Macro Outlook Report

IIP in July slightly rebounded compared to June’s. Domestic demand strongly increased, which also resulted in higher retail sales. Agriculture sector still recorded a low growth. CPI inched up in July and the average CPI in the first 7 months of 2019 was the lowest in the last 3 years. A trade surplus was posted in July, thanks to a surge in export growth. Total registered FDI slowed down compared to the same period last year, while disbursed FDI remained stable. USD/VND exchange rates were relatively stable in July, interbank and unofficial exchange rates decreased to the buying rate at SBV. There was a slump in interbank exchange rates in July, and a net-withdrawal from the SBV in OMOs. Primary and secondary government bond trading in July was busy in July with a large trading volume.

- The VN-Index corrected -3.1% in Q2, but overall, it still maintained an increase of 6.4% from the beginning of this year. - Foreign investors have been net-buying since 2019 with the total value of more than VND10,000 billion. - VN-Index Q1 earnings dropped significantly. As a result, we cut earning growth outlook for 2019 down to 9% (lower than the growth of 13% - 15% in 2015-2016). - Domestic macro factors continued to affect the market moves but external factors may have a bigger impact. The reasonable price for VN-Index in the second half of the year is in a range of 930-1000 points. - Retail and IT sectors have a positive outlook in the 2H of 2019. Meanwhile, the banking, real estate, petroleum, electricity, and pharmaceutical sectors were neutral, although opportunities still exist in some stocks with their own stories.

CPI in May gained 0.49% MoM and the average CPI in the first five months climbed 2.74% YoY – the lowest 5-month average CPI in the last three years. In May, inflation is the most concerned factor in addition to exchange rates, whereas oil and gas prices went up and prolonged hot weather raised the demand of electricity consumption. Figure 1 shows CPI movements by main sectors. Transportation and housing – construction materials (rising 6.49% and 4.20% YoY respectively) are the two sectors that had a large contribution to CPI in May (0.25% and 0.20% MoM). Food and food stuff witnessed insignificant gains (+0.05% MoM, 5.54% YoY) as prices of substitute goods like beef, poultry meat, and seafood surged under the impact of the African swine fever. Core inflation in May inched up 0.13% MoM and 1.9% YoY – in five consecutive months, and approached the target set by the Government (2% YoY) – this means that the remaining room for the State Bank of Vietnam (SBV) to loosen monetary policy is no

The index of industrial production (IIP) in April climbed 0.6% MoM and 9.5% YoY, in which manufacturing and processing still played a key role and boosted the overall growth (+1.2% MoM; +10.5% YoY). IIP of the whole sector was at a moderate level, with IIP of manufacturing and processing saw a two-digit growth in 11 consecutive months. Production of mobile phones increased sharply over the same period in 2018, + 17.2% YoY, and exports of phones and components thus maintained a positive growth rate of +12% YoY in April. This is a positive signal while Samsung's new product line this year opened for sale one week earlier than in 2018 (March 8, 2019 compared to March 16, 2018). In particular, on April 22, Samsung announced to delay the selling date of Galaxy Fold, but this may not affect the manufacturing and exports of Vietnam as in the beginning of 2017. This is the market-penetrative product (estimated to account only for 1% of the total Samsung shipments), and many experts do not c

GDP growth: GDP growth in the 1Q.2019 was moderate with the main forces of processing and manufacturing sector. It is forecast that 2019 GDP will stay positive at 6.6 – 6.8%. Inflation: Inflation in the first three months hit the three-year lows. However, inflation pressure may return in April. The average inflation rate in 2019 is expected to be under control, surrounding 3.8 – 4.0%. Monetary policy: SBV monetary policy was further loosened in the 1Q, but in the rest of the year, it would be more prudent due to the inflation pressure. Exchange rates: VND was quite stable in the 1Q and expected to depreciate by 1.5 -2% in the whole year of 2019.

Industrial growth showed signs of a recovery: The index of industrial production (IIP) of the whole industry sector in the first two months was estimated to gain 9.2% YoY, lower than the 13.7% increase in 2018. However, regarding the high growth base in January 2018 and the nine-day Lunar New Year holiday, this can be considered a positive growth. The processing and manufacturing sector started to rebound (+11.5% YoY), while the mining sector plunged (-4.7% YoY, compared to the decrease of -1.8% YoY in 2018). In particular, in 2019 Samsung has launched the new mobile phone products one week earlier than in 2018, most of manufacturing activities were focused on November and December last year instead of December and January as in 2018. The total volume of mobile phone production in November, December 2018 and January 2019 hit 57.4 million phones, +5.1% more than that in 2018. The television manufacturing sector has maintained the momentum since 2017, with the total producti

GDP: GDP in 2018 grew by 7.08% thanks to significant contribution from processing and manufacturing industries. GDP growth is expected to gain 6.6 – 6.8% in 2019. Inflation: Average headline CPI in 2018 was 3.54% due to the pressure of climing prices of oil, healthcare services and food. 2019 CPI is forecast to be around 3.8 – 4.0%. Monetary policy: M2 and credit growth in 2018 dropped due to the SBV’s prudent monetary policy. In 2019, monetary policy continues to manage prudently, M2 and credit growth are supposed to be 11- 13% and 13 - 15% respectively. Exchange rates: VND depreciated by 2.4% in 2018 because of external factors. In 2019, VND could depreciate by 2.3 - 2.5%

GDP Growth: GDP growth strengthened in the first 9 months thanks to robust growth rate in Q1 and Q3, however, it is expected to slow down in Q4/2018. Inflation: Q2 and Q3’s CPI were on the rise, pressure on SBV’s 2018 average inflation target of 4%. Monetary policy: Monetary policy will be more prudent till year-end. Exchange rate: Exchange rate will be under control if VND depreciation is within 3%. External factors will be the most influencers to VND in Q4.

Growth: GDP’s growth strengthened with the highest 1H growth rate since 2011, however it is estimated to slowdown till year-end. Inflation: CPI reached highest June’s CPI since 2011, high pressure on SBV’s inflation target of 4%. Interest Rate: SBV’s monetary may show sign of tightening up in 2H2018. Exchange Rate: Under control if depreciation within 2% movement. Trade deficit, pressure on Balance of Payment.

1. Vietnam Macroeconomics Scorecard from 2009 to 2018 2. Vietnam Stock Market Review in 2Q.2018 3. Stock market’s concerns and opportunities in 3Q.2018 4. Stock market’s scenarios in 2H.2018 5. Recommendations and investment opportunities