We are bullish on the Vietnamese equity market for 2024. We expect robust growth in corporate earnings and domestic interest rates to remain low, while current valuations look undemanding. We project 19% upside to our end-2024 VN-Index target of 1,350.

Macroeconomic outlook. We forecast GDP growth to accelerate to 6.5% in 2024, driven by the following. First, we expect further gradual recovery in exports, despite near-term headwinds for global growth from the lagged impact of monetary tightening in 2022/23, as we believe inventory restocking can lead a recovery in consumer spending and retail sales in the US and EU and Vietnam will continue to gain market share in global manufacturing value-added. Second, we expect fiscal and monetary policy to remain supportive. The Government’s financial position is strong, and we expect relatively high budget disbursement for investment in infrastructure to continue in 2024. Meanwhile, threats to the State Bank of Vietnam’s (SBV’s) current accommodative stance from inflation or exchange rate concerns have receded. Third, we project FDI disbursements to remain robust following renewed growth in new project registrations in 2023. In addition, there is scope for further recovery in international tourist arrivals, which reached 70% of the 2019 level in 2023, and gradual recovery in real estate and construction activity with lower mortgage rates and ongoing regulatory reforms to ease legal bottlenecks for developers. 

Robust growth in corporate earnings projected for 2024/25. We forecast growth in aggregate NPAT-MI for HSX-listed stocks under our coverage of -1%/+18%/+21% in 2023/24/25, respectively. For non-financials, we expect revenue growth to pick up and operating profit margins to expand with less pressure from input costs and less intensive price competition as revenue growth recovers. Net margins should receive a further boost from falling interest costs and there should be less risk of FX losses on USD debt. Meanwhile, banks should benefit from faster credit growth and peaking credit costs as asset quality improves with a stronger economy and an extended period of low interest rates.