Full HSBC report - Issue 15 (27 June 2008) - Việt Nam có bị khủng hoảng tiền tệ như Thái Lan 1997?

Full HSBC report - Issue 15 (27 June 2008) - Việt Nam có bị khủng hoảng tiền tệ như Thái Lan 1997?


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Good, solid, rational analysis without all the hype and forecasts of doom.

How refreshing!

A few highlights:

Equity Strategy: Mounting economic concerns have caused stocks to fall by 55% this year. The three day stock exchange closure in May makes us nervous.

PE has fallen to 10x but there is further downside risk.

Fixed Income Strategy: VGB yields have peaked amidst an emergence of onshore demand from bank accrual books. New FX regulations have led to a collapse in USD/VND NDFs. Although this may encourage some more offshore interest in VGBs, albeit within the official USD/VND trading band, we recommend caution as the new regime may lead to a further decline in FX liquidity, unless further upward adjustments in spot USD/VND are seen.

FX Strategy: The NDF curve has peaked for now in our view. Vietnam is due for some good news ?" inflation and the trade balance will improve, and interest rate hikes will shift capital flows. Importantly also, FX policy appears to be increasingly targeting a more stable fixing rate.

Repeat of the Asian Financial Crisis?

Vietnam?Ts economic situation has deteriorated precipitously, with inflation hitting 25% y-o-y in May while the trade deficit hit an amazing 53% of GDP in January-March. This has led to a fall in confidence about policy leading to downward pressure on the Vietnam dong, which has fallen 5% since its near-term peak in late February. These developments have led to comparisons with the Asian Financial Crisis of 1997-1998 and have sparked two questions:

Could Vietnam suffer a currency crisis similar to that of Thailand in 1997?

Could Vietnam?Ts situation cause contagion in the rest of the region, as happened with Thailand during the Asian Financial Crisis?

We find that Vietnam?Ts balance sheet situation looks much better than those of countries hit most directly by the Asian Financial Crisis just before the crisis struck. Moreover, the risk of contagion spreading to the rest of the region is limited, since conditions on the whole are much different from the situation at the time of the Asian Financial Crisis. Most fundamentally, currencies already float to a great extent, and there is not much evidence that Asian currencies are over-valued as they were in 1997.

...

Vietnam?Ts economic situation has worsened markedly, but we think that comparisons with countries like Thailand before the Asia Crisis are overdone. In some respects it looks worse, as the Vietnam dong has risen more in real effective terms than the Thai baht did, the CPI inflation rate has zoomed up to 25% y-o-y, and the current account deficit is expected to widen dramatically to 21% of GDP this year.

Nonetheless, we find significant differences as well which make Vietnam look less vulnerable. There is no obvious sign of a loss of export competitiveness, the problem rather is excessively strong imports due to high investment demand. The ratio of foreign direct investment to GDP is much higher than it was in the countries most affected by the Asia Crisis. The ratio of external short-term debt to foreign exchange reserves is quite low, expected to be just 11% this year even if foreign exchange reserves fall further.

Finally, it seems unlikely that Vietnam?Ts trend growth will slow significantly from here, as it remains at an early stage of the economic development path.

Equity Strategy:
Some signs of lifê?
?but too early for confidence to return
The Vietnam stock market is down 59% since the start of the year, but from the middle of June it did at last start to show some signs of life.

...

We think, however, that it is too early to be confident that the worst is over. True, valuations do look reasonable now. If we assume that EPS for the market will grow 10% this year (and most companies still forecast 15-20% growth), then 12- month forward PE has fallen to 9.4x (see Chart 3) ?" and even based on 2007 earnings it is on only 10.7x.

But we still see some risks to come. First, will earnings really grow this year? Four of the 13 largest capitalisation stocks saw a y-o-y decline in earnings in Q1. With so many companies having diversified into real estate and securities brokerage, the weak state of these two markets could easily hurt earnings further in the rest of the year. Also, for companies that listed in 2005 or earlier, the two-year 50% tax break for listed companies expired at the end of 2007, which will hurt EPS this year.


Được Dao_Duy_Anh sửa chữa / chuyển vào 08:37 ngày 08/07/2008