VNI recorded its sharpest decline in 16 months. The VN-Index (VNI) achieved a record high of 1,420.3 at the beginning of July. However, it subsequently retreated due to profit taking and escalating COVID-19 cases in HCMC and southern provinces that later led to the implementation of strict social distancing measures/restrictions in 19 southern provinces, Hanoi and several other areas. Although the VNI rebounded slightly at the end of the month, it still plunged 7.0% in July — the sharpest monthly decline in 16 months. Since the beginning of the year, the VNI has increased 18.7%, outperforming major neighboring markets, including Thailand’s SET (+5.0%), Indonesia’s JCI (+1.5%) and the Philippines’ PCOMP (-12.2%). 

Banks and real estate led the decline. The banking sector tumbled 10% MoM largely due to VCB (-15.8%), CTG (-15.7%) and BID (-13.0%). Meanwhile, the real estate sector (-9.4% MoM) was dragged down by VIC (-9.9%), VHM (-8.2%) and NVL (-14.0%). In contrast, information technology (+7.4% MoM) and consumer discretionary (+2.5% MoM) were the only two sectors that increased. 

Market turnover cooled from a record high level. Average daily trading value (ADTV) on HSX plummeted from nearly USD1.2bn in the first week of July to USD750mn in the last week of the month. For the full month of July, ADTV of the HSX fell 14.1% MoM to USD903mn. ADTV for the three bourses combined declined 17.7% MoM to USD1.1bn in July from a record high of USD1.3bn in June. In 7M 2021, ADTV jumped four times to USD1.0bn from only USD250mn in the same period last year. 

Monthly foreign net inflows climbed to a 13-month high. Foreign investors returned to net buy USD231.7mn on the three bourses combined in July, which helped to curb 2021 net foreign outflows to USD1.1bn. NVL (+USD59.9mn) and VHM (+USD49.9mn) remained among the top foreign net bought stocks. Meanwhile, VIC (-USD98.7mn), VPB (-USD46.9mn) and CTG (-USD37.7mn) saw the strongest foreign net outflows. Among neighboring markets, the Thai SET and the Philippines’ PCOMP also experienced net foreign outflows of USD3.0bn and USD1.7bn in 7M 2021, respectively, while Indonesia’s JCI recorded a net foreign inflow of USD1.3bn.

H1 2021 earnings results remain optimistic. The earnings season ended with aggregate reported NPAT-MI of H1 2021 for our coverage (excluding KBC and HVN) surging 67% YoY from a low base in H1 2020, representing 51% of our forecast for aggregate reported NPAT-MI for FY2021. 

Outlook: Containing COVID-19 in southern provinces and Hanoi remains a tough mission for the Government. At the beginning of August, the Government announced an extension of the implementation of restrictions under Directive 16 in 19 southern provinces in order to contain the spread, which has led to continuing disruptions for economic activity, including hospitality, transportation, retail and some areas of industrial production. Over 13 million doses of COVID-19 vaccines arrived in Vietnam from July to the beginning of August; we expect to see a much faster vaccination rate in August. Meanwhile, as of the end of July, the VNI’s ttm P/E of 16.5x remained attractive vs neighboring markets such as the Thai SET at 27.0x and the Philippines’ PCOMP at 26.5x.