Research Center

The impressive rebound of Vietnam’s economy in 4Q21 creates momentum for further economic recovery in 2022. We expect the following sectors to be key growth pillars for the economy: (1) robust and stable industrial growth thanks to secured production activity and increased export demand; (2) pent-up demand in domestic spending in the reopening phase; (3) strong recovery in capital investment, primarily driven by investment demand from government and FDI. Last but not least, the upcoming fiscal - monetary support program will further push the economy back to the high-growth track in 2022.

Corporate bond offerings rebounded to VND102.9tn, 86.3% mom, +60.9% yoy in Dec, promting to VND698.3tn, +52.9% yoy in 2021. Commercial banks and stockbroking firms subscribed 55.9%/21.5% in Dec, and 31.3%/38.9% in 2021. Individual bondholders made up 4.9% and corporate lenders occupied 19.9% in 2021.

A seasonally high liquidity demand in December put significant upward pressure on fixed-income interest rates, especially the ones with short-term and mid-term maturity. From our view, this pressure would continue to exaggerate in January, but it would likely be faded away after that. Besides, accelerating credit growth momentum and higher inflation outlook would be the main drivers for fixed-income rates to the upside. Taking all into account, fixed-income rates are expected to form higher levels in January.

After a severe contraction in 3Q21, Vietnam's economy has successfully backed into the pre-pandemic growth track in the fourth quarter. It is visible that the main growth drivers for 4Q21 are from the manufacturing and export areas when these sectors have a phenomenal run in the reopening phase. Meanwhile, marked recovery in retail sales in the last two months also eases some pressure on the economic growth. These developments lay a strong foundation for the economic outlook in the next year.

Corporate bond offerings slumped to VND26.9tn, -53% mom, -3.2% yoy in Nov, prompting to VND547.2tn, +52.1% yoy in 11M21. Commercial banks and security firms subscribed 27.4%/36.3% in Nov, and 28%/42% in 11M21. Since commercial banks constituted 33% of total Real Estate bond subscription and 70% of total Real Estate bond offerings aimed to refinance, to leveraged buyout, and expand, we estimate a 20-21% of total bond issuance could be hit by this circular 16.

Interest rate conditions continued to be accommodative in November thanks to massive inflows of liquidity in the banking system. Interbank rates remained around their bottoms in recent months, while bond yields were finding their new record lows. However, a fast pace of economic recovery in the early reopening may result in a marked change in the super-low interest-rate environment in the near term. From our view, this upward pressure on interest rate levels could materialize from December.

Economic recovery continued gaining momentum in the second month of the reopening with robust growth in trade and industrial sectors taking a spotlight. Furthermore, a marked rebound in the retail sector also caught our eyes. On the other side, inflation was also signaling upward pressure from inflated energy prices, although it remained well-controlled.

A short-lived upward pressure on interest rates, due to high liquidity demand during end-3Q21, was diminishing in October as interbank rates and government bond yields fell back to previously low levels. Looking forward to the remainder of 2021, we remain of our view that monetary conditions continue to be accommodative in the coming months, supported by an easing monetary stance of SBV and weak economic recovery, resulting in a continuation of the declining trend in interest rates.

October macro figures well illustrate that the economic recovery has been more resilient than our expectation in the early reopening. From the supply side, the industrial sector has been through a resilient recovery to surpass a pre-pandemic level. On the demand side, retail sales also rebounded remarkably shortly after easing social-distancing rules, while export demand remained sound and stable. From our view, this is just a start of the successful economic recovery in the fourth quarter.