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Should Vietnam Be Worried About Indonesia Joining the CPTPP?
Last week, Indonesia officially applied to join the Comprehensive and Progressive Trans-Pacific Partnership free trade agreement. Whereas the benefits to Indonesia are clear, for Vietnam, a founding member of the agreement, it could be problematic. This article looks at the risks and opportunities for Vietnam if Indonesia’s accession goes ahead… Read More »
Banking and Finance News
Buy Now Pay Later market in Vietnam could grow to US$5 billion by 2029: Report
The Buy Now, Pay Later–BNPL–market is projected to grow at a compound annual growth rate of 29.2 percent from 2024 to 2029, according to a report from Markets and Research. The gross merchandise value of buy now pay later in Vietnam is expected to rise from US$1.32 billion in 2023 to US$6.89 billion in 2029.
See also: Vietnam’s Financial Sector
Vietnamese consumer bank deposits continue to climb
The total volume of cash kept in banks by individual account holders (as opposed to businesses) reached VND 6.84 quadrillion or US$277.3 billion at the end of July, according to State Bank of Vietnam data. This represents an increase of 4.68 percent since the end of 2023 and is despite interest rates being relatively low.
Over the last two years in the wake of a broader economic downturn brought on by higher interest rates in key export markets and the near-collapse of Vietnam’s real estate industry, everyday Vietnamese have turned to saving rather than spending their excess income. Of note, local consumption has been an important growth driver over the last decade or so but retail sales, month on month, in 2024, have been more or less stagnant since the beginning of the year. This latest data from the SBV suggests this could last a while longer.
See also: Banking in Vietnam: Industry Overview 2024
State Bank continues to pump cash into the market
There was US$1.5 billion in reverse repose outstanding to local banks as of close of business October 3. Notably, this is a decline over the same time last week when there was US$1.94 billion outstanding.
See also: Vietnam Dong Tracker: Daily Updates.
Outstanding reverse repos to Vietnam banks
Issued | Length | Maturing | VND* | US$ | % p.a. |
26-Sep | 7 | 3-Oct | 7,960.20 | $321,526,806 | 4.00 |
27-Sep | 7 | 4-Oct | 19,828.83 | $800,922,136 | 4.00 |
28-Sep | 7 | 5-Oct | 4,823.14 | $194,815,306 | 4.00 |
1-Oct | 7 | 8-Oct | 3,251.12 | $131,318,589 | 4.00 |
2-Oct | 7 | 9-Oct | 2,265.27 | $91,498,333 | 4.00 |
Total | 38,129 | 1,540,081,170 |
*billions
Car news
Mercedes-Benz plant lease extended after months of uncertainty
The Mercedes-Benz plant in Ho Chi Minh City has had its land lease extended for five years from April 14 next year, Tuoi Tre has reported. This comes after months of uncertainty as the authorities struggled to find a way around regulations that required the plant to hand back the land when its 30-year lease expired next year.
The joint venture between Mercedes-Benz and local firm SAMCO had requested an extension of its land lease as far back as 2021, however, the request was never actioned due to the aforementioned regulatory challenges (the can was essentially kicked down the road). This came to a head earlier this year, however, when the company said it was considering shutting down its operations in Vietnam altogether as a result of the lolly-gagging. Of note, it employs 800 people and contributes about US$800 million to the city’s coffers.
This final approval ended up coming after Deputy Prime Minister, Tran Hong Ha, issued a decision directing the Ho Chi Minh City People’s Committee to tell the municipal Department of Planning and Investment to extend the firm’s licence.
See also: Vietnam’s Automotive Industry Overview
Economy news
S&P Global raises GDP growth outlook for Vietnam .4 points
In its Economic Outlook Emerging Markets Q4 2024 S&P Global forecast GDP growth for Vietnam of 6.2 percent in 2024 and 6.8 percent in 2025. This is an increase of 0.4 points and a tenth of a point over its second-quarter forecasts, respectively.
The report notes that Vietnam and Malaysia in particular are experiencing strong growth in electronics exports and attracting substantial foreign direct investment in the electronics sector.
In Vietnam, it points out that manufacturing output increased by approximately 10 percent year-over-year in the first half of 2024. However, it also notes that the electronics industry is known for its cyclical nature, and any decline in global demand could impact this momentum, leading to potential fluctuations in production and investment.
See also: Vietnam Electronics Manufacturing: Industry Overview
IMF-Vietnam consultation report forecasts GDP growth of 6.1 percent 2024
The International Monetary Fund has released its Vietnam: 2024 Article IV Consultation report which breaks down the performance of Vietnam’s economy over the last 12 months. Notably, it forecasts GDP growth for this year and 2025 of 6.1 percent.
The 97-page report also includes a number of recommendations. A few that stand out are:
- Allow greater exchange rate flexibility;
- Give the SBV greater operational autonomy;
- Replace credit growth ceilings with a sound systemic risk management framework.
- Create a medium-term strategy for gradual wage and pension increases rather than large annual increases; and
- That structural policies should be used to mitigate precautionary savings, like improving social safety nets, and facilitating greater non-FDI investments to address external imbalances.
See also: Vietnam Economy News
Manufacturing news
Vietnam Purchasing Managers Index records 5.1 point fall in September
The S&P Global Vietnam Purchasing Managers’ Index has recorded a 5.1-point fall in September, from 52.4 in August to 47.3 a month later, according to a press release from the firm. This moved the index below the 50-point break-even mark which means that Vietnam’s manufacturing industry, according to the index, contracted in September.
Key findings from the survey include:
- Typhoon Yagi caused a reduction in manufacturing production.
- New export orders dipped, but the contraction was marginal and weaker compared to total new business, with international demand remaining relatively strong.
- Firms scaled back purchasing activity.
- Manufacturers who made purchases faced longer supplier delivery times due to flooding, leading to a rapid decrease in purchase stocks.
- Stocks of finished goods also declined.
- Outstanding business saw its sharpest rise in two-and-a-half years.
- Sentiment improved to a three-month high.
- Positive expectations and increased new orders in previous months led to slight staffing expansions.
- Some firms raised prices due to higher input costs, while others offered discounts due to muted cost inflation.
See also: Manufacturing in Vietnam
Real estate news
Vietnam real estate giant’s profit swings to loss after financial statement audit
Vietnam real estate giant Novaland has banked its worst half-year on record after audited financial reports found huge discrepancies, The Investor has reported. Specifically, the company’s own financial statements reported a profit of VND 3.5 trillion or US$142.2 million, however, an audit found the company had actually made a loss of VND 7.3 trillion or US$296.6 million.
In a release to the HoSE the company’s management said the discrepancies were because its initial statements didn’t include a provision for an outstanding land rent debt because it is in dispute. Furthermore, it decided to include contract penalties owed to the firm as revenue in its statements, even though it had not received payment for said penalties in the reporting period.
Stock market news
Deadline to connect national IDs with trading accounts passes
A September 30 deadline for trading firms to connect an individual’s trading account with their national IDs has now passed with some securities firms reporting that as little as ten percent of their customers have complied, according to Tuoi Tre. The State Securities Commission has “recommended” that securities firms cease to allow online trading for customers who are not in compliance and instead require them to perform transactions over the counter.
See also: Vietnam Securities Industry
Foreign traders net-buy US$51.2 million in HoSE shares
Over the last five trading sessions, to the close of business on October 3, in total, foreign investors net-bought back into the Ho Chi Minh City Stock Exchange to the tune of US$42 million. This reduces the total net withdrawn from the market by foreign traders this year to US$2.62 billion.
See also: Vietnam’s Foreign Investor Stock Sell-Off: Unpacked 2024
Foreign trader activity, last five trading days
Buy | Sell | Change | ||||
Date | VND | US$ | VND | US$ | VND | US$ |
27/9 | 2,064 | $83,368,675 | 1,813 | $73,230,333 | 251 | $10,138,342 |
30/9 | 1,417 | $57,235,181 | 1,921 | $77,592,648 | -504 | -$20,357,467 |
1/10 | 1,915 | $77,350,297 | 1,225 | $49,479,955 | 690 | $27,870,342 |
2/10 | 1,365 | $55,134,807 | 1,108 | $44,754,114 | 257 | $10,380,693 |
3/10 | 1,775 | $71,695,445 | 1,201 | $48,510,552 | 574 | $23,184,893 |
Total | 8,536 | $344,784,405 | 7,268 | $293,567,602 | 1,268 | $51,216,802 |
*billions
Source: www.hsx.vn
Trade news
Vietnam ceramics exports up 11.3 percent in value August over July
Vietnam’s ceramics exports climbed by 11.3 percent in August over July from US$51.1 million to US$56.9 million. Vietnam’s ceramics exports for the year now stand at US$425 million which represents an increase of 9.2 percent over the same period last year.
See also: Vietnam Ceramics Manufacturing: Industry Overview 2024
Vietnam seafood exports up 7.3 percent in value August over July
Vietnam’s seafood exports climbed by 7.3 percent in August over July from US$916 million to US$983.2 million. Vietnam’s seafood exports for the year now stand at US$6.3 billion which represents an increase of 9 percent over the same period last year.
See also: Vietnam Seafood Processing: Industry Overview 2024
Vietnam-made tyres subject of South African anti-dumping investigation
The International Trade Commission of South Africa has announced that it has launched a circumvention investigation into tyres from Cambodia, Thailand, and Vietnam. The Commission is working on the hypothesis that these three Southeast Asian countries may be acting as conduits to get around antidumping measures applied to tyres from China.
See also: Vietnam Trade Remedies News
US announces preliminary subsidy rates on solar panels from Vietnam
The US Department of Commerce has announced its preliminary findings in its countervailing duties investigation of solar cells from Cambodia, Malaysia, Thailand and Vietnam. Subsidy rates on Vietnamese firms subject to the investigation range from .81 percent to 292.61 percent, with the latter the highest rated applied of all firms from all four countries. The next closest were three firms from Malaysia that had subsidy rates of 123.94 percent.
Transport and infrastructure news
Vietnam to self-fund high-speed rail, avoid ‘strings attached’ foreign loans
Vietnam’s Transport Ministry, set to reveal its plan for a high-speed rail line between Hanoi and Ho Chi Minh City, has said the project will utilise domestic finances and technology, as opposed to support from abroad, VN Express has reported. The central budget, government bonds, and low-interest loans will be used to fund the US$67 billion project.
“With a spirit of independence and self-reliance, the Politburo has decided that we will not depend on foreign loans, as borrowing from any country often comes with strings attached,” Nguyen Danh Huy, Deputy Minister of Transport, is quoted as saying.
Notably, debt-diplomacy has become common in recent years particularly in developing nations and given Vietnam’s precarious position in the world in terms of geopolitics, a reluctance to be indebted to external creditors is understandable. That said, this is a huge and very expensive project that really needs to be done right. Vietnam, however, has no existing high-speed rail and therefore no experience installing and using the technology to speak of.
See also: Logistics in Vietnam
The week ahead
There are a handful of events coming up this week. For more information see the: Doing Business in Vietnam: Events Directory 2024
Also, Vietnam is a dynamic market that is changing rapidly. To keep updated to date with the business environment and how it is evolving make sure to subscribe to the-shiv.