Monthly Newsletter – August 2024

Each month, we deliver a comprehensive market overview, focused on the latest economic landscapes, leadership strategies, consumer actions, M&A transactions, investment activities, regulatory updates, and event highlights, providing you with actionable insights to make informed decisions, overcome challenges, and explore new opportunities.

With our proven track record, expertise, and deep market knowledge, we have had the privilege of advising and supporting many in shaping successful strategies, identifying the right opportunities, fostering connections with leading investors and prominent entrepreneurs, and facilitating impactful M&A transactions.

Stay ahead in this ever-evolving business landscape with our support and expertise. Together, we can navigate market dynamics confidently and empower your business and investment strategies!

If you have any questions or would like to see how we can help, please call +84 789 505 789 or email market@asart.com.vn, and we will get back to you.

MARKET OVERVIEW
July was the second month in a row witnessing a surprisingly strong economic growth in Vietnam. The recovery of production, import and export in the region including Vietnam has continued. The tourism sector has also experienced a strong recovery, reaching 1.15 million international visitors, a 51% increase compared to the same month in 2023.

Gold prices and exchange rates are more stabilized. Positive progress are happening across all three major sectors (agriculture, industry, and services), with the PMI index reaching 54.7 points, the highest level since November 2018. VND interest rates and related activities, however, are still worth watching for.

GDP Growth
Given a strong recovery and growth in July, and a projection of continued growth, we have revised our forecast to 6.2% for the year. If the current momentum continues, Vietnam would be able to achieve its growth target this year or even higher.


Source: GSO, ASART analysis
* Decimal and thousand separators follow English conventions

Inflation and Interest Rates
Inflation signaled a notable increase in July 2024 and continues to edge near the government’s target ceiling of 4.5% for the year. In July’s inflation increased by 4.36% y-o-y and the average inflation in seven months of 2024 rose by 4.12% y-o-y. The core inflation rose by 2.61% y-o-y and the average core inflation in seven months of 2024 grew by 2.73% y-o-y. Although it is said to be under control, we anticipate it will rise above 4.5% at the end of the year.



Source: GSO, ASART analysis
* Decimal and thousand separators follow English conventions

Interest rates, particularly deposit rates at commercial banks, are increasing slightly from the end of March and continued through April, May, and June. By July, 18 commercial banks have raised their rates. State-owned banks maintain the lowest rates at 1.6% for one-month terms and 1.9% for three-month terms while. The number of banks offering rates of 5% or more doubled from 12 to 26.

Trade Activities
Exports have surged, providing a trade surplus of USD 2.12 billion, that has helped maintain balanced payments although USD 700 million lower than the previous month.

Vietnam’s total trade value in July is estimated to reach USD 69.72 billion, a 21.8% y-o-y increase. Exports are estimated at USD 35.92 billion, up 19.1% y-o-y, while imports are estimated at USD 33.8 billion, a 24.7% y-o-y increase.

In July, the top imports included computers, electrical products, and their spare parts and components, totaling USD 10 billion, a 13.4% increase y-o-y. Machinery, equipment, tools, and instruments reached USD 4.4 billion, up 15.6% y-o-y. Fabrics amounted to USD 1.2 billion, down 3.9% y-o-y. Plastics also reached USD 1 billion, up 12.4% y-o-y, while Telephones, mobile phones and parts thereof were at USD 0.92 billion, up 22.8% y-o-y. The top import partners were China at USD 12.8 billion, Korea at USD 5.1 billion, Taiwan at USD 2.1 billion, Japan at USD 1.8 billion, and the US at USD 1.3 billion.

On the export side, computers, electrical products, and their spare parts and components totaled USD 5.8 billion, a 10.1% decrease y-o-y. Telephones, mobile phones, and their parts reached USD 5.4 billion, up 14.8% y-o-y. Machinery, equipment, tools, and instruments amounted to USD 4.7 billion, up 12.1% y-o-y. Textiles and garments reached USD 3.7 billion, up 17.6% y-o-y, and footwear totaled USD 2.1 billion, up 4.3% y-o-y. The leading export partners were the US at USD 11.2 billion, China at USD 4.7 billion, Japan at USD 2.3 billion, Korea at USD 2.2 billion, and Netherlands at USD 1.1 billion.


Source: GSO, ASART analysis
* Decimal and thousand separators follow English conventions

Investment and M&A
Total Foreign Direct Investment (FDI) flows into Vietnam in July reached USD 2.81 billion, a modest increase of 0.62% y-o-y.

While Merger and Acquisition (M&A) activities decreased to USD 571 million in July from last month (a decrease of 12.89%), it grew 343% and contributed a significant role in FDI compared to last July.

M&A’s contribution to FDI dropped in the first 7 months of 2024, down from 26% to 13%.


Source: GSO, ASART analysis
* Decimal and thousand separators follow English conventions

Exchange Rate
Exchange rates in July has been stable with a slight increase by 0.05% compared to last month, while still high compared to last year with a 7.14% increase. On average, for the first seven months of 2024, the index increased by 5.85%.


*Ask rate on the last day of the month, decimal and thousand separators follow English conventions
Source: Vietcombank, ASART analysis

M&A SPOTLIGHTS

VIETNAM Financial Services Baoviet Holdings (BVH) and PVI JSC (PVI) have announced plans to divest state-owned capital to attract foreign investors. Currently, the government owns 65% of BVH and 35% of PVI. The government will divest 14% to reduce its stake at BVH to 51% after 2025. The divestment percentage of PetroVietnam at PVI is not yet disclosed. Automotive Tasco Auto acquired 100% of Sweden Auto, the only genuine importer and distributor of Volvo cars in Vietnam, to help Tasco Auto strengthen its position as the largest automobile distributor in Vietnam and develop a vertically integrated business model. Renewable Energy The Southeast Asia Clean Energy Fund II (SEACEF II), managed by Clime Capital, a Singapore-based management company specializing in low-carbon energy conversion services and Nami Distributed Energy (Nami), has invested $10 million USD in Viet Thang Holding Company. Potential project to provide sky-high energy solutions and on-site energy solutions.   Levanta Renewables, a leading Southeast Asia-focused renewable energy platform acquire a 28.7 MWp rooftop solar system in Vietnam. Entertainment Vietnamese startup METUB, operating in the digital entertainment and media sector, has raised USD 15.5 million from North Haven Thai Private Equity, a private equity fund managed by Morgan Stanley

THE WORLD Beverage Danish brewer Carlsberg is acquiring 100% British soft drink manufacturer Britvic for USD 4.2 billion, to be completed in Q1 next year. Financial Services Allianz, a German financial services company, has entered into an agreement to buy a 51% stake of Income Insurance, a Singaporean insurance company, for S$2.2 billion (USD 1.64 billion), or S$40.58 (USD 30.29) per share. The acquisition is awaiting regulatory approval, and is expected to close in the fourth quarter of 2024 or first quarter of 2025   Retail HBC, the retail conglomerate known for owning Saks Fifth Avenue, reached an agreement to acquire Neiman Marcus for USD 2.65 billion on July 3rd. This deal marks a significant expansion of HBC’s footprint in the high-end consumer goods market in the USA.   Fishery MSD Animal Health, a division of Merck & Co., Inc, completed its acquisition of Elanco Animal Health Incorporated’s aqua business to strengthen MSD Animal Health’s presence in the aqua sector, enhancing its ability to support fish health, welfare, and sustainability across aquaculture, conservation, and fisheries.   Hospitality Darden Restaurants is set to acquire all outstanding shares of Chuy’s for USD 37.50 each, in an all-cash deal worth about USD 605 million. This acquisition will bring Chuy’s Tex-Mex restaurants into Darden’s portfolio, which already includes Olive Garden, LongHorn Steakhouse, and other well-known brands.    Aviation Boeing announced a definitive agreement to acquire Spirit AeroSystems in an all-stock transaction valued at approximately USD 4.7 billion, including Spirit’s net debt, the total transaction value is about USD 8.3 billion. The acquisition, representing a 30% premium over Spirit’s stock price, aims to realign Boeing’s commercial production systems and workforce priorities.   Technology Cybersecurity startup, Wiz, rejected an acquisition offer worth up to $23 billion from Alphabet – Google’s parent company. Instead, they aim to reach $1 billion in revenue and proceed with their IPO plans.

INVESTMENT AND RELEVANT NEWS

VIETNAM Initial public offerings (IPOs) Vietnam Vietnam registers only one IPO in first half of 2024. DNSE Securities JSC was the only company to list on the stock exchange in the country, raising a significant amount of USD 36.9 million.   South Korean investors leading the FDI wave GC Holdings from South Korea will officially enter the Vietnamese healthcare market next month by partnering with Phenikaa Group to establish a genetic and cancer diagnostics center.   South Korea’s Phillips is mulling an electric vehicle (EV) and EV battery manufacturing development in the Northern Province of Bac Ninh.   KGA from South Korea plans to build an entertainment complex in Quang Ninh province with a total investment of up to USD 2 billion.   South Korea-based Partron Vina, a key supplier for Samsung, plans to invest an additional USD 269.4 million in Vietnam to expand its electronic component production in Khai Quang Industrial Park, Vinh Phuc province. The project is set to begin next month.   Other Countries AMKOR Technology Singapore Holding poured an additional investment of over USD 1.07 billion into the Semiconductor Materials and Equipment Manufacturing, Assembly, and Testing Factory at Yen Phong Industrial Park.   Chinese battery manufacturer Sunwoda plans to invest an additional USD 300 million in Yen Lu Industrial Park in Bac Giang province.   BBE Semiconductor Industries NV (BESI) from the Netherlands is set to invest USD 42 million in its Saigon High-Tech Park factory (HCM) for microchip packaging and testing equipment.

THE WORLD Initial public offerings (IPOs) The IPO market in Southeast Asia recorded 67 IPOs during the first half of the year, representing a 21.2% y-o-y decline. The capital raised from these IPOs decreased by 53.3% y-o-y, totaling USD 1.4 billion. It experienced a significant decline  with market capitalization dropping by 71% to USD 5.8 billion.   Interest Rates Cut Trend A wave of interest rate cuts swept across several economies, signaling a concerted effort to reignite growth. On July 22, the People’s Bank of China (PBOC) announced a cut in the seven-day reverse repo rate from 1.8% to 1.7% to boost growth. Following this, China reduced its one-year loan prime rate (LPR) to 3.35% and the five-year LPR to 3.85%. On July 24, the Bank of Canada cut interest rates for the second consecutive time, lowering them to 4.5% from 4.75% due to declining household spending on consumer goods and housing, despite ongoing inflation pressures.

EVENT HIGHTLIGHTS
Critical Insights into IFRS and Sustainable Accounting Initiatives in Vietnam
On July 9, 2024, we joined the business luncheon focusing on IFRS adoption and Sustainable Accounting Initiatives in Vietnam. The event focused on navigating the evolving landscape of financial reporting in Vietnam and a comprehensive analysis of several key topics:

Session 1: IFRS Adoption
The voluntary IFRS adoption phase in Vietnam runs from 2021 to 2025, with mandatory adoption required afterward for large parent companies and state-owned enterprises.

Vietnam is developing Vietnamese Financial Reporting Standards (VFRS), set to replace the current Vietnamese Accounting Standards (VAS) by 2025.

Session 2: IFRS Readiness Survey 2020-2022
48% of surveyed enterprises are in the process of adopting IFRS. However, challenges include a lack of expertise, inadequate IT systems, and insufficient guidance from authorities.

Session 3: New IFRS 18 Standards
IFRS 18, effective January 1, 2027, focuses on detailed reporting of business performance, requiring distinct accounting for various activities such as core business, investment, and discontinued operations.

Session 4: IFRS S1 and S2 Introductions & Sustainable Accounting Initiatives
IFRS S1 and S2 address sustainability-related disclosures, with a focus on climate risks. While these standards are not yet mandatory in Vietnam, they are crucial for enhancing transparency in financial reporting.

At the event, we exchanged and gained valuable knowledge and tools to help our clients comply with international standards, integrate sustainable practices, and make strategic financial decisions, in order to ensure their overall competitiveness and transparency. Complying and reporting with transparency undoubtedly support our work and our clients in both private and public sectors.



2024 Vietnam Real Estate Market
2024 Vietnam Real Estate Market Forum was held by CBRE on July 11 in HCMC. A highlight of event was the engaging panel discussion with guest speakers. The real-world perspectives and experience helped participants gain a comprehensive understanding of macro situation in Vietnam, impact of Land Law of 2024, and residential selling prices.

The event was structured into Market H1 2024 Review & H2 2024 Outlook
Macro Overview: The first half of 2024 covered key economic indicators, including GDP, trade, FDI, inflation, and credit growth.

Office Market: Vietnam’s office market witnessed significant changes in both Hanoi and HCMC.

Retail Market: Strong retail demand led to higher occupancy rates and rental growth in both CBD and non-CBD areas.

Industrial Market: Infrastructure improvements continued to drive industrial development, with mild rental growth observed despite moderate absorption rates.

Residential Market:
Condominiums: The market showed divergent trends between Hanoi and HCMC.

Landed Property: The market remained subdued, with minimal new supply following 2022.

Overall, the forum offered valuable insights and set the stage for strategic planning and decision-making in the evolving real estate market.

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Disclaimer 
This newsletter is of a general nature. It is for information purposes only. It is not intended to serve as advice or recommendation, or to address the circumstances of any entity, individual, or matter.

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Where it contains statements, estimates, and projections with respect to the anticipated future performance of Vietnam, markets, companies and related figures, such statements, estimates, and projections may or may not prove to be correct. There is no representation nor guaranty made on the accuracy and completeness of the content presented.

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