Monthly Newsletter – September 2024

Dear valued clients and friends,

Each month we provide a market overview and pick out the M&A transactions, investment activities, regulation updates, and event highlights that we find relevant to your businesses to share with you in order to help you make informed decisions, solve problems, or gain a new perspective.

Our execution, experience, and in-depth understanding of the market have assisted many of our clients in solving their most difficult problems, augmenting the right strategies, finding targets, connecting with investors, and closing deals successfully. So stay informed with us, and make the right decisions for your businesses and investments!

MARKET OVERVIEW
In August 2024, Vietnam’s economy experienced stable, rising deposit interest rates, and impressive trade growth. The inflation rate demonstrates a better result in this month when it increases modestly compared to the previous month. The deposit rate experienced an increase from various banks, which had Big 4. The bilateral trade between Vietnam and many other partners surged continuously prompting to trade surplus. Foreign investment grew modestly, though M&A activity declined slightly. The exchange rate recorded a decline this month.

Inflation and Interest Rates
In August, inflation increased by 3.45% y-o-y and the average inflation in eight months of 2024 rose by 4.04% y-o-y. The core inflation rose by 2.53% y-o-y and the average core inflation in eight months of 2024 grew by 2.71% y-o-y. These figures indicated that the price of goods and services remained stable in August and inflationary pressure showed signs of easing this month.


Source: GSO, ASART analysis

In August, deposit rates continued to rise, with 15 commercial banks increasing their rates. For 12-month deposit terms, DongA Bank led the increases, raising its rate by 0.8% to 5.3%. Sacombank raised its rate by 0.5% to 5.4%, and CBBank increased its rate by 0.4% to 5.7% per year. ABBank offered the highest deposit rate for the 12-month term, reaching 6%. Overall, most banks maintain deposit rates of 5% or higher for this terms, and these rates are expected to increase further in the coming period.

Trade Activities
In August 2024, Vietnam’s total trade value is estimated to have reached USD 70.65 billion, representing a 13.5% y-o-y increase. Exports are projected at USD 37.59 billion, up 16.1% y-o-y, while imports are estimated at USD 33.06 billion, reflecting a 15.8% y-o-y increase. Consequently, the trade surplus for August 2024 is estimated at USD 4.53 billion, up 18.5% 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 USD1.3 billion. 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

Investment and M&A
The total Foreign Direct Investment (FDI) flows into Vietnam reached USD 2.52 billion in August 2024, reflecting a increase of 32.14% y-o-y.

While the FDI M&A activities decreased to USD 541 million in August from USD 597 million in July, representing a decrease of 5.25% m-o-m and 9.38% y-o-y.


Source: GSO, ASART analysis

Exchange Rate
The USD/VND exchange rate witnessed a downward trend in August 2024, when it declined from USD/VND 25,400 to USD/VND 25,030, reflecting a decrease of 1.46%. According to the General Statistics Office, the US dollar price index decreased by 0.64% m-o-m. However, it increased by 5.86% y-o-y, with an average increase of 5.85% y-o-y for the first eight months of 2024.


*Ask rate on the last day of the month
Source: Vietcombank, ASART analysis

M&A SPOTLIGHTS

Vietnam Food & Beverage – Every Half Coffee, a Vietnamese coffee startup, has received an investment from two venture capitalists, Openspace Ventures and DSG Consumer Partners. – Marubeni acquired additional shares in AIG Asia Ingredients Corporation (AIG) on August 5, marking its second investment in AIG following the initial investment at the end of 2023. – Phuc Sinh Corporation received USD 25 million from the Dutch &Green Fund and plans to pursue an IPO within the next four years. Automotive – Mitsui & Co. became a strategic shareholder in Tasco Auto to develop the automotive services sector in Vietnam. Real Estate – EQT Private Capital Asia, a Hong Kong-based private equity firm, has acquired PropertyGuru, a leading PropTech company headquartered in Singapore, for USD 1.1 billion; PropertyGuru owns Batdongsan.com.vn, a prominent property portal in Vietnam. – Kido Group increased its ownership from 39.41% to 58.05% in Hung Vuong JSC (Hung Vuong Plaza Shopping Center). The deal value was not disclosed. Financial Services– GELEX Group (GEX) has acquired an additional 4.9% stake in Eximbank, increasing its total ownership to 10% charter capital to become the largest shareholder. Healthcare – The German-based generic drugmaker STADA acquired the Nizoral Cream business in Vietnam, the Philippines, and Thailand from the US-based Johnson & Johnson Group, to expand its consumer healthcare business in the Asia-Pacific region.

The World Food & Beverage – US leader in pet care, snacking, and food Mars acquires US company specializing in snacking, cereals, and noodles Kellanova for nearly USD 36 billion to expand Mars’ snack division.  Convenience Store – Canada-based Couche-Tard, the owner of Circle K’s, is acquiring the 7-Eleven convenience store chain from Japan’s Seven & i Holdings to expand its business with an undisclosed value. Healthcare – Carlyle Group, a U.S.-based global investment management firm is acquiring Baxter International’s kidney-care unit, Vantive, a US healthcare company for USD 3.8 billion. Financial Services – An international consortium consisting of CVC Capital Partners (private equity, Luxembourg), Abu Dhabi’s sovereign wealth fund (sovereign wealth fund management, UAE), and Nordic Capital (private equity, Sweden) is acquiring Hargreaves Lansdown, the UK’s largest investment platform, for USD 6.9 billion. Agriculture – Olam Group is in talks to sell its 64.57% stake in Olam Agri to Saudi Agricultural and Livestock Investment Company, a state-owned enterprise in Saudi Arabia. Technology – The cybersecurity solutions provider OPSWAT announced the acquisition of InQuest to enhance its capabilities on August 7.

RELEVANT NEWS & INFORMATION

Vietnam Vietnam strengthens global ties – The new President of the Socialist Republic of Vietnam, To Lam, and his spouse paid a State visit to the People’s Republic of China from August 18 to August 20, 2024. In this visit, China and Vietnam signed 14 agreements to enhance railways, trade, and defense cooperation following a meeting between Chinese President Xi Jinping and Vietnam’s new General Secretary To Lam on August 19.  – The U.S. Department of Commerce acknowledges positive economic changes but doesn’t recognize Vietnam as a market economy. The Ministry of Industry and Trade stated disappointment and determination to work further for a reconsideration. – Costa Rican Minister of Foreign Trade Manuel Tovar officially presented a diplomatic note on Costa Rica’s recognition of Vietnam as a market economy on the afternoon of 5 August 2024. This is a significant step in promoting economic and trade relations between the two countries. – Hong Kong Special Administrative Region of China (HKSAR) visited Vietnam, marking a strengthening of bilateral relations. In 2023, Hong Kong was the third-largest foreign investor, contributing USD 4.68 billion, equivalent to 12.8% of total FDI. In the first seven months of 2024 was the second-largest FDI investor, contributing over USD 2.19 billion, a 200% increase y-o-y. – Vietnam and the United Arab Emirates (UAE) negotiated on comprehensive economic partnership agreement (CEPA) to boost trade and investment. In the first half of 2024, bilateral trade reached USD 3.2 billion, a 43% increase y-o-y. Vietnam’s exports exceeded USD 2.8 billion, up 47%, while imports reached over USD 435 million, a 25% increase. – Vietnam secures major global investments Hai Phong City granted certificates for seven projects worth USD 190 million and signed several MoUs with Chinese firms. Key investments include USD 50 million for photovoltaic glass production and USD 58 million for vehicle diagnostic tools manufacturing. – Quang Ninh met with Japan National Economic Recovery and Development Association (TNG) to explore investment opportunities, leading a total of 20 countries with a total investment capital of USD 14 billion, of which more than 10 projects with investors from Japan. – PepsiCo Vietnam has started to build a USD 90 million food production plant in Ha Nam, set to open by July 2025. – Signetics, a South Korean semiconductor, plans to invest USD 100 million in Vinh Phuc to support Samsung’s upcoming expansion. – Johnson Corporation is planning to build the world’s largest fitness equipment manufacturing and assembly plant at Thuan Thanh I Industrial Park, Bac Ninh, with a total investment of USD 100 million. – T&T Group and Ramky India have signed a memorandum of understanding on investment cooperation to develop the High-tech Pharmaceutical Park Project in Vietnam, jointly contributing capital equivalent to 50% of each party. – Hunan Hualian Ceramic Industry Co Ltd., a major ceramic manufacturer in China, plans to invest USD 200 million in the northern province of Thai Binh. – India’s Adani Group plans to invest USD 5 billion in seaports, airport infrastructure, and the energy sector in Vietnam. – Google is considering building a large data center near Ho Chi Minh City, Vietnam. The project is expected to be completed by 2027, with costs estimated from USD 300 to USD 650 million. This would mark the first time a major American tech company invested in data infrastructure in Vietnam. – Vietnam’s Kim Long Motors Hue JSC and China’s Yuchai JSC started construction of a motor engine manufacturing and assembly plant in Hue, with an investment of USD 260 million. – China’s TAILG has started production of electric two-wheelers. Current electrification rate in VN is 9% with an expected value to be over USD 8 billion in 2025. Other public information – Vietnam recorded 46 data breaches in the first half of 2024, affecting 13 million records and 12.3GB of source code. Ransomware attacks caused damages exceeding USD 10 million, with 3TB of data being encrypted. – 30,000 F&B outlets in Vietnam shut down in the first six months of 2024, down 4% y-o-y, to around 304,700 F&B stores. Revenue reduced to VND404 trillion (USD 16.2 billion), only 68% of 2023 revenue. – Consumer finance regains growth momentum. Disbursed capital in Q2 picked up 9% compared to Q1 and up 53% y-o-y in H1. At the end of June, consumer loan outstanding balances amounted to USD 133.3 billion, which is up 10% y-o-y. – The Vietnamese government has officially transferred the National Power System Operation Center (A0), now rebranded as the National Power System and Market Operation (NSMO) from EVN to the Ministry of Industry and Trade (MOIT).

The World Global economic landscape Interest Rates – FED decided to maintain interest rates at the highest level in 23 years, ranging from 5.25% to 5.5%. Rates are still expected to drop soon as inflation approaches the target level. The US inflation rose 2.9% y-o-y in July, which is 0.1% lower than the previous month, potentially prompting the Fed to consider an interest rate cut in September. Many investors expect FED will have an interest rate cut in the forthcoming meeting on September 17 and 18, 2024 due to favorable economic indicators. According to the US Department of Commerce, in the second quarter, the economy grew at an annual rate of 3%, higher than an estimated rate of 2.8%. – The Bank of England has lowered its interest rate from 5.25% to 5% for the first time since the COVID-19 pandemic began in March 2020. Other major central banks have made their first interest rate cuts in 2024 (Sweden in May, Switzerland in March, the EU and Canada in June, and China in July), and the US is expected to follow in September. – On August 20, China maintained its benchmark lending rates. Specifically, the 1-year Loan Prime Rate (LPR) remains at 3.35%, while the 5-year LPR stays unchanged at 3.85%. – Prime Minister Fumio Kishida’s decision to step down may result in the Bank of Japan (BOJ) delaying its interest rate hike plans. Other public information – Jerico Pictures Inc. was hacked, exposing nearly 3 billion people’s personal information, making it one of the largest data breaches in history. – Canada will impose a 100% tariff on electric vehicles and a 25% tariff on aluminum and steel from China starting October 1st, 2024.   – A U.S. federal judge has ruled that Google violated antitrust laws by maintaining a monopoly position in the online search market. This is the first antitrust decision in the modern internet era.

EVENT HIGHLIGHTS
ASART 7th Anniversary Celebration
It’s hard to believe that seven years have passed since ASART began this inspiring journey. On the occasion of our 7th anniversary, we proudly reflect on our path, the growth of our team, and ASART’s evolution into a trusted partner for clients, partners, and friends around the world.

We extend our heartfelt thanks to our dedicated team, who continuously work together to build a sustainable future, as well as to our clients, partners, and friends who have always trusted and supported us throughout this journey. Your trust and support remain the greatest motivation for us to keep striving and growing.

The road ahead is full of both challenges and exciting opportunities. ASART hopes to continue receiving the trust and support of our team, clients, partners, and friends as we work together to maintain our position as the leading expert consulting firm in Vietnam, conquer new heights, and create a prosperous and sustainable era!

OUR SUCCESS IS SEEING YOU SUCCEED.

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EXPERIENCE, AND LOCAL INSIGHTS.

Everyone is different and so is your company. There is no one single magic formula or one-size approach that fits all. We are here to offer the advice and services that are carefully tailored for you, Vietnam, and Asia.

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Disclaimer 
This newsletter is of general nature. It is for informational purpose only. It is not intended to serve as advice or recommendation, or to address the circumstances of any entity, individual, or matter. No one should rely and/or act on the information presented without appropriate professional advice from ASART. ASART accepts no liability for the content of this newsletter, or for the consequences of any actions taken based on the opinions and information provided. Where it contains statements, estimates, and projections with respect to the anticipated future performance of Vietnam, markets, companies, employees and related figures, such statements, estimates, and projections may or may not prove to be correct. There is neither representation nor guarantee made on the accuracy and completeness of the content presented. Any person or entity who uses this newsletter to form a discussion, decide, or perform any actions must verify all relevant matters including all the information and statements contained in this newsletter, and must rely upon their own enquiries, investigations, judgement rather than upon the information and statements contained herein. ASART does not accept responsibility for any information contained herein and disclaims all liability to any entity, person, and matter arising out of or in connection with this newsletter.

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