Thump Thump

Ian Gisbourne of UBS has published a 50-page thumper on Vietnam macro. It reads well. Here are some of the more notable points in it from MM’s viewpoint:


  • Internet penetration in Vietnam is quite high: at 44% as of mid-2014, third highest in Asia after Malaysia (67%) and China (47%). This is quite remarkable for a country towards the tailing end of GDP per capita in the region, and speaks well to Vietnam’s relatively good basic education and proactivity to modern trends.
  • Vietnam is the only market in Asia still about half off its all-time high (which was 2008 in Vietnam’s case). Simple metrics like this are always noteworthy.
  • A reminder that TPP, should it duly happen, will be more beneficial for Vietnam than for any of the other 11 countries. The study cited in the report shows a 14% uplift to GDP eventually emanating from TPP for Vietnam, at least six times bigger a boost in relative-to-GDP terms than for any other signatory.
  • Speculation on the stock market foreign ownership limit is back on the front burner again. Of course disappointment at nothingness has been the result on this for years already, but perhaps this time there really is something in the air. Gisbourne cites the logic of a Thai-style NVDR system (long MM’s favoured route). Other commentators such as SSI are talking about a limit-free environment for shares except in the specific sectors of banking, insurance, telecom, pharma and security. Both of these seem more sensible than the previous suggestion of a 60% limit, which to MM had no policy making rationale.
  • The possibility of an MSCI upgrade from “frontier” to “emerging” is also mentioned. MSCI typically reviews markets each June for a possible move 12 months hence. When this happens (it is only a matter of time), it will have a big positive market impact. The problem is that the criteria are qualitative/subjective, so it is difficult to do anything other than speculate on the timing of this.
  • The report of course alludes to the de rigeur universally acknowledged weak points of the banking sector NPL issue and the slowness of SOE reform. UBS avoids dramatic opinions on these thorns (daggers?). In coming articles MM will attempt to stick his neck out on them.
  • There is a raft of handsome-sounding reforms this year on enterprise law, property ownership, red tape, and bankruptcy law. It is difficult to assess their impact, because of the one-party system and associated implementation doubts. Progress on these is worth watching to assess their true import.
  • The final takeaway from the report is one that is not mentioned in it. Has this ostensibly uncommercial thumper been produced to help UBS’s investment bankers steal the rug out from the more-established-in-Vietnam CSFB to win the next big lucrative Vietnamese capital market deal or deals? Another sovereign bond issue on the way following last November’s 4.8% coupon success; trying to be a player in the not-too-distant Mobifone sale – these two possibilities spring to mind.


Mekong Man

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