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| Vietnam’s exports grew strongly in January 2024. |
Exports are on the rebound
According to Mr. Michael Kokalari, Director of VinaCapital Macroeconomic Analysis and Market Research Department, the strong growth of Vietnam’s exports in January 2024 is due to an increase of nearly 60% over the same period in the export segment of computers and electronic products.
Global smartphone revenue also returned to growth at the end of 2023 for the first time in two years, although the recovery was not as pronounced as in the computer segment because new products lacked attractive enough functions to push users to upgrade. Vietnam’s smartphone exports increased by 16% over the same period in January 2024, thanks to the launch of the new Samsung S24 phone model during the month.
Another reason why Vietnam’s exports increased sharply in January 2024 is because this month has 25% more working days than January 2023 (due to Lunar New Year taking place on January 21-27 of 2023).
Manufacturing increased by 19.3% year-on-year in January 2024, so export growth far exceeded production growth. That means that manufacturers’ inventories fell last month (Vietnam’s January 2024 PMI index also confirmed a decline in finished goods inventories). The combination of falling inventories and increasing new orders means that factory production in Vietnam will need to ramp up to meet rising demand for “Made in Vietnam” products.
Manufacturing accounts for nearly 25% of Vietnam’s GDP, so boosting manufacturing activities will boost GDP growth. In addition, nearly 10% of Vietnam’s workforce is working for FDI companies with relatively high salaries.
According to the General Statistics Office, FDI companies have cut workers in early 2023, which is also a reason why Vietnam’s GDP only increased by 3.3% in the first quarter of 2023, but labor in the manufacturing industry has been recovering from last year’s cuts. Factory worker wages also recovered 5-7% after hitting bottom last year.
So the economy will get a boost from increasing manufacturing activity and higher consumption this year, supported by rising manufacturing jobs. Consumer confidence and domestic demand will recover.
“While we do not expect consumer spending to grow strongly in the first quarter, we still expect consumer spending and domestic consumer demand to be stronger in the later stages of this year,” the VinaCapital expert emphasized.
Economic recovery boosts profits of listed companies
VinaCapital experts also expect that, along with export growth, domestic investors will pour more money into the Vietnamese stock market in the first quarter and this year.
The reasons to motivate domestic investors to pour money into the stock market are that bank deposit interest rates in Vietnam are near the lowest level; The above broad economic recovery will boost corporate profits – especially the banking industry and consumer companies. Along with that, market valuation is at a very attractive level, 25% lower than the valuation of emerging markets in the same region.
Vietnam’s export recovery started in the fourth quarter of 2023 and gained momentum in January 2024, supported by rising demand for high-tech electronic products. VinaCapital expects manufacturing activities to continue to grow throughout 2024.
Plus, manufacturing employment has rebounded after last year’s cuts, so consumption will likely get a boost as factories employ more workers in the coming months.
“A broad-based economic recovery from exports, production and consumption will boost the profits of listed companies. We expect the profits of listed companies to recover from a decrease of 33% in 2023 to an increase of 50% in 2024, and the profits of listed banks will increase from 6% to 18%,” Mr. Michael Kokalari said.