Insight on Vietnam from an insider: VNDIRECT’s Thoa Tran Thi Kim

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Insight on Vietnam from an insider: VNDIRECT’s Thoa Tran Thi Kim

We wanted to bring you an update on Vietnam.  We highlighted how to invest in Vietnam about two years ago.  Since then, the main index is up +21% and the economy continues to be one of the strongest in the world.

Vietnam is the 14th most-populous country in the world and is very well-positioned geographically and strategically for its economy to grow.  There are certainly numerous challenges with respect to its relations with neighbors and structural issues and it emerges as a market economy, but we remain optimistic about the country’s future.

To that end, we thought it would be helpful to profile a market insider.  This week we interview Thoa Tran Thi Kim from VNDIRECT, one of the major brokers in Vietnam.  Thoa has been a financial advisor/portfolio manager with VNDIRECT since 2015.

Thoa Tran Thi Kim of VNDIRECT

VNDIRECT has grown substantially over the last few years, what are areas of growth that VNDIRECT is targeting right now? What do you attribute to your success, including a larger market share?

VNDIRECT has been one of the most reputable securities companies in the market and has been growing substantially over the last few years, the areas of growth that VNDIRECT is targeting right now are securities brokerage, securities depository, corporate finance advisory, proprietary trading, underwriting and portfolio management. In 2017, we are focusing on individual clients, continuing to develop the investment banking department and investing in technologies to becomes the best financial institution from a technology perspective.

The larger market share is the main factor for our success. However, some of the securities companies are bankrupted or being acquired. I think our success comes from the high quality of our services, technologies and finally, the human factor. We always keep developing these factors to please our customers.

The Dong has continued to weaken since the recession, do you feel that this is likely to continue? Do you view it as a strength of weakness for the economy and the stock market?

I think it depends on various macro and micro economic factors, but I am not a currency expert. I just follow Dong changes and assess its impacts to determine prudent changes in our investment approach.

Can foreigners invest in Vietnam? What are the restrictions?

Of course, foreigners can invest in Vietnam. The number of foreign investors continues to increase.

Foreign investors (account) 31/12/2015 31/12/2016 31/05/2017
Institution 2.264 2.503 2.657
Growth rate 10.55% 6.15%
Individual 15.525 16.850 17.658
Growth rate 8.53% 4.80%

Source: Vietnam Securities Depository (http://www.vsd.vn/tab/7/tra-cuu-thong-ke.htm )

The challenges are:

  • The difficult procedure of transferring money from foreign accounts to Vietnam, and transferring money back. So, you need an Indirect Investment Capital Account and a trading account at a securities firm. Any commercial banks having licenses for foreign exchange can offer this account, such as BIDV, HSBC, Standard Chartered Bank, and Deutsche Bank.
  • It is difficult to quickly update contact information.
  • Meeting companies that you’d like to invest in can be challenging, foreign ownership caps can be limited, but it continues to increase.
  • Foreign investors incur exchange rate risk.

What services does VNDirect provide to foreign investors?

We offer execution services through the following venues:

  • Online Trading via vndirect.com.vn: Our pioneering online trading platform within Vietnamese market that is far and away the best on the market.
  • Bloomberg EMSX & FIX (broker code VNDB for broker assisting and VNDS for DMA)
  • DMA and STP access
  • Mobile applications on iOS/Android
  • Direct communication with our traders
  • Faster opening account:  Full document support from VNDIRECT.
  • More Convenient: One contact point from applying for Securities Trading Code, Opening Indirect Investment Capital Account to Opening Securities Trading Account.
  • In investment ideas and market reviews, we offer research reports, Market commentary, sector reports, company research, strategy, macroeconomist views, and bonds & monetary research.
  • Market: Overview, Technical Analysis, Foreign Trading.
  • Company: Company quarterly & annual reports
  • Stock screen and compare
  • Stock recommendations

What are some factors that make you optimistic about Vietnam’s economy?

I optimistic about Vietnam’s economy as it currently experiences a “mega-trend”. Vietnam’s GDP growth rate has averaged 6.5% percent for ‎2015-2016 (Source: general statistic office of Vietnam). The government remains on track to privatize companies in order to operate more effectively.

The State Bank of Vietnam (SBV) has set a credit growth target of 18% for this year, and it pledged to continue measures to keep credit growth suitable for the country’s economic development. The forecast is based on credit institutions’ optimistic about a stable macroeconomic environment, higher GDP growth and inflation is kept at a reasonable level which will facilitate liquidity of the banking system. Oil and food costs have slowed for the first 4 months of 2017, which is keeping CPI stable.

Per World Bank, the Vietnamese economy is expected to maintain its long-term growth rate as long as it continues to boost restructuring of its economy to support a growth model based on productivity. Base on recent developments and FDI capital, Vietnam in 2017 will grow 6.3%, and 6.4% in the next 2 years. Growth in manufacturing which is driven by exports will help boost the GDP growth rate. Government budget and divestitures will increase reciprocally.

In other countries, government protectionism and risks associated with protectionist measures in major economies are major risks to Vietnam. In the context of a stronger US dollar, most of Vietnam’s major trading partners have strongly reduced exchange rates, the probability of VND appreciation and its negative impact on competitiveness for Vietnam’s exports remain a concern.

In parallel, due to the high growth rate of the middle-class population, there is strong development within retailing, healthcare, travel, and real estate. In the next few years, we expect credit growth to remain strong, while CPI is stable.

What are some factors that concern you about future growth?

If credit growth increases 18% annually over 3 years, I am concerned that an economic bubble will follow. Vietnam is focusing on heavy industry and agriculture. With limited technology, Vietnam cannot compete with China and may have increased costs that inhibit it competing in low-scale manufacturing. Low taxes on commodities imported due to WTO restrictions is also a threat to the performance of domestic companies.

The government still owns a lot of businesses across many industries.  Do you see an increase in public offerings from the Vietnamese government? Why or why not

The Government still owns a lot of businesses across many industries and has gained a lot of profit from its dividends. However, in the trending of integration to the world market, the Vietnam government must privatize those industries. In the recent months of 2017, the SCIC (State Capital Investment Corporation) of Vietnam divested 9% of Vinamilk and begin the divestment operation. SCIC is planning to divest its entire capital in 137 state-owned enterprises (SOE) by 2020. Changes in foreign ownership limits, a growing economy, and a strong performing stock market have attracted considerable interest from foreign investors for earlier SOE’s divestments. However, a lack of transparency and the slow progress of divestments are affecting investor sentiment. For 2017-2018, the companies under consideration for divestment are Giang Stone Exploitation & Processing One Member Company, Trang Tien Trading Co. Ltd, Hoang Quan Appraisal Co. Ltd, and the Publishing & Printing company under HCM City’s Publishing Association. However, SCIC will continue investing in SCIC Investment One Member Company Limited, Ha Giang Mineral and Mechanics Joint Stock Company, and FPT Corporation, which are already part of their portfolio. Since its inception in 2006, SCIC has divested in over 900 enterprises. In 2016, SCIC divested from 60 business and in turn achieved an impressive 2.58x return.

Moving ahead, the Vietnamese government needs to speed up the divestment process, increase transparency, and provide higher share for investors to attract foreign investment. Future divestments will provide the country the much-needed capital to address its expanding budget deficit, which has been increasing due to falling oil prices, rising expenditures, and high public debt.

What are some of the opportunities for investors with the push towards increased electronics exports?

In 2016, Vietnam exported US$34.32 billion, 18.9% of total exports (Vietnam Customs). The Electrical machinery, equipment, mainly because of Samsung. The Vietnamese company that exports its own goods which is listed on the stock market that I have known is VTB (the Viettronics Tân Bình joint stock company) (HSX:VTB), which is quite good but has a low market share.

What are trading costs like in Vietnam?

Trading cost

Services Fee
Open account Free
Direct Account

(For individual independent investors)

0.15%/ total trading value
Prime Account

(For individual investors using the investment advice service)

0.2%-0.35%/ total trading value

What have been some of the impacts on listed companies from the drought in Vietnam?

Vietnamese listed companies were affected by the drought because of El Niño 4 months ago. Southeast Vietnam was damaged the most. Agriculture, Fertilizers, Sugar, Hydropower especially in the southeast like DPM (PetroVietNam fertilizer and chemicals corporation (HSX:DPM)), DCM (PetroVietNam CaMau fertilizer joint stock company (HSX:DCM), in Fertilizer; CHP (Central Hydro Power Joint Stock Company (HSX:CHP)) and SHP (SOUTHERN HYDROPOWER JOINT STOCK COMPANY (HSX:SHP)) in Hydropower , LSS (Lam Son Sugarcane & Sugar Joint Stock Company (HSX:LSS)) KTS (Kontum sugar joint stock company (HNX:KTS)) in sugar. The drought caused the late arrivals of the rainy season and made water saltier which affected fertilizer companies whose sales dropped. Similarly, in sugar, it decreased the quantity and quality of sugar. Subsequently, there were limited resources for hydropower, which reduced electric generation capacity. Rubber is also indirectly affected by El Niñobe cause the quality of Vietnamese and Thailand rubber dropped.

Is there anything you would like our readers to know?

When you invest in Vietnamese market you should update all your information about:

  •  Politics
  • Potential

I recommend the following:

  • Have a strategy and follow it
  • Having a native partner (may be a broker, a friend… )
  • Don’t guess

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We hope you enjoyed that interview with Thoa Tran Thi Kim.  She is very knowledgeable on the market, so if any of you are thinking about investing in Vietnam, certainly reach out to Thoa, who we are certain would be happy to help you out.

If you have any follow-up questions or comments, please let us know.

 

 

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