HSBC: Vietnam Remains Attractive Investment Destination

LG Display has recently approved an additional investment of US$1.4 billion for a factory in Hai Phong City to increase OLED screen output. Photo: Economy and Forecast Review

The Vietnamese market will remain an attractive investment destination for foreign investors moving forward, according to the Hong Kong Shanghai Banking Corporation (HSBC) Vietnam.

In its monthly macroeconomic update for September 2021, HSBC says the Covid-19 pandemic has seriously impacted the Vietnamese economy, especially the leather and footwear industry, VOV reported.

The bank cites statistics from the Vietnam Leather, Footwear and Handbag Association (LEFASO), saying more than 30% of garment makers have suspended production, prompting garment exports to drop by 4.5% in August compared to the previous month.

It is noteworthy that Vietnam’s leather and footwear industry currently makes up 15% of the world’s market share, a two-fold increase during the past 10 years. Vietnam is also one of the world’s largest textile and garment makers, just behind China and Bangladesh.

Vietnam is also one of the world’s largest textile and garment makers, just behind China and Bangladesh. Photo: VNA

However, Vietnamese exports of mobile devices and components recorded a sharp increase in August, achieving an annual growth rate of 11%. Meanwhile, exports of computers and electronic products also decreased by 12% compared to the same period last year.

This increase can largely be attributed to the production capacity of two Samsung’s factories in the northern provinces of Thai Nguyen and Bac Ninh which have so far brought the fresh Covid-19 outbreak under control. Remarkably, Thai Nguyen is also among 10 cities and provinces which have recorded no COVID-19 cases over a period of 14 days.

The fresh coronavirus outbreak that started in late April has raised concerns about the viability of the Vietnamese supply chain, especially from digital tech giants like Apple and Google that have delayed moving their production lines to Vietnam.

Despite potential challenges, HSBC says Vietnam remains an attractive destination for foreign investors in the coming time thanks to its strong economic fundamental set to help financiers continue to invest into the market.

According to HSBC, Samsung is poised to expand its mobile device assembly and production line ahead in the second half of this year to increase production of foldable phones by 47% to 25 million units.

Samsung plans to expand its mobile device assembly and production line ahead in the second half of this year. Photo: VOV

Moreover, LG Display has also recently approved an additional investment of US$1.4 billion for a factory in Hai Phong City to increase OLED screen output.

Foreign investment inflows to Vietnam totaled US$19.12 billion in the first eight months of the year, a drop of 2.1% compared to the same period last year, according to statistics released by the Ministry of Planning and Investment.

Despite the complicated nature of the Covid-19 pandemic in localities nationwide, the disbursement of FDI projects during the initial eight months of the year saw an annual rise of 2% to US$11.58 billion.

Underlying strength of the economy

Loading and unloading rice for export at Saigon port. Photo: VNA

VietnamPlus cited Stanley Chou, Chair of the Vietnam Enterprise Investments Limited (VEIL), as saying that Vietnam’s first half growth demonstrates the underlying strength of the economy, which will provide a platform for the country's growth once its new Covid-19 outbreaks are contained.

Chou said in his statement issued recently that the economy remained resilient in the first half of 2021, posting GDP growth of 5.6 %, despite being negatively affected by two new waves of the virus.

The statement said the key driver in Vietnam's economic performance for the first six months was manufacturing, which expanded by 8.4 % on-year. This was reflected in robust trade numbers, in which exports increased by 28.5 % to $158 billion and imports increased by 36.3 % to $159 billion. Increased imports supported production and much of the surge came from inventory restocking. The resulting trade deficit was %1.5 billion and is widely expected to be reversed in the second half of 2021.

According to VEIL, the Vietnamese stock market was among the top performing indices in the world in the first half of 2021 and hit an all-time record high of above 1,400 points in June 2021.

Against such backdrop, VEIL rose strongly by 42.1% in the period and is ahead of its reference index, VN-Index, by 13.3 percent.

Chou stated VEIL believes that in the long-term, Vietnam still offers one of the strongest structural growth outlooks among developing markets, led by industrialisation and urbanisation./.

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