This year is predicted to be tough due to factors such as inflation, high-interest rates and the Ukraine-Russia conflict. But companies in Viet Nam say they have strategies to overcome the challenges. Viet Nam News reporters Thu Ngan and Vu Hoa ask senior executives where they think the Vietnamese economy and their own sectors are headed.
Nguyen Thanh Tung, deputy general director of Vietcombank:
Nguyen Thanh Tung, deputy general director of Vietcombank
According to experts and international organisations, 2023 will be a year with many difficulties because we will continue to face inflation and potential risks in the real estate market and corporate bonds. In 2023, it is necessary to have more effective and quality solutions for granting credit.
This year, Vietcombank will continue to play the leading role of a state bank of Viet Nam in implementing monetary policy. Therefore, we are committed to maintaining the deposit interest rate at a reasonable level, saving costs and maintaining a low lending interest rate compared to the market to support businesses and consumers in life and production.
In addition, from the beginning of 2023, we will continue to reduce the lending interest rate for customers. This is a practical programme to support customers who want to invest in a business right from the first months of the year.
In the context of a volatile market in 2023, Vietcombank will focus on credit quality, prioritising manufacturing industries and essential areas of the economy. We will continue strictly controlling potentially risky sectors such as real estate, stock, corporate bonds and BOT.
Strengthening risk control and management will be one of our key tasks this year. We will build three layers of protection, applying international practices to ensure that the bank manages risks effectively, thereby delivering better performance for the year.
To improve competitiveness, in 2023 and the following years, Vietcombank will invest in digital transformation. We think the successful application of digital transformation in the management system and the development of products and services on the digital platform could support Vietcombank to manage more effectively. In addition, digital transformation is an essential factor that helps the bank develop products and services on a digital platform, better meeting customer needs.
Through investing in digital transformation, the closer connection between Vietcombank and customers will also be effective and safer for our customers.
Ha Ngoc Son, general director of TV.Pharm Pharmaceuticals JSC:
Ha Ngoc Son, general director of TV.Pharm Pharmaceuticals JSC
The pharmaceutical industry has weathered the greatest challenge posed by COVID-19, as demonstrated by rapid innovation and new technologies developed in times of crisis.
In this volatile context, TV.PHARM has demonstrated the bravery, agility and especially the responsibility of the pharmaceutical manufacturing unit for public health. TV.PHARM is among the few businesses that have strongly grown the pharmacy channel, clearing goods amid the supply chain challenges of the whole industry.
Notably, building product quality to enhance the value of product positioning is the most critical content in our development plan.
In the 30-year journey of construction and development, 2022 was a milestone marking impressive growth in the pharmaceutical industry and rising higher on the prestigious rankings with the quality of our products. The company was qualified to become a National Brand of Vietnam (an appraisal and honour of the Ministry of Industry and Trade) on November 3, 2022.
TV.Pharm was honoured in the Top 10 prestigious pharmaceutical industries in Viet Nam. This is the second time in a row that the company has appeared in this ranking. The company was also named in the Top 500 Most Profitable Enterprises in Viet Nam in 2022, and Top 500 Fastest Growing Enterprises in Viet Nam of the FAST500 Ranking.
These titles are the driving force behind TV.PHARM to promote the development of production capacity and maintain the company's position in the domestic pharmaceutical market.
Ben Gray, director of Capital Markets, Knight Frank Vietnam:
Ben Gray, director of Capital Markets, Knight Frank Vietnam
Companies and individuals with direct exposure to real estate via investing or developing should be bracing themselves for a tough year in 2023 as access to capital onshore continues to be challenging.
Banks have been advised by the State Bank of Viet Nam this month that they may look to expand credit 'room' by 1.5-2 per cent -- and this is well received from a senior lending perspective. It does not address the negative sentiment investors, and the banks have towards the real estate sector as we ended 2022 and enter 2023.
The impact of this negativity is the cost of capital -- the pricing of debt or equity -- raised from the capital markets or traditional lending is prohibitively high and will remain so well into the second half of next year.
Vietnamese companies with strong balance sheets and without refinancing events in the year's first half will be well placed to weather the storm. Those not so well positioned will have to make painful decisions to sell assets or look to private credit to provide liquidity for projects.
Knight Frank Vietnam can react quickly to these changing Vietnamese market dynamics in support of our clients in these more challenging times. We can continue to offer the services they seek in a tailored and highly focused manner. As a locally owned partnership, we can drive our top line in the country when the markets are expanding, and we can continue to do so when the markets are contracting. We are looking forward to a challenging yet robust 2023.
Kim Thien Quang, CEO of Maybank Investment Bank Vietnam:
Kim Thien Quang, CEO of Maybank Investment Bank Vietnam
The year 2023 will likely see our anticipated rebound face continued threats from inflation and developer's deleveraging. The former has replaced forex volatility as the top concern for the central bank given the Tet (Lunar New Year) break, China’s reopening, a potential electricity price hike, and the low base in 2022. Headline inflation has shot past 4 per cent for the third month in a row, while core CPI jumped by 5 per cent year-on-year in December 2022. This threatens to keep monetary policies tight throughout 2023, sending the economy into a prolonged cyclical downturn.
Maybank Investment Bank Vietnam is prepared for the worst-case scenario. While the high level of retail participation in the corporate bond market is unhealthy and needs to be reduced, current bank credit headroom is insufficient to fully replace the US$8.4 billion worth of real estate bonds maturing each year in 2023-24. If there are more bankruptcies, home buyers’ confidence will be shattered, sending the real estate market into a deep slump.
However, we are still looking for the good. Firstly, the Government is aware of the potential impact of the bond turmoil and has reacted swiftly. It also plans to support the economy by spending $31.1 billion on infrastructure, an increase of 38 per cent year-on-year and a record figure.
Secondly, China, the biggest trading partner of Viet Nam, is opening up, which will offset the slowdown in western countries.
Thirdly, we expect foreign inflows rise significantly this year, given that the application of new central counterparty clearing will make Viet Nam eligible to be upgraded to emerging status by FTSE.
And lastly, and most importantly, the Viet Nam stock market is trading at a once-in-a-decade low price-to-earnings (P/E) ratio of 10.6x. This valuation has, in our view, fully priced in inflation headwinds and partly the potential crisis in the real estate market.
The market is likely to see volatility and then consolidation in the first half of 2023 before forming a clear recovery trend in the latter months of the year. We believe investors with longer investment horizons can time the market to accumulate good assets/stocks in Viet Nam at deep discounts during the first half. — VNS