According to SGI Capital’s recently published August report, Vietnam’s fundamental growth indicators such as consumer spending, import-export activities, industrial production, FDI capital, and PMI continued their positive trajectory in August, albeit at a slower pace.
The rapid decline in the USD index is creating favorable conditions for the monetary policy to maintain its easing phase instead of facing tightening pressures as it did during the summer. While public investment disbursement has slowed considerably over the past six months, it is only a minor setback in the overall positive picture of economic recovery and growth over the past eight months.
However, the stock market always looks ahead and reflects the expectations for the economy and corporate earnings over the next 6-12 months. This depends not only on significant efforts in domestic governance but also on the international context, which is becoming less optimistic. A global economic recession in 2025 would significantly impact Vietnam’s growth rate and investment capital flows in the coming months.
SGI Capital expects credit growth to surge in the last few months of the year to achieve the target of 15% set for 2023. However, this goal seems unrealistic. As of the end of August, the entire banking system recorded a meager growth rate in mobilization of less than 3%, while credit growth reached nearly 7%.
The low deposit interest rates are causing the banking industry to experience its slowest eight-month mobilization period in history. To achieve an 8% growth rate in the remaining four months, the banking sector must mobilize three times the amount mobilized in the first eight months, or it will push the LDR ratio to a new record high.
Meanwhile, SGI Capital believes that this target will bring short-term growth but increase long-term pressure on the banking system and the entire economy.
In the past, when monetary policy was relaxed, and credit growth outpaced deposit mobilization (2008, 2010-2011, and 2021-2022), real estate credit grew rapidly, leaving liquidity shocks and significant bad debt consequences. As the bad debt problem from the 2022 real estate sector remains unresolved, continuing to aggressively push credit growth could increase the potential for bad debt risks from the real estate sector to a higher and more challenging level.
According to SGI Capital, the recent positive macroeconomic information in Vietnam no longer positively impacts the cash flow in the market. Foreign investors have slowed down but still maintain net selling whenever the VN-Index approaches the 1,300-point threshold. Domestic cash flow has not increased and is under pressure to share with the recent large issuances of securities, real estate, and corporate bond stocks.
At the same time, the hot topic of the past two quarters is shifting to the real estate market, causing some investor cash flow to be diverted from the stock market to this channel. As a result, trading value in August decreased by 30% compared to the March-April period, even though the VN-Index is in the same point range. Vietnam’s stock market has never maintained an upward trend when liquidity plummeted.
This year, the pressure of bond maturities at the end of the year remains a burden on cash flow for many large enterprises, including listed companies. SGI Capital believes that cash flow and liquidity will struggle to improve in the coming months, while risks may increase, especially due to significant fluctuations in the global market.
“In investing, it is essential to seek opportunities with low risk and high returns. The current environment presents significant risks and potential disruptions, while clear opportunities are relatively scarce. When these risks are fully exposed and reflected in the market and stock prices in the future, having ample purchasing power and liquidity can provide a significant advantage,” SGI Capital’s report emphasized.
In a recession, not losing is already a significant achievement.
In recent reports, we have noted that the global market is transitioning from optimism about economic growth and the Fed’s expected rate cut to concerns about a recession. The decline in new jobs and the increase in layoffs in August continue to reinforce the upward trend in unemployment.
At the end of each long growth cycle, the economy usually shifts from strong growth to a phase of deceleration and eventually enters a recession. The world’s major economies, including the US, China, and the EU, are experiencing a growth slowdown, and the risk of recession has gradually increased over the past few months.
As the economy nears a recession, interest rates tend to fall and even drop sharply, but cash flow still avoids risky assets and flows into safe havens such as gold, bonds, and cash.
After many years, investment and speculative cash flow has focused on seeking profits in risky assets such as stocks, corporate bonds, real estate, and cryptocurrencies. A recession is a significant enough risk to trigger a massive outflow of cash from these risky assets. Capital preservation and financial deleveraging will take priority because, in a recession, not losing is already a significant achievement.
The financial deleveraging process during a recession can cause similar significant fluctuations in asset channels. Cryptocurrencies, which were expected to benefit the most from lower interest rates, have recently experienced net outflows. In recent years, Bitcoin has always been an early indicator of risky assets.
Prime Minister: Proposing a Goal to Rank Our Country Among the Top 30-35 Largest Economies Globally
On the morning of September 9, Prime Minister Pham Minh Chinh, Head of the Sub-Committee for Socio-Economic Affairs of the 14th National Congress of the Party, chaired a meeting of the Government’s Standing Committee with the Standing Committee of the Socio-Economic Sub-Committee.
“Unleashing Investment and Business Opportunities with the $3,000 Billion Economy.”
India has established itself as a trusted partner for many countries worldwide, seeking to set up a global supply chain. Vietnam, in particular, has consistently maintained a strong relationship with the Indian government and businesses alike.
A Call to Action: Global Community, Unite to Provide Relief and Aid for the Devastation Caused by Storm No. 3
As of the morning of September 9, the third storm had claimed 26 lives, with many more missing. The storm has wreaked havoc on agriculture, with over 113,593 hectares of rice and 22,047 hectares of crops submerged, and 6,887 hectares of fruit trees destroyed. The impact on infrastructure is also devastating, with 121,668 trees uprooted and 9,851 homes damaged. The aftermath of this storm has been nothing short of catastrophic, and Vietnam is in dire need of international aid to recover and rebuild.
“The Economic Impact of Storm Yagi in Vietnam: A Devastating Blow to Agriculture”
On the morning of September 8, the tropical depression, which had weakened from the third storm, further weakened into a low-pressure area in the Northwest region. It continued to move westward before dissipating entirely.
The Sweet Success of Vietnam’s Sugarcane Industry: Climbing to the Top
Since 2021, Vietnam’s domestic sugar industry has been witnessing a resurgence, following the implementation of trade defense measures on imported sugarcane products. Between 2011 and 2021, sugarcane fields witnessed a decline from 283,000 hectares in the 2011/12 crop year to just 146,938 hectares in the 2021/22 crop year. However, in the last three years, there has been a notable turnaround, with sugarcane fields now covering nearly 175,000 hectares, indicating a sweet revival for the industry.
