Economics

Equity Market Research Team +84 8 3823 9355

Issue 3Q 2015

on VietnamWindow

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Window on Vietnam 3Q2015

WINDOW ON VIETNAM 3Q2015 22 July 2015 Feature Article FTAs - Which Sectors Will Benefit the Most? Page 3

Economy Balanced Growth and a Time for Equities Page 9

Equity Market A Tale of Banks and Policy Changes Page 12

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Window on Vietnam 3Q2015

OVERVIEW This quarter saw some key developments on Free Trade Agreements with the signing of two trade pacts - one with Korea, and another with the Eurasian Customs Union (EACU), of which Russia is the major member. Promising progress was also made on both the TPP and the Vietnam - Europe FTA. In this article, we give an update on the progress of the FTAs and, more importantly, look at the which companies and sectors are likely to benefit the most from the agreements. UPDATE ON FTAs The Trans-Pacific Partnership Agreement (TPP) A decade after the first round of meetings and negotiations, the end may finally be within sight for what is billed as the most ambitious trade agreement ever. A 21st-century trade pact, in addition to the usual trade issues, the TPP addresses various other related critical matters such as intellectual property rights, FDI, SOEs, labor, and the environment. Late this June saw another important breakthrough in the progress of TPP, as the US Senate voted to advance a bill to allow "fast-track" approval of large international trade bills. This raised the market’s expectations that the TPP may be concluded by 2016. Whilst TPP negotiations have been secretive, various independent investigations have proclaimed that Vietnam would be the biggest beneficiary among the 12 nations involved in the trade pact. Sectors benefitting most directly include the manufacturers of textiles and apparel, footwear, and furniture. At the same time, we see the potential for increased competition in the F&B sector, in particular confectionary and dairy products, as well as pharmaceuticals. Vietnam – Europe FTA Vietnam is the fourth ASEAN country to hold FTA talks with the EU, after Singapore, Malaysia, and Thailand, with Vietnam reaching the 13th round of negotiations in early June. Similar to the TPP, the scope of this FTA extends beyond trade, also covering services and investments, government procurement, etc., though some requirements are less stringent than the TPP. Specifically, regarding the rule of origin in the textile sector, the EU-FTA only commands a fabric-forward rule, meaning cut-trim-make textile companies that source fabrics from FTA member countries can qualify for the tariff benefit as well. With Europe already a major trade partner with Vietnam with annual trade value worth over $36bn, this FTA will have a significant impact on Vietnam’s economy in the long term. ASEAN FTA (AFTA)

Vietnam essentially cut tariff rates to below 5% on a majority of items imported from ASEAN countries in 2009. However, in 2018, Vietnam will further reduce tariff rates to zero for ASEAN countries in certain sectors. For example, tax rates for imported automobiles from ASEAN countries will come down to zero from around 50%-70% currently. Since the AFTA went into effect in 2010, as of the end of 2014 Vietnam’s export to ASEAN countries increased 125% vs. 2010, while total imports from ASEAN increased only 67% in the same period. ASEAN-China FTA (ACFTA) ACFTA is a free trade area between the ten ASEAN member states and China. The ACFTA is the largest free trade area in the world in terms of population and third largest in terms of nominal GDP, trailing only the European Economic Area and North American Free Trade Area. Under this Agreement, the six original ASEAN members and China have to eliminate tariffs on 90% of their products by 2010, while Cambodia, Lao PDR, Myanmar and Vietnam have until 2015 to do so. In the ACFTA details, the commitments of Vietnam are divided into three main categories: The early harvest list, the common list, and the sensitive list. The items on the early harvest list were cut to 0% in 2008. The common list items were cut to 0% in 2005. The sensitive list is divided into an “ordinary” section (reduction to 20% in 2015 and to 5% from 2020), and a “highly sensitive” part (to 50% from 2018). Update on Signed FTAs 2Q15 marked the signing of two new FTAs, one with the Eurasian Customs Union, and another with Korea. While the trade agreement with the EACU is relatively small (approximate bilateral trade of $3bn), the FTA with Korea was a significant event for both nations. As the third largest trade partner of Vietnam (bilateral trade of $24bn), the FTA with Korea is forecast to boost bilateral trade turnover to $70bn by 2020. Already a favoured investment destination for Korean manufacturing conglomerates in recent years, this FTA is expected to pave the way for even more technology transfer to Vietnam from Korea in the future. IMPACTS ON LISTED COMPANIES No doubt the TPP and EU-VN FTAs will create tremendous benefits for the whole country in terms of job creation and manufacturing, due to Vietnam’s low-wage comparative advantage. For example: Petri of Brandeis University and Peterson Institute for International Economics estimated that Vietnam’s GDP in 2025 would be significantly higher (by 10.5%) if the country participated in TPP. However, it is always difficult to assess the impact of FTAs on individual companies.

FTAs - WHICH SECTORS WILL BENEFIT THE MOST?

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Window on Vietnam 3Q2015 Given the complexity of the multiple dimensions of these

trade agreements, we limited our study to the direct, and quasi-direct, impacts of FTAs on listed companies. To analyze the impact, we studied how FTAs will affect companies’ imported materials, i.e. input prices; their export prices, i.e. output prices, and market competition; i.e. imported products becoming more competitive in Vietnam due to Vietnam lowering their tariffs. Greatest Beneficiaries of the FTAs

Fishery Sector: Hung Vuong Group (HVG), Vinh Hoan Corporation (VHC) Input Prices: There will be no impact from any of the coming FTAs. Both HVG and VHC import 30% of the cost of their production material, mostly in the form of soybean meal, from the US, Brazil and Uruguay. The import tariff for soybean meal is already zero. Output: Exports account for 30% and 80% of revenue of HVG and VHC, respectively. Major export markets for both are the US and the EU. HVG also exports to Russia. At the moment, the import tariff on pangasius is 5.5% in the EU and 5.6% in Russia, while the US does not levy an import tariff on Vietnam’s pangasius. But the US has levied anti-dumping taxes on Vietnamese fish. Participating in the EU-FTA will help remove import tariffs, thereby reducing costs for importers and creating more demand for Vietnamese fish. The TPP will hopefully help Vietnam’s relations with the US, which should lead to a resolution of the issue of the anti-dumping tax. HVG is paying an anti-dumping tax of $0.58 per kg, equivalent to 17% of its historical average selling price of $3.5 per kg. VHC also suffers from anti-dumping taxes by the US. Competition: No impact. The substitutes of Vietnamese pangasius are Chinese tilapia, Alaskan Pollock and other white-meat fish. We do not see any increasing competition from these substitutes, given that Vietnam’s fish have a very low production cost. Textile Sector: Vinatex, Soi The Ky (STK), Thanh Cong Garment (TCM) Input: STK imports purified terephthalic acid and MEG chips (70% of COGS) from Taiwan, Korea, Indonesia, and Thailand, with tariffs ranging from 0% to 5%. Thus the FTAs will have a neutral impact on the company’s input materials. TCM, together with a few Vinatex subsidiaries, imports cotton for fabric production from the US, India, Australia, and Brazil - at a 5% tariff. So the TPP will have a positive impact on these companies. However, a majority of companies under Vinatex, and other garment producers, still import fabric from China. The FTAs will have a neutral impact on these companies. Output: Textile and garment producers of Vietnam export more than 90% of their production to the US,

Japan and Europe. But the current import duties are quite high - averaging 12% in the EU, and ranging from 5.6% to 19% in the US. The TPP applies strict Rule of Origin (ROO) demands on the textile industry to enjoy the full benefit from duty exemption. However, the EU - FTA only commands a fabric-forward rule, meaning cut-trim-make textile companies that source fabrics from FTA member countries can qualify for the tariff benefit as well. Under TPP negotiations, Vietnam is likely to have a five year grace period during which Vietnam does not have to apply ROO. Hence the benefits will be immediate. However, Vietnam has a lot of work to do as a large part of its apparel manufacturers are merely doing cut-and-sew with a great amount of input materials being imported from countries not involved in both trade agreements, namely China, Taiwan and Korea. We have started seeing the development of full supply chains in the textile industry in the last two years in anticipation of the TPP and EU-FTA. Therefore, we believe these trade deals would confer a huge long-term benefit to the textile sector. TCM is a fully integrated garment manufacturer, so it will benefit from these trade pacts. Moreover, STK - a local fiber producer - should ride on the coattails of trade liberalization due to increasing demand for domestically-produced inputs. Competition: Vietnam ranks very favorable as a textile and garment exporter to the rest of the world. We do not see any major direct competition in the sector stemming from the FTAs. Logistics And Port Operations: Gemadept (GMD) and Viconship (VSC) Input and Output: These services are not directly impacted by the tax benefits of the coming FTAs. However, companies in this sector are expected to enjoy the indirect benefit of increasing trade flow, which would most likely result in: (1) increase in cargo and dry bulk throughput; and (2) increase in demand for logistics services. Competition: We do not expect to see any significant threat for domestic port operators as the strategic locations for these ports have been mostly mapped out. On the other hand, logistics companies may encounter higher levels of competition from multi-national logistics providers (most of which are already operating in Vietnam) as the demand for logistics services grows. We believe that companies that own ports and are developing higher levels of logistics services (3PL or higher), such as GMD and VSC, will have an edge over both domestic and foreign competition in the FTA era. Industrial Park Developers: Kinh Bac City (KBC) and Itaco (ITA)

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Input and Output: Industrial park developers are another indirect beneficiary of the FTAs, in particular the TPP Agreement. IP developers have been enjoying steady inflows from foreign manufacturers in anticipation of various FTAs over the last few years. Of all the on-going or recently-signed FTAs, none has affected the flows more than the TPP, which saw a great influx of textile companies migrating to Vietnam. Competition: Besides the increase in demand for industrial park leasing (output), we don’t see much impact, directly or indirectly, for either the input or competition for IP developers, as most of the current players (including foreign JVs) including KBC and ITA have positioned themselves well for this flow over the past few years now. Construction Sector: (CTD) Increasing demand for factory construction due to TPP has benefited construction companies. This point has been firmly demonstrated by Coteccons (CTD), a top private construction company. CTD has benefited from TPP in the last two years by winning lots of bids to construct factories, especially textile/garment factories from Chinese investors who want to front-run the upcoming TPP. Infrastructure Sector: (CII, HUT, IJC) With neither exports nor imports, as well as restrictions on participation in BOT/BT projects (except for ODA projects), we see no direct impact from the FTAs to domestic infrastructure companies. However, we believe the focus on infrastructure investment in anticipation of these FTAs (among other goals) have been ramped up since early 2014. Moreover, with our forecast that there will be increased demand for logistics services, we believe infrastructure companies such as CII, HUT and IJC, which own several BOT projects, will benefit from the increase in traffic. Non-Beneficiaries of the FTAs Pharmaceuticals: (DHG, IMP) Input Prices: Positive. Over 90% of inputs are imported. The import tax of active ingredients ranges from 0-10%. For example, Paracetamol and Cephalosporin have 0% import tariff while amoxicilin has a tariff of 10%. The active ingredients are imported from the US and Europe. Hence, if TPP is concluded, the import tariff of some ingredients such as amoxicilin will be removed. This supports Vietnam’s pharmaceutical producers in general and DHG and IMP in particular. Outputs: No impact. Both DHG’s and IMP’s key market is Vietnam. Both companies export very little (less than 1% of sales) to Moldova, Ukraine, Myanmar, and their export tax is 0%.

Competition: Negative. Competition is rising since generic drugs made in the US, Japan and the EU will be cheaper, having zero import tariff under TPP and EU-FTA, down from 5%. TPP may also reduce non-tariff barriers for imported drugs and hence it may negatively impact domestic drug producers. However, Vietnamese pharmaceutical companies won’t suffer from loss of patent protection as they mainly produce generic drugs. From a cost perspective, a key competitor for Vietnamese pharmaceutical companies are Indian drugs. Both US and EU-imported drugs are far more expensive than local ones. Food & Beverages: (VNM, MSN, and KDC) Vinamilk (VNM): Input: Positive. VNM imports milk powder (app. 70% of its input materials) from Oceania markets, mainly Australia and New Zealand. According to ASEAN-Australia and ASEAN-New Zealand FTAs, the current tariff of 7% will be cut down to 5% in 2016 and 0% in 2017. Thus these FTAs and TPP will have a positive impact on the company’s input material cost. Output: VNM exports less than 10% of their annual turnover to the Middle East, with 70% of this going to Iraq. Meanwhile, the ASEAN Trade in Goods Agreement already provides for 0% tariffs to ASEAN markets such as Cambodia and Myanmar, among some potential export markets of Vinamilk. As such, the recent FTAs have no impact on the company’s output. Competition: Import duties for American infant formula, and milk products, are below 15%. In addition, the current tariff on some milk products imported from Australia and New Zealand are around 12%, which is expected to go to zero under TPP. However these imported products are for a niche market segments and hence do not account for any noticeable market share. Therefore, we believe the competition from these niche market segments may not have a significant impact on VNM. Moreover, a number of major US players have already established their manufacturing and distribution operations in Vietnam, i.e. Abbott and Mead Johnson, so they will also have import tariffs for their raw materials lifted, just as VNM will do. Despite some possible negative consequences, the competitive landscape post-FTAs for VNM is unlikely to impact the company much. Masan (MSN): Input: Masan Food imports wheat starch for noodle production, soybean meal for soya sauce and animal feed production, corn for animal feed production, and other additives and flavors for beverages and foodstuffs. Due to the limited information provided by the company, we conclude from trade data of Vietnam that the country imports the above mainly from Australia (wheat - 15% tariff), the US and South America (wheat, soybeans at 5% tariff, and corn).

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We are not sure where the imported flavors and additives come from. Masan is mostly self-sufficient in their coffee input for instant coffee production. As animal feed accounts for 50% of the group’s sales from 2015 onwards, and corn and soybean meal account for 70% of the input materials, the current tariff of 5% will decline to 0% with the TPP. This will then have a positive impact on Masan’s input costs. Output: Masan only exports 9% of its instant coffee output through Vinacafe, which constitutes a marginal portion of total sales. The FTAs will therefore have a neutral impact on the group. Competition: Current import duties for Korean and Japanese noodles are around 25%. VN-Korea and ASEAN-Japan FTAs will reduce these tariffs to zero by 2018-19. Given the small noodle market share of Korea and Japan in Vietnam, the current impact is not significant for MSN. However, the liberalization of tariffs may be marginally negative for MSN in the future. Kinh Do Corporation (KDC): Input: Currently, Vocarimex (expected to become a KDC subsidiary) imports crude palm oil at 0% tariff. On the other hand, KDC sources its milk powder (for yoghurt and ice cream) from secondary domestic resellers. Thus the impact on KDC’s milk powder cost is uncertain. For now, we rate the impact on KDC’s input as neutral. Output: KDC no longer exports any of its products since the sale of its confectionery division. KDC may expand its product portfolio in the future through M&A and thus may benefit from the abolition of tariffs from the coming FTAs. However, since knowledge on this is currently limited, we rate the impact on KDC’s output as neutral. Competition: For the edible oil segment, the MOIT tariff on imported edible oils is 3% in 2015. It will fall to 2% in 2016 and 0% in 2017. We believe that the current tariff is too low to seriously impact the present competition dynamic of the industry. Overall we rate the impact on competition for KDC from the upcoming FTAs as neutral. Auto and Tire Industry (Danang Rubber - DRC, Casumina - CSM) The domestic car industry will suffer due to ASEAN FTAs lowering tariffs on cars and trucks imported from within ASEAN during 2015-18. The current tariff is around 50%, which will reduce to 40%, then 30% by 2016 and 2017, respectively. From 2018, there will be no tariffs on imported car and trucks. The VN-Korea FTA also hints at further tariff reduction for imported Korean cars and trucks to Vietnam, which could pose more headwinds. Most listed companies in the auto sector are distributors. Hence the impact is minimal. However, the dynamics of the tire industry are different. Input: DRC and CSM’s imported inputs are not a

significant part of their COGS, at about 20-25%. The main input to be imported is synthetic rubber, mostly from the US, Japan and China. The most prominent tax rate for this input is 0-1% and 5% from China, which will be reduced to 0% in 2018. Other imported products include fibers whose import duty rates are 5% for the ASEAN FTA and 15% from China. The rate for the ASEAN FTA will be reduced to 0% by 2018 but will remain unchanged for China. Therefore, the overall impact from FTAs would be positive for inputs, but those benefits will not start accruing until 2018. Output: DRC and CSM’s export markets are mainly ASEAN countries, with current tariff rates of 5% before being reduced to 0% in 2018. Other than that, DRC also exports a small portion of its radial products to the US with a tax rate of 4%. Hence, TPP will have a positive impact on DRC, while both tire producers should be able to increase exports to ASEAN by 2018. Competition: The overall impact might be negative, for two reasons: First, Vietnamese tire producers are faced with very high competition from China, which currently bears an import tax rate of 25%. According to ACFTA, tires are not a tax-preferential product, and regulations on this are unclear. However, within the spirit of FTAs, we conservatively deem that the tax will be reduced and thereby have a potentially negative impact. Secondly, with the tax rate among ASEAN countries being reduced to 0% by 2018 from 5% currently, competition from Malaysia and Thailand will also increase. Steel Sector (Hoa Phat Group-HPG, Hoa Sen Group-HSG) Hoa Phat Group (HPG) Input: Minimal impact as most raw materials already have 0% import tariff. Output: Steel pipe exports will benefit – currently pipe products are subject to various anti-dumping regulations in certain foreign markets. On the other hand, rebar (construction steel) primarily serves the local market as HPG exports very little (less than 5% of total output). We don’t think local companies can compete abroad with Chinese rebar yet at this stage. Competition: Rising competition from Chinese steel, but no immediate threat in the next three years as the Government still implements measures to protect local steelmakers until 2018. Currently, tariff for billet is 9% and for construction steel 12-15%, depending on the product. While there is no clear, specific guideline / roadmap for tax reduction, not until 2025 would all tariff for steel products drop to 0%. Hoa Sen Group (HSG) Input: Minimal impact as import tariffs for hot rolled coil

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is already at 0%. Output: HSG exports to over 40 countries and its exports account for over 40% of its total output (galvanized sheets & pipes), the company will benefit from these FTAs. Currently these steel products are subject to various anti dumping regulations in foreign markets. Competition: Rising competition from Chinese steel, but no immediate threat in the next three years as the Government still implements measures to protect local steelmakers until 2018. Currently, tariffs for sheets and pipe products range from 7-12% depending on the product. On the other hand, the upcoming FTAs would help HSG gain access to foreign markets as the company is already exporting over 40% of its output. Hence, HSG would become more competitive on an international level. Unaffected By the FTAs Fertilizer Sector (Phu My Fertilizer and Ca Mau Fertilizer) Input: Minimal impact. The key input is natural gas, which accounts for more than 75% of production cost. This gas source is domestically provided by PV Gas. The alternative – imported LNG – is three times more expensive and therefore not a viable substitute. Output: Currently DPM and DCM export only 5-10% of total output to neighboring countries, e.g. Cambodia, Myanmar and the Philippines. We don’t think they will benefit much from these FTAs, competing against China which accounts for 35% of world production. Competition: Slightly negative. Competition may rise from China, which currently imposes a 6% import tariff. According to the ASEAN-China FTA, the import tariff declines to 5% by 2020. Currently, Vietnamese fertilizer producers compete with smuggled fertilizer products from China. Hence, the landscape for competition won’t change much post-FTAs. Plastic Sector (Binh Minh Plastic-BMP and Tien Phong Plastic-NTP) Input: BMP and NTP’s main locally-purchased input material, polyvinyl chloride (PVC) from TPC Vina and Phu My. The input of PVC is Vinyl Chloride Monomer, whose import tax is already 0% in many FTAs. This leaves us with a neutral impact on BMP and NTP’s input. Furthermore, due to increasing local competition in the plastic pipe market, any benefit from lower input prices would be used to support sales rather than to improve margins significantly. Output: BMP and NTP hold more than 50% of domestic market share, with almost no exports. Therefore, the FTA would have a neutral impact on the outputs. Competition: The competition is mainly between local players trying to expand market share. Plastic pipes are

neither easy nor cheap to transport. Hence the impact of the FTAs would be neutral. Cement Sector (Ha Tien 1- HT1) Input: About 85%-90% of input is self-supplied. The FTAs would therefore have neutral impacts on HT1. Output: Sells its product largely domestically, only exporting a small amount of clinker with a minor contribution to earnings. Hence, no impact from the FTAs. However, it may create a better valuation for a foreign strategic to buy out local cement companies. In 2012, Semen Gresik Cement Group paid $230m for 70% of Thang Long Cement, a 2.3m ton-capacity cement producer. We observe that Semen Gresik is looking to acquire more cement companies. Competition: HT1 is holding 10% countrywide market share and nearly 30% of the market in the South, its main market. This strong foothold makes it rather invulnerable to potential competition. The FTAs would have neutral impacts. Financial Sector (Banking, Insurance, and Securities)

We hold the view that there will be no major direct impact on the financial sector from the coming FTAs. This is mainly because of recent financial reforms by the Vietnamese government, as foreign financial institutions have already been allowed to establish 100%-foreign-owned one-member companies in Vietnam. These companies can perform most of the core operations in their respective services, though there are some restriction in place for certain operations. We believe that further liberalization of the financial market will be more likely to come from the willingness of the Government to commit to more reforms (of which recent indicators such as the FOL development are very positive) rather than from FTAs negotiations. In any case, financial sectors such as banking and insurance may still see a little boost in the form of rising demand in L/C service or cargo insurance as a result of increasing trade flow. Retail and Wholesale Distribution (Mobile World - MWG, Petrosetco - PET, FPT) The retail and wholesale industry has already gone through an extended period of transformation from the momentous WTO signing in 2007 that we believe the competitive landscape will be relatively unaffected from the FTA negotiations. The pledges made by the Government in the WTO to open up the industry have been very specific. These include terms that detailed the level of market access, the type of goods, the scale and requirements to expand the distribution network that foreign competitors were allowed.

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Though similar to the financial services sectors with certain restrictions remaining in place, the current terms still imply a high degree of openness to foreign players. As such, we believe it is improbable that any FTA negotiation could have further material impact on regulatory changes of the industry beyond what has been committed through the WTO Agreement. In our current understanding, we see little impact, if any, on the current listed retailers (such as MWG or FPT Shop, a division of FPT) or wholesalers (such as PET, PSD or the upcoming Digiworld). Conclusion The exercise we have conducted demonstrates that export-heavy sectors (such as textile and fisheries) should benefit the most from the upcoming FTAs, whilst certain services sectors (such as port operation, industrial park and construction) should also see greater level of activities thanks to growing trade flow. As with any opportunity, these trade agreements also hold a number of challenges for domestic companies, mostly in the form of rising competition from the abolition of import tariffs. Determining the eventual impact of this may be difficult, but we also view this as a chance for domestic players to raise their game and compete on a level playing field with multi-national companies. Not stopping at just simple increase in trade flow, the FTAs are also expected to positively impact the economy by paving the way for more technological

transfer and training. This should raise both the productivity and competency of the labour force. Overall, in our view, the developments of the FTAs over the next couple of years will be an exciting time for an export-focused economy such as Vietnam.

ASEAN + 6: ASEAN FTAs with China, Japan, South Korea, India, New Zealand and Australia

Impact of FTAs on Listed Stocks by Sector

Textiles Strongly Positive

Fisheries Positive

Logistics Positive

Infrastructure Positive

Industrial Parks Positive

Property  Slightly Positive

Cement Slightly Positive

Pharma Negative

F&B Slightly Negative

Tires Slightly Negative

Steel  Slightly Negative

Fertilizer Neutral

Plastic Neutral

Retail Neutral

Wholesale  Neutral

Sector Overall Impact

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OVERVIEW Various indicators point toward Vietnam’s economic growth transitioning from being export-led to being more balanced between the external and domestic sectors. This trend is very encouraging and should lead to steadier and more sustainable growth. And given where Vietnam is at this stage of the economic cycle, there is good reason to believe that equities are the place to be invested for the foreseeable future. GROWTH SHIFTS TO DOMESTIC SECTOR 2Q15 GDP Growth Highest Since 2007 Second quarter 2015 GDP grew by 6.44% yoy, the highest 2Q growth since 2007. The resulting 6.28% 1H2015 yoy growth is a significant acceleration compared to the same period last year.

Driven By Expansion of Domestic Sector In key sectors of the domestic economy, manufacturing grew by 9.6% while wholesale and retail sales rose by 8.4% yoy. These numbers confirm our ongoing thesis that manufacturing is strengthening and consumption is recovering, making our seemingly aggressive 6.6% annual GDP target practically a consensus forecast now.

Job Creation Up, Job Destruction Down After many years of ever larger numbers of companies closing down, 1H2015 saw 5.8% fewer companies fail compared to the same period last year. At the same time, there were 45,400 business startups, and these startups will create an estimated 650,000 jobs, +20.5% compared to 1H2014. This is yet another indication of a turnaround in the domestic economy. Strong Pick-up in Consumer Confidence The ANZ-Roy Morgan Vietnam Consumer Confidence Index rose sharply to 143.1 in June 2015, a new record high. For some time, the Vietnamese recovery has been dichotomous, characterized by an out-performing external sector and an under-performing domestic and household sector. The record high consumer confidence index is clearly pointing to that dichotomy starting to yield to a more balanced economic performance. And with consumer confidence at a record high, it is clear that the economic recovery is both broadening and strengthening. Validated By Increase in Retail and Auto Sales Retail sales in 1H2015 grew 9.8% to a five-year high, showing that domestic activity is gradually recovering to historical double-digit levels. The first five months’ auto sales posted a strong increase of 69% from the same period last year, with sales for commercial purposes up over 70%. A strong acceleration of auto sales likewise hints at a meaningful recovery in domestic consumption and confidence. Total Property Units Sold Reaches Record High Supported by a recovering economy, high demand from a rising middle-income class and better confidence, the property market continued to recover well into 1H2015. Analysts were caught by surprise last year as the total number of apartments sold in Ho Chi Minh City (HCMC)

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ECONOMY: BALANCED GROWTH AND A TIME FOR EQUITIES

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Window on Vietnam 3Q2015 shot up 250% in 2014 as compared to 2013. In 1H2015,

the total number of apartments sold in HCMC was estimated at 16,000 units, almost equal to the number of units sold in the whole of 2014. Higher Growth With Lower and Stable Inflation Despite the oil price recovering by 20% in 2Q and a 10% increase in retail electricity prices, headline inflation remained stable at a low level at 0.55% ytd and 1% yoy. Low inflation with high domestic growth indicates that Vietnam’s economy is running below its potential capacity and hence inflation risk should remain low for quite some time. We retain our 2015 inflation forecast at 2.5% versus 2% in 2014. The marginally higher expected inflation for 2015 can be explained by the large drop in the oil price in 2014 – something unlikely to be repeated this year. ECONOMIC CYCLE A Simplified Model of the Cycle Given where Vietnam is now in its growth cycle, and muted inflation, we think it is a good time to revisit a simplified description of economic cycles. In short, economies go through different cycles, namely reflation, recovery, overheating and stagflation. Each cycle is uniquely defined by the direction of GDP growth relative to the trend, and the direction of inflation. Each of these phases is linked to the outperformance of a specific asset class and a different interest rate cycle. During reflation, bonds are expected to perform best, whilst during recovery, stocks tend to outperform. Vietnam Well into Recovery Phase From 2Q2010 to 2Q2011 Vietnam was in the stagflation phase with rapidly rising inflation and slowing GDP growth. In 3Q2011, Vietnam entered the reflation phase where growth was sluggish, profits were weak and real yields dropped as inflation decelerated. In 1H2013, growth bottomed. Inflation in 2013 and 2014 posted 6% and 2%, respectively.

Given inflation around its bottom and GDP growth approaching 7% in the next 1-2 years, Vietnam has moved well into the recovery phase where equities are the right asset class and interest rates are approaching their bottom. Divergence in Interest Rates After falling continuously for three years, bond yields finally bottomed out: The 2-year bond yield dropped from 13% in May 2011 and bottomed out at 4.1% in October 2014. The yield tested the bottom again in March 2015 before rising to 5.2% as of the end of May 2015. However, lending rates continued to drop another 20 bps in 2Q2015 to reach approximately 8.9%.

The divergence in interest rates indicates that banks are now more willing to shift from low risk government bonds into the higher returns available in retail and corporate lending. This couples with the recovery of the economy, resulting in 6.3% credit growth in 1H2015, a significant acceleration compared to the 3.72% growth at the end of June last year.

The SBV expects that credit growth will meet the target of 13%-15% this year and stated that it may lift the target

Figure 6: Loan and Deposit Growth Rates

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Figure 4: Economic Cycle

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Window on Vietnam 3Q2015

to 17% to accommodate faster economic expansion. That would be the fastest growth of credit since 2011. Despite lower core inflation, we don’t expect lending rates to drop further as we observed deposit rates pick up by 10 bps in mid-June, the first increase in years. We believe that stable lending rates actually provide a better environment for generating credit demand.

Exchange Rate and Foreign Trade After a 1% adjustment at the beginning of January 2015, on 7 May 2015 the SBV adjusted the US$/VND reference rate down another 1% from VND 21,460 per US$ to VND 21,673. This was done to compensate for the recent weakening of regional currencies against the US$. Peer currencies have depreciated 2%-10% since September as the dollar gained strength. Even with the VND strengthening against most peers in the last six months, Vietnam’s exports still outperformed its peers strongly.

Estimates show a trade deficit in the first 6M2015 of $3.7bn. Export growth in 6M2015 was around +9.3%, led by falling commodity exports in both price and quantity: coffee -35% yoy; oil -45%. Export growth has started improving from the low of 6.9% in 1Q as the impact from low commodity prices fades. Manufacturing exports continue to perform well: In 6M, smart phone exports grew 27% while electronics exports rose 60%.

Import turnover in 5M2015 increased 15.8%. Most import components have already slowed since April, except for autos, which saw a 95% increase due to a truck load limit policy imposed by the Transport Ministry.

The surge of 1Q imports was exacerbated by speculation on a depreciation of the VND. Firms tried to import machinery and capital goods before any depreciation of

the Dong, which has since occurred at the beginning of May. Thus, although we continue to see improving local demand, we expect import growth to slow. We forecast exports and imports to grow by about 10% and 15.5% respectively in 2015. As such, we revise up our trade deficit forecast to $6-7bn, or 3%-3.2% of GDP.

After three years of a slight trade surplus because of deleveraging and restructuring, we are getting back to trade deficits again. We think a trade deficit at 3-4% of GDP is reasonable and healthy at this stage of Vietnam’s development, as local demand usually grows much faster than external demand. Note that before the boom and bust in 2007, Vietnam’s trade deficit was about 7%-10% of GDP during 2002-2006.

We see this adjustment in the currency as a correct and timely move that will better reflect the market rate, support Vietnamese exports in the long run, and help attract more investment. Given the expected current account surplus this year and sizeable FX reserves, we believe the SBV is able manage the effective VND/US$ rate around its mid-rate. However, we think the SBV may adjust the Dong by another 1% by year end if the US$ continues to strengthen.

CONCLUSION Vietnam’s economic recovery is gathering strength: GDP, production, sales, property, confidence - all are on the upswing. Credit growth, the missing piece for the last four years, has come back. If things continue this way, Vietnam’s economy should perform very well indeed. And, if the TPP and EU-FTA are signed, Vietnam’s economy will go through a significant transformation that should further propel growth - for many years to come.

18,000

18,500

19,000

19,500

20,000

20,500

21,000

21,500

22,000

22,500Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Jul-14 Jun-15

Interbank Rate

Official Rate

Figure 7: VND / USD Exchange Rates

Source: Reuters, SBV, DC

Figure 8: Balance of Trade

(24)

(20)

(16)

(12)

(8)

(4)

0

4

(18)

(15)

(12)

(9)

(6)

(3)

0

3

02 03 04 05 06 07 08 09 10 11 12 13 14 15F

%$bn

Deficit (LHS)

Deficit/GDP (RHS)

Source: GSO, DC

Page 12

Window on Vietnam 3Q2015

OVERVIEW Banking stocks continued their run this quarter, propelling the overall market higher. Several market-positive policies were also enacted by the Government. With these changes, together with the Vietnamese equity market’s low valuations, there is no reason why this rally shouldn’t run a bit more.

MARKET PERFORMANCE The VN Index returned to the fast track in 2Q15, rising 7.6% and closing the first half of the year at 593. Average daily turnover improved to $84m, up 4% qoq, though this level is still 17% below the 2014 average. Foreign investors also returned en masse, becoming net buyers for all three months in the quarter and injecting $178m into HoSE. This represented the strongest quarterly inflow since 2Q14.

The advance of the index was not without drama, though. After an initial 3% rally in the first two weeks of April, the VN Index tumbled over 7% from its peak to hit a ytd low at 528. The fall of the index somewhat coincided with the dampened sentiment surrounding the banking sector. This was primarily due to the approval of adverse swap ratios for the acquisitions of smaller banks by the three biggest listed State-Owned Commercial Banks (SOCB) as part of the SBV’s efforts to restructure the sector. Interestingly, the negative sentiment did not extend to foreign investors as foreign flows into the banking sector remained resilient throughout. The sector ended up attracting $88m from abroad and accounted for 49% of total foreign inflows in 2Q15. This was not entirely surprising. As we noted in our last WoV, banking stocks were largely overlooked over the last few years and the recent surge in the sector (which has been the most heavily weighted sector in the Index since 1Q15) certainly has attracted the attention of portfolio managers, both domestic and foreign.

Eventually, on the back of relentless foreign buying and buoyed by a flurry of policy developments (which we will detail below), banking stocks once again led the index, which staged a remarkable turn-around in the second half of 2Q15, ending the quarter up 12% from its low.

Picking up where it left off, the banking sector rallied another 25% in 2Q15 on top of its 14% gain in the first quarter. The sector’s weight in the VN Index rose to 29% by the end of the quarter as VCB (+40% qoq, +53% ytd) overtook GAS to become the most valuable listed company in Vietnam by market cap. Other SOCBs also performed well, with BID gaining 31% (+80% ytd) and CTG advancing 15% (+43% ytd).

The rise in banking stocks since the start of 2015 has been nothing short of phenomenal. But it was not without reason: Pre-provision operating profits rose 21.5% yoy in 1Q15 thanks to higher credit growth and increasing net interest margins. Nevertheless, despite a favorable outlook, the valuations of top banks have started looking a bit stretched. VCB, for example, is currently trading at a forward PB of 2.9x, BID at 1.6x, and CTG at 1.2x (though CTG’s asset quality is believed to be inferior to the other two banks).

MARKET: A TALE OF BANKS AND POLICY CHANGES

Source: Bloomberg, DC

Figure 9: VN Index 2007-15

0

50

100

150

200

250

300

350

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1,100

1,200

Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15

Volume (RHS)VN Index (LHS)

$m

Figure 10: Foreign Inflows into Banks vs. VNI

-16

-11

-6

-1

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-15

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1-Apr 16-Apr 1-May 16-May 31-May 15-Jun 30-Jun

Net foreign flow into VNI (RHS)Net foreign flow into Banking (RHS)VNI Change (LHS)Banking Index change (LHS)

% $m

Source: Bloomberg, DC

Figure 11: Banks as Percentage of VN Index

20

21

22

23

24

25

26

27

28

29

30

5-Jan-15 3-Feb-15 4-Mar-15 2-Apr-15 1-May-15 30-May-15 28-Jun-15

%

Source: Bloomberg, DC

Page 13

Window on Vietnam 3Q2015

The brokerage sector also had a notable performance in the quarter, with HCM +21% and SSI +19%, driven by supportive policy developments for the industry. The first of these measures was that 100% foreign ownership of listed brokers will soon be allowed. Furthermore, the State Securities Commission (SSC) recently circulated a draft proposal which outlined the basis for intraday trading, albeit initially, this would be possible for stocks within the VN30 and HNX30 baskets only. The proposed requirements for brokers eligible for this service (charter capital on the plus side of VND 800bn and CAR of at least 240%) should pave the way for further consolidation within the industry. On a separate but no less encouraging note, the SSC also revealed that it is working on shortening the payment period from T+3 to T+2. Once implemented, this would naturally improve the market’s liquidity. East Sea Tensions Throughout the quarter, geopolitical tensions over the East Sea were simmering with the land reclamation by China on Fiery Cross Reefs (part of the Spratly islands). The move attracted heavy criticism from certain international quarters as China started the construction of an airstrip on the island, which may be used for military purposes. Fearing a repeat of last year’s spectacular collapse, Chinese oil rig movements in the East Sea and news of land reclamation were closely monitored, with some even attributing the fall of the VN Index in mid-April to these events. In our view, the geopolitical tensions over the East Sea will be, regrettably, an on-going theme for many years to come. Whilst far from ideal, unless there is an escalation of the conflict, either in the form of confrontation over sea or land, we believe the impact on the stock market will not be material. POLICY UPDATE A policy-heavy quarter, in addition to the draft circular on intraday trading and the shortening of the payment period

as mentioned above, there was also a pivotal announcement regarding foreign ownership limits (FOL). FOLs – A Two-Year Promise, Finally Delivered On 26 June, the government passed a decree, effective from 01 September 2015, which will open up foreign ownership limits in public companies. Besides directly lifting the FOL to 100% (conditional on classification of business lines), this decree also laid the foundation for possible future Non-voting Depository Receipts (NVDR), which would allow foreign investors to even own equity stakes in companies in which FOLs are full. While the details of this decree are still being worked out, we view it as an important milestone in the liberalization of Vietnamese financial markets. It signals a change in the Government’s philosophy toward foreign indirect investors as they have done to foreign direct investors. It is also an essential step toward qualifying for the MSCI Emerging Market classification, a status that, if achieved, could help Vietnam bridge the gap in valuation to its regional peers. (Vietnam’s stock market is trading at a 40% discount to its peers.) This would lead into a new phase of multiple expansion in the equity market. IPO / PRIVATISATION UPDATE This quarter only saw one major SOE IPO, and that was Saigon Port, a household name in the industry. A brief look at the company’s financial statements did not make for exciting reading, with a four-year revenue CAGR of 1% and low-single-digit ROEs. The IPO did attract some big names, such as Vincom, Vietin Bank and VP Bank, all of which were most likely interested in the company’s land bank in prime riverside locations rather than the immediate outlook of its port operation business. The IPO was sold out in the end, though the eventual buyers are still unknown at this point. In any case, Saigon Port’s IPO is perhaps more suitable to project developers than pure financial investors at this point. Other big-name privatizations, such as Mobiphone, ACV, SATRA and VISSAN, did not have notable updates during the quarter. We are, however, still expecting them to be completed within 6-12 months. In addition to the SOE privatization, we are also keenly looking forward to the IPO of large private names such as Vietjet Air.

EQUITY OUTLOOK In our previous note, we had expected the early part of 2015 to be a period of consolidation and deepening for the stock market. Thus far, the market’s performance has somewhat mirrored our expectations with a respectable 8.6% gain in 1H15. Our main concern was the equity supply potentially on

Figure 12: Comparison of Bank Valuations

Source: Bloomberg, DC

Bank

Market

 Cap

($m)

Total

Assets

 ($ m)

2015F

PBR

2015F

PER

2015F

Yield

2015F

ROE

BID 3,485 34,102 1.69 12.03 4.8% 15.7%

CTG 3,625 33,234 1.26 12.42 5.3% 10.7%

VCB 6,296 28,647 2.76 24.35 1.8% 11.7%

ACB 892 9,098 1.43 15.62 3.4% 9.3%

STB 991 9,527 1.06 10.28 4.6% 10.8%

EIB 754 8,010 1.05 12.99 0.0% 8.4%

MBB 1,088 10,620 1.02 8.33 4.6% 15.6%

SHB 341 8,532 0.61 8.22 9.1% 7.9%

Page 14

Window on Vietnam 3Q2015

offer this year limiting the upside of the market in the short term. However, a wave of policy updates in the second half of 2Q15 have offset the potential oversupply. Specifically, the announcement of the decree on raising FOLs was a momentous development in terms of accessibility for foreign capital. We believe the policy will be critical in both helping the VN Index close the valuation gap with regional peers as well as absorbing the coming supply. Taking into account our view of strength in the macro outlook, the deepening process of the stock market and the commitments the government has shown in delivering financial reforms, we are becoming more and more hopeful about the prospects of a sustainable uptrend in the VN Index in 2H15 and beyond. Competing Investment Channels The property sector continued to thrive in this quarter. According to CBRE, condominium sales in HCMC hit a historical high quarterly absorption (10,000 units sold, up 94% qoq) while Hanoi’s market also saw multi-year high quarterly absorption (4,480 units sold, up 46% qoq). These numbers once again underline the firm recovery of the property market.

However, we still hold a negative view about the other investment channels such as term deposits (deposit rates are still at the bottom of the cycle) and gold bars (a stagnant market after the clampdown from the SBV on gold bar trading).

VALUATIONS

Market Valuation

As at 30 June 2015, our Top 50 companies are forecast to deliver 5% EPS growth yoy for the 2015FY, implying a forward PER of 12.5x. The modest EPS growth this year is primarily due to the expected fall in profits of oil and gas companies (GAS -32%, PVD -13% and PVS -20%).

Additionally, both VIC and HPG profit forecasts for 2015 are down 18% and 17% respectively due to the timing of real estate booking. On the other hand, we currently leave out a one-off profit from KDC (which is going through a business transformation); if included, this would raise our top 50 forecast EPS growth to 16.2%. Looking forward to 2016, EPS growth is expected to accelerate to 19.3% thanks to (1) strengthening of banking sector earnings (+18% yoy); (2) recovery of oil and gas sector earnings (+18% yoy); and (3) a further reduction of the CIT to 20% from 22% currently.

Relative Valuation

Compared to its regional peers, the case for Vietnam has not changed much, with the TTM PER of the VN Index at just 12.6x, the second-cheapest in the region, which has a median PER of 20.9x.

This is even more compelling when we remove the five largest companies, which tend to skew the market’s PER toward to the higher side (except in the case of China). At just 10.8x PER Vietnamese market becomes the cheapest in the region by some margin with, arguably, an even brighter growth story in 2016 than its more expensive peers.

We believe that the recent promising development of the market both in terms of size and liquidity will help erase this discount fairly soon, especially if Vietnam succeeds in attaining emerging market classification.

Figure 13: Vietnam Top 50 Ratings

Top50 All-In 2013 2014 2015F 2016F

PER (x) 13.7 13.7 12.5 10.6

EPS Growth (%) 19.1 3.0 5.5 19.2

PEG (x) 0.7 4.6 2.3 0.6

Sales Growth (%) 7.4 20.5 13.4 16.8

EBIT Growth (%) 11.2 11.5 15.5 18.6

PBT Growth (%) 20.3 3.6 7.2 19.3

NPAT Growth (%) 22.6 4.6 7.8 19.6

Net DER (x) 0.2 0.3 0.2 0.2

PBV (x) 2.3 2.1 1.7 1.6

Yield (%) 3.8 3.2 3.1 3.1

ROE (%) 17.7 16.3 14.2 15.6

Figure 14: Vietnam Top 50 Ratings Ex-Property

Source: DC

Source: DC

6.0

8.5

11.0

13.5

16.0

18.5

21.0

23.5

26.0

Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15

INDOPHI

THAIINDIACHI

MAL

VIET

PAK

X

Figure 15: Regional Trailing PER Comparison

Source: Bloomberg, DC

Top50 Ex-Prop 2013 2014 2015F 2016F

PER (x) 14.0 13.2 12.0 10.3

EPS Growth (%) 7.0 8.8 5.5 16.7

PEG (x) 2.0 1.5 2.2 0.6

Sales Growth (%) 5.8 19.1 12.6 13.6

EBIT Growth (%) 6.8 8.4 13.6 15.2

PBT Growth (%) 9.1 8.7 8.2 15.8

NPAT Growth (%) 10.0 10.3 7.9 17.0

PBV (x) 2.3 2.1 1.8 1.7

Yield (%) 4.1 3.6 3.9 3.9

ROE (%) 17.2 16.8 15.4 17.1

Page 15

Window on Vietnam 3Q2015

CONCLUSION We hold the view the Vietnamese stock market is now in a sweet spot for investment as it offers good value (PER of 12.6x vs. regional median PER of 20.9x) with an exciting growth outlook (Top 50 - 2016 EPS growth of 19.3%) and an ever-improving macro picture (2016 GDP growth of 6.8%). In our previous WoV note, we had expected the market to take one to two quarters (up to 3Q15) for further consolidation and deepening, mainly because of the potential equity supply both from existing companies and from IPOs / Privatisations. However, a host of policy updates have boosted investor sentiment and attracted notable inflows into the market, which will make for an exciting second half. Looking at 2016 and beyond, the positive effect from the decree on FOLs and the upcoming FTAs, in particular TPP, should improve long-term market prospects considerably, especially if emerging market status is achieved.

Figure 16: Ex-Top 5 Trailing PER

CHINA

INDIA

THAILAND

PHILIPINES

MALAYSIAINDONESIA

PAKISTAN SRI LANKA

VIETNAM9

11

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17

19

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31

0 1 2 3 4 5 6 7 8 9 10

x

Source: CLSA, CS, Bloomberg

Source: CLSA, CS, Bloomberg

Figure 17: Ex-Top 5 Trailing PBV

CHINA

INDIA THAILAND

PHILIPINES

INDONESIA PAKISTAN

MALAYSIA

SRI LANKA

VIETNAM

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

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3.2

3.4

x

Page 16

Window on Vietnam 3Q2015

Key Indicators

APPENDIX 1: MACRO

Item Unit 2009 2010 2011 2012 2013 2014E 2015F

GDP $bn 100.8 114.0 133.5 155.8 172.1 184.1 202.1

Real GDP Growth % 5.3 6.8 5.9 5.3 5.4 6.0 6.6

Services Growth % 6.6 7.5 7.0 5.9 6.6 6.7 7.0

Agriculture Growth % 2.0 2.8 4.0 2.7 2.7 3.0 2.6

Ind'l and Const'n Growth % 5.5 7.7 5.5 5.8 5.4 6.2 8.0

Retail Sales Growth % 18.6 24.5 24.2 16.0 13.5 12.0 14.0

CPI % 6.5 11.8 18.1 6.8 6.0 1.8 3.0

Money Supply M2 % 26.2 29.7 11.9 24.5 18.0 16.0 18.0

Average Lending Rate % 10.0 13.1 20.1 17.9 13.2 9.7 8.6

5-yr VGB % 11.7 11.5 12.6 9.8 8.2 5.2 6.5

VND : $ $1 18,500 20,700 21,200 20,850 21,250 21,350 22,032

Trade Balance $bn (11.8) (12.6) (9.8) 0.8 0.0 1.9 (6.1)

Current Account $bn (6.6) (4.3) 0.2 9.1 6.8 6.0 8.3

Current Account / GDP % (6.6) (3.8) 0.2 5.8 4.0 3.3 4.1

FDI Registered $bn 12.0 19.0 14.7 13.2 21.6 14.0 13.5

FDI Disbursement $bn 10.0 11.0 11.0 10.5 11.5 12.5 13.1

FDI Net Disbursement $bn 7.6 8.0 7.4 8.4 8.3 7.9 8.6

FX Reserves $bn 16.5 12.4 13.5 25.6 32.1 37.2 41.2

External Debt $bn 34.7 40.4 49.6 58.4 63.2 68.5 75.5

External Debt (% GDP) % 34.4 35.4 37.2 37.5 36.7 37.2 37.4

Fiscal Balance (% GDP) % (6.9) (5.5) (4.5) (5.4) (5.5) (5.3) (5.1)

Source: IMF, MOF, GSO, WB, DC

Top-Down

Prices

Money, FX & Interest Rates

External Sector

Public Debt & Fiscal Balance

Page 17

Window on Vietnam 3Q2015

Top 25 Companies

APPENDIX 2: MARKET

Key Stock Market Data

Sources: BBG,DC

30-Jun-14 30-Jun-15 30-Jun-14 30-Jun-15 30-Jun-14 30-Jun-15

Market cap (USDm) 47,818 50,728 5,873 6,590 53,691 57,319

Number of stocks 300 304 360 361 660 665

Number of large cap stocks (> USD 400m) 19 19 3 3 22 22

Stocks with no room for foreigners 23 24 4 3 27 27

Market cap of stocks with no room (USDm) 8,492 9,606 888 1,018 9,381 10,625

Share of Market Cap with No Room (%) 17.8 18.9 15.1 15.5 17.5 18.5

HSX HNX Total

30-Jun Price Mkt Wt

No Company Price YTD Cap in VNI 2014 2015F 2016F 2014 2015F 2016F 2014 2015F 2016F

(VND) (%) ($m) (%) (x) (x) (x) (x) (x) (x) (%) (%) (%)

1 Vietcombank 48,800 53.0 5,961 11.8 28.3 24.4 20.6 2.9 2.8 2.5 2.0 2.0 2.0

2 PV Gas 62,000 -12.1 5,384 10.6 8.3 12.2 10.2 3.3 3.0 3.0 6.5 4.8 4.8

3 Vinamilk 113,000 18.3 5,180 10.2 18.6 15.9 13.7 5.7 5.0 4.3 3.5 3.5 3.5

4 Vingroup 43,500 14.7 3,659 7.2 24.2 29.4 16.5 3.1 3.4 2.8 1.6 2.3 2.3

5 Vietinbank 19,200 39.1 3,277 6.5 12.5 12.5 11.2 1.3 1.3 1.2 5.2 5.2 5.2

6 BIDV 22,100 74.0 2,848 5.6 12.6 12.6 10.4 1.9 1.8 1.6 4.6 4.1 4.1

7 Masan Group 81,000 -2.4 2,732 5.4 55.1 35.6 37.7 4.0 3.3 3.3 0.0 0.0 0.0

8 Bao Viet Holding 41,000 28.1 1,279 2.5 22.2 22.5 20.7 2.3 2.2 2.2 2.4 2.4 2.4

9 Sacombank 18,600 3.3 974 1.9 10.5 11.2 10.3 1.2 1.1 1.0 0.0 0.0 0.0

10 Hoa Phat Group 28,900 -18.2 971 1.9 6.6 8.0 7.5 1.2 1.8 1.8 3.5 6.9 6.9

11 FPT 46,400 11.2 845 1.7 11.2 9.8 7.3 2.0 2.1 1.9 4.3 4.3 4.3

12 ACB 20,500 33.1 842 - 20.2 16.3 12.3 1.5 1.4 1.3 3.4 3.4 3.4

13 Military Bank 15,100 15.3 802 1.6 7.1 8.3 7.0 1.1 1.0 0.9 4.6 6.6 6.6

14 Eximbank 13,000 1.6 733 1.4 286.4 13.0 9.7 1.1 1.0 1.0 6.5 6.5 6.5

15 HAGL 19,000 -14.0 688 1.4 10.2 8.4 6.6 1.1 1.0 1.0 0.0 0.0 0.0

16 PV Drilling 52,500 -18.6 633 1.4 6.6 7.6 7.2 1.2 1.1 1.3 3.3 3.3 3.3

17 PV Technical Services 26,900 0.0 551 - 6.6 8.3 7.0 1.3 1.2 1.2 4.5 4.5 4.5

18 PVFCCo 29,700 -3.6 517 1.0 10.3 8.6 7.7 1.3 1.2 1.2 10.1 8.4 8.4

19 SSI 24,300 6.0 476 0.9 13.9 13.9 12.7 1.5 1.8 1.8 0.0 4.1 4.1

20 Mobile World 73,500 -15.7 471 0.9 14.7 11.5 9.8 5.3 4.3 3.0 0.0 0.0 0.0

21 Kinh Do Corp 42,800 -14.2 461 0.9 18.7 21.2 17.7 1.8 1.7 1.7 4.7 4.7 4.7

22 Kinh Bac City 15,500 -2.5 334 0.7 16.9 14.1 13.4 1.1 1.0 1.0 0.0 0.0 0.0

23 Saigon Hanoi Bank 8,200 1.2 333 - 9.2 8.2 6.7 0.7 0.6 0.6 0.0 0.0 0.0

24 Ha Tien 1 22,800 31.0 332 0.7 23.6 17.7 16.8 1.9 1.8 1.8 0.0 0.0 0.0

25 REE 26,900 -4.6 332 0.7 6.7 7.1 6.2 1.2 1.1 1.0 5.9 3.7 3.7

PER PBV Yield

Window on Vietnam

CONTACTS

DRAGON CAPITAL REPRESENTATIVE OFFICE

Ho Chi Minh City

1901 Me Linh Point

2 Ngo Duc Ke

District 1, Ho Chi Minh City

Vietnam

Tel: +84 8 3823 9355

Fax: +84 8 3823 9366

© Dragon Capital 2015

CONTRIBUTORS

BILL STOOPS

Chief Investment Officer

billstoops@dragoncapital.com

Mob: +84 908 015 830

TUAN LE ANH, PhD

Director of Research

Chief Economist

tuanleanh@dragoncapital.com

Mob: +84 937 661 448

TUAN VO NGUYEN KHOA

Economist

tuanvo@dragoncapital.com

Mob: +84 989 984 273

TUAN BUI MINH

Senior Analyst

tuanbui@dragoncapital.com

RANDY BRINGOL

Senior Editor

randybringol@dragoncapital.com

Page 19

Window on Vietnam 3Q2015

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