.
Please open the link for our full reportVietnam Macro Weekly_20190107
Our
(Source: SSI Securities Services)
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