Vietnam

Economics & Strategy

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Global Research

Vietnam Monitor  Economics: GDP growth is on a steady path. But

trade deficit and inflation problems will persist. We
(Issue 27) expect the central bank will tighten throughout 2010 to
deliver total rate hikes of as much as 4%.
Inflation and trade deficit concerns
overcast Vietnam  Equity Strategy: The HCM Index continues to
underperform. Although the foreign sell-off has
stabilized and valuation is cheap, it is still too early to
call it a turnaround yet due to falling liquidity.

 FX Strategy: Illiquidity in the FX market and lack

of confidence in VND will continue to exert depreciation
pressure on VND. We expect VND will reach 18,400 at
year-end.

Trade deficit remains a gaping concern

USD bn
10
8
6
4
2
0
-2
8 February 2010 -4

Jacqueline Tse* 2005 2006 2007 2008 2009 2 010

Equity Strategist Trade ba lance Ex port Import
The Hongkong and Shanghai Banking Corporation Limited
+852 2996 6602 jacquelinetse@hsbc.com.hk Source: HSBC, CEIC

Daniel Hui*
FX Strategist
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 4340 danielpyhui@hsbc.com.hk Inflation pressures likely to intensify

Wellian Wiranto* %
40
Economist
The Hongkong and Shanghai Banking Corporation Limited, 30
Singapore Branch
20
+65 6230 2879 wellianwiranto@hsbc.com.sg
10
0
-1 0
View HSBC Global Research at: http://www.research.hsbc.com
2003 2004 200 5 2006 2007 2008 2009 2010
*Employed by a non-US affiliate of HSBC Securities (USA) Inc,
and is not registered/qualified pursuant to NYSE and/or NASD Year-on-Year 3m-on-3m annualized
regulations
Source: HSBC, CEIC
Issuer of report: The Hongkong and Shanghai Banking
Corporation Limited

Disclaimer & Disclosures

This report must be read with the
disclosures and the analyst certifications
in the Disclosure appendix, and with the
Disclaimer, which forms part of it
 Vietnam
Economics & Strategy abc
8 February 2010

Economics
 GDP growth is gathering pace and should remain strong in 2010
 However, the strong growth has translated into trade deficit and
inflation problems
 More aggressive tightening actions are expected to rectify the
situation, but policymakers are likely to only act in March at
the earliest

Growth spurt continues grew by 14.0% y-o-y and contributed 1.6 percentage
points to the overall GDP growth.
The Vietnamese economy appears to have
recovered firmly throughout the course of 2009. It Most of the other sectors within the economy are
finished the year with a strong 7.7% year-on-year starting to show some signs of recovery as well.
growth in Q4. This growth rate is a huge uplift
The services sector, which accounts for over 40%
from the 3.1% increase registered at the beginning
of the economy, is starting to inch closer to its
of the year and it is significantly stronger than the
long-term rate of contribution to overall growth.
4.4% and 5.2% seen in Q2 and Q3.
In Q4, the sector contributed 2.7ppt to growth –
compared to its long-run average of around 3ppt.
1. Construction remains strong and manufacturing is turning
The manufacturing sector, which constitutes about
% YoY
20 a quarter of the economy, has started to pick itself
16
up from the doldrums it found itself in at the
12
beginning of the year. The sector posted 5.7%
8
4 year-on-year growth in Q4, as compared to 0.5%
0 in Q1 of 2009. Although there is still some way to
-4 go before Vietnam’s manufacturing returns to its
2001 2 002 2003 2004 200 5 200 6 2007 2008 2009 long-run average growth rate of 9.5%, its recent
Manufacturin g Construc tion trend is pointing towards the right direction.

Source: CEIC The recovery in manufacturing is tied to the

The construction sector – spurred on by the
government’s USD8bn stimulus package last year
that is heavily tilted towards infrastructure spending
– has contributed greatly to the turn in GDP growth.
With an 8-9% share of the economy, construction
recent uptick in the country’s exports, just as its
earlier slump corresponded to the decline in
exports. In keeping with our pan-Asian view of a
virtuous cycle of growth in the region whereby
exports pick up in response to a policy-led

2
 Vietnam
Economics & Strategy abc
8 February 2010

demand recovery, Vietnam’s exports are bouncing caused indirectly by the government’s growth-
back substantially. boosting policies of 2009.

2. Vietnam's exports are recovering firmly Take automobile imports, for instance. Courtesy
% YoY of the effects of a temporary VAT reduction as
80
well as the 4ppt interest subsidy scheme on loans
60
that was given by the government last year,
40
20 automobile imports have skyrocketed, helping to
0 push up the country’s import bills in 2009.
-2 0
4. 2009: The best year ever - for car imports
-4 0
2001 2002 2 003 2004 2005 2006 2007 20 08 2009 2010 Unit th USD m n
15 500
Total Ex -Oil
12 400

Source: CEIC 9 300

Apart from exports, we expect the economy to gain
its strength from domestic consumption and an
improvement in investments. Together, these factors
should allow the GDP to grow by 6.8% in 2010.
6 200
3 100
0 0
Jan-07 Jul-07 Jan -08 J ul-08 Jan-09 Jul-09 Jan-10
Volume Value - RHS

Worry #1: Trade deficit Source: CEIC

While the recovery in exports has only started to

In fact, monthly car imports registered the highest
gather pace near the end of 2009, imports started
level ever in both value and volume terms by the end
galloping rather earlier. This gap has resulted in a
of last year, as consumers rushed to procure their
widening trade deficit of USD1-2bn per month
choice vehicles before the scheduled withdrawal of
since April and the trend has continued until the
these friendly measures at the end of the year.
last reading of USD1.3bn in January of this year.
It is no coincidence that a major vehicle supplier
3. Trade deficits remain a gaping concern
we spoke to this week told us that 2009 was their
USD bn
10 best year ever in terms of sales. However, as these
8 temporary measures are no longer applicable at
6
4
the start of this year, automobile imports have
2 come down dramatically.
0
-2 These temporary factors aside, there remains an
-4 inherent imbalance in the economy that will
2005 2006 2007 2008 20 09 2010 continue to result in strong imports which, more
Trade balance Ex port Imp ort often than not, outpace exports.

Source: CEIC For one, a developing country like Vietnam requires

a higher level of infrastructure investments, which
To some extent, the deepening of the trade deficit are necessary to unlock the potential of the economy
recently has to do with some one-off factors in the long term. In the immediate period, however,
such investments translate into import bills for items

3
 Vietnam
Economics & Strategy
8 February 2010
ranging from construction steel to heavy
machineries. The stimulus-driven increase in
infrastructure spending could not help but exacerbate
this further.
Moreover, as the country continues to position itself
to attract FDI investors, it is worth noting that the
capital expenditure involved in setting up production
facilities for FDI investments would result in higher
imports for capital goods, etc. The hope is that,
eventually, these investments would turn around and
become foreign exchange earners through exports.
The breakeven point remains to be seen, however.
All in all, due to the structural dynamics painted
above, we expect the trade deficit to remain an issue
in the near term. However, we think that we might
have witnessed the worst parts of the trade deficit
problem, as the one-off factors resulting from
growth-boosting policies of 2009 get phased out.
For their part, the government is addressing the
trade deficit problem by trying to limit the imports
of “unnecessary” consumption items such as
luxury cars and electrical appliances. It remains
an open question as to how effective such
administrative measures will prove to be.
Worry #2: Inflation
Vietnam’s CPI rose by 7.6% in January,
reaffirming our concerns that demand and prices
will continue firming in 2010. In sequential terms,
January’s number went up by 1.3% m-o-m sa, the
fifth month in which prices have increased by
more than 1% in comparable terms.
Apart from the rise in prices that has been driven by
the overall strength in the economy, there are signs
that the infrastructure spending as part of the
government’s stimulus measures has resulted in
price pressure in items such as construction materials
– whose prices rose by nearly 14% y-o-y in January.
We believe that inflationary pressures will continue
to build up, as suggested by the recent sequential
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price rises. In 3m-on-3m seasonally adjusted terms,
January’s inflation rose by an annualized rate of
16.2%, pointing towards further increase in inflation
rates in the months ahead.
5. Inflationary pressures continue to build up
%
40
30
20
10
0
-1 0
2003 2004 200 5 2006 2007 2008 2009 2010
Year-on-Year 3m-on-3m annualized
Source: CEIC, HSBC
We project headline inflation to hit double-digit
by the end of Q1 and peak at 13% by the end of
Q2. By the second half, however, we expect to see
inflation coming down somewhat around 8% by
the end of 2010, as the adverse base effect of
commodity prices filters off.
The central bank is expected to react to the
incipient inflationary pressures by raising rates
incrementally throughout the year. They have
taken a step in the right direction by hiking the
policy rates by 1% point late last year, but we
expect another 400bps increase this year.
It is likely that the next rate hike will come
in March.
In the last rates announcement from the central
bank in late January, they decided to hold the
policy rates steady at 8%. We believe this
decision has been prompted by the fact that the
central bank is cognizant that any tightening at
this time of the year will further exacerbate the
seasonally tight liquidity around the Tet festive
period, which falls in mid-February.
Wellian Wiranto
 Vietnam
Economics & Strategy abc
8 February 2010

Equity Strategy
 HCM Index down 8% in 3 months, worst performer in Asia
 Foreign sell-off eased but liquidity remains low
 At 12M fwd PE of 11x, value emerging but not time to get in yet

Worst performer in Asia 2. Daily trading value on HCM and Hanoi exchanges (20DMA)

250
HCM Index down 8% in 3 months HCM Hanoi
Vietnam equity was the worst performer in Asia 200

over the last three months, with the HCM Index 150
USDm

down 8% vs the 3% rise in the MSCI Asia ex- 100

Japan (Chart 1).
50
1. Vietnam stock index vs MSCI Asia ex-Japan
0
Oct-06

Oct-07

Oct-08

Oct-09
Jul-06

Jul-07

Jul-08

Jul-09
Jan-06
Apr-06

Jan-07
Apr-07

Jan-08
Apr-08

Jan-09
Apr-09

250 Jan-10

200
Source: HSBC, Bloomberg
150

100 Foreign ownership stabilized

VNINDEX MSCI AEJ Due to the recent stock market correction, the
50
number of companies with market capitalization
0
over USD200m has dropped to 24 compared to 32
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10
recorded in November 2009 (see table 6 for details).
Source: HSBC, Bloomberg But foreign investors have been net buyers since
December 2009, which was coincidentally after the
Turnover shrank 58% well-attended Euromoney conference in Hanoi. Of
Turnover also fell off as anticipated. The 20-day the 600 participants at the conference, 400 were
moving average of the HCM Index declined to from overseas, which is an indication of renewed
USD91m, a 58% drop from the November 2009 interest in Vietnam among foreign investors. Foreign
average. Hanoi saw a drop of a similar magnitude investor ownership has stabilized at 15% and the
to reach a 20-day moving average of USD44m as foreign share of turnover is levelling off at around
of 3 February 2010 (Chart 2). 8%. It will be hard to go much lower from the
current levels. The number of stocks that have
reached their foreign limit also increased to five
(Vietnam Export-Import Commercial JSC, Saigon
Thuong Tin Commerical JS Bank, Sieu Thanh JSC,

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 Vietnam
Economics & Strategy abc
8 February 2010

3. Foreign net buying of Vietnamese equities (USD mn) 4. Foreign share of turnover, HCM Exchange

100 50%
45%
40%
50 35%
30%
USD m

0 25%
20%
-50 15%
10%
5%
-100 0%
Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

2007 2008 2009

Source: HSBC, Bloomberg (Up to Feb 2, 2010) Source: HSBC, Bloomberg (Up to Feb 2, 2010)

Toro, and Tung Kuang Industrial JSC). We expect to be a concern for foreign investors. The
the Vietnamese market will stabilize, but it is too following negative factors also cloud the market’s
early to call a turnaround yet. outlook:

5. Key stock market data 1 Monetary policy uncertainty

HCM Hanoi Total
Inflation soared to 6.5% in December 2009,
Market cap (USDm) 27,258 2,032 29,291
No. of stocks 207 265 472 driven by rising food and commodity prices.
Stocks with mkt cap >USD1bn 7 1 8 The central bank, SBV, expects loan growth
Stocks with mkt cap >USD500m 16 2 18
Stocks with mkt cap >USD200m 23 5 28 to reach 25% in 2010, after strong growth of
Stocks that hit foreign limit 3 2 5
Daily turnover (USDmn, 1mth ave) 91 44 135 28% in 2009. Regulators are closely
Foreign ownership 16% 8% 15% monitoring the potential risk of overheating
PE (2008) x 13.7 21.5 14.2
ROE (%) 20.5 60.9 23.3 in the economy. In the meantime, the VND
DY (%) 1.2 2.4 1.2
continues to trade materially above the
Source: HSBC, Bloomberg (Up to Feb 2, 2010)
official rate of VND18,500/USD in the NDF
market (see the FX section). Therefore, we
Valuation lower…
expect SBV will continue to tighten policy in
After underperforming for the past two quarters, the coming months.
the valuation of Vietnam’s stock market has now
2 Discontinuation of loan subsidies
returned to a much more reasonable level. The
HCM Index now trades on 13.7x 2008 earnings. The successful loan subsidy program expired at
Based on our forecast of 20% earnings growth for the end of 2009. It was replaced with a scaled
2009 and 2010, 12-month forward PE would drop down version of the loan program that offers a
to 11x, placing Vietnam at the low end of the 2% interest rate for medium- and long-term
Asian peer group, just above Korea’s 10.1x and loans to companies that facilitate agricultural
roughly in line with Thailand’s 11.2x. production. Therefore, some subsidised loans
taken out in 2009 will gradually come due and
…but outlook still bearish
require refinancing at a higher market rate
Although there seems to be an easing of foreign (~8% or higher). This will further tighten
sell-off and value is starting to emerge in liquidity and erode firms’ margins.
Vietnam, low and still falling turnover continues

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Economics & Strategy abc
8 February 2010

3 Stagnant foreign investments There are two key risks to our bearish view.
Firstly, the government could speed up
In 2009, foreign direct investment (FDI)
privatization of state owned enterprises and
inflow dropped to USD22bn from the record
streamline IPO procedures so more companies
high of USD64bn in 2008. This can be only
will be listed. But even if this happens, liquidity
partially explained by the global downturn.
will not pick up immediately as in most other
More importantly, the structural problems in
markets because the stocks are usually traded on
Vietnam are a deterrent to significant FDI
OTC markets rather than the stock exchange after
growth. For example, infrastructure is in poor
they are listed. Secondly, the Hanoi Stock
condition, roads are of low quality, urban
Exchange is pilot testing an online trading system.
planning is lacking, the electricity system is
44 out of 63 companies are in the first batch that
unreliable, and regulations are ambiguous. The
are qualified for online transactions. The online
government has plans to upgrade infrastructure
system will facilitate the exchange of paperwork
but implementation at the local level is
between brokers and the exchange and increase
extremely slow due to complicated
transparency. However, the small sample size of
administrative procedures. Therefore, the
companies participating in the official launch on 8
official FDI forecast for 2010 is only
February 8 is unlikely to boost liquidity
USD19bn. The actual disbursement amount is
meaningfully in our view. Therefore, we maintain
even more important and is estimated to be flat
our bearish stance on Vietnam equities until we
from last year at USD10bn.
see foreign buying pick up to support turnover
above USD100m.

Jacqueline Tse

7
8

6. Key valuation data for the largest listed Vietnamese stocks (market cap > USD 200mn)

8 February 2010
Economics & Strategy
Vietnam
Code Name Industry Subgroup Exchange Mkt cap (USDm) Ave daily t/over (USDm) Foreign ownership (%) Foreign limit (%) Room for foreign buying (USDm) PE Chg 3M
VCB JSC BANK FOR FOREIGN TRADE Commer Banks Non-US HCM 2,855.1 1.5 24.1 100 216,744.4 na -16%
CTG VIETNAM JSC COMMERCIAL BANK Commer Banks Non-US HCM 1,696.8 0.5 7.8 100 156,480.7 na -12%
VNM VIET NAM DAIRY PRODUCTS JSC Food-Dairy Products HCM 1,638.4 1.5 44.4 46 2,620.0 8.3 6%
ACB ASIA COMMERCIAL BANK Commer Banks Non-US Hanoi 1,491.8 2.8 30.1 49 28,148.4 9.2 -16%
BVH BAOVIET HOLDINGS Multi-line Insurance HCM 1,291.7 0.4 14.2 49 44,894.2 na 13%
HAG HAGL JSC Real Estate Oper/Develop HCM 1,171.4 3.4 22.6 49 30,886.7 13.0 10%
EIB VIETNAM EXPORT-IMPORT COMMER Commer Banks Non-US HCM 1,097.8 3.6 30.0 30 na 17.7 -13%
VIC VINCOM JSC Real Estate Oper/Develop HCM 1,027.8 0.6 3.9 29 25,770.7 19.4 25%
MSN MASAN GROUP CORP Investment Companies HCM 953.5 na 14.7 49 32,659.6 47.4 na
SQC QUY NHON MINING CORP Non-Ferrous Metals Hanoi 829.9 na 7.9 49 34,105.5 593.0 na
PVF PETROVIETNAM FINANCE JSC Finance-Invest Bnkr/Brkr HCM 819.0 0.9 13.3 30 13,704.5 299.1 -14%
STB SAIGON THUONG TIN COMMERCIAL Commer Banks Non-US HCM 810.4 4.3 30.0 30 - 8.0 -22%
SSI SAIGON SECURITIES INC Finance-Invest Bnkr/Brkr HCM 698.5 8.9 44.8 49 2,956.7 15.6 -3%
HPG HOA PHAT GROUP JSC Miscellaneous Manufactur HCM 687.0 2.8 31.1 49 12,307.6 9.9 -9%
PVD PETROVIETNAM DRILLING AND WE Oil-Field Services HCM 673.6 1.3 27.5 49 14,473.7 11.3 -6%
FPT FPT CORP Telecommunication Equip HCM 659.2 0.9 39.2 49 6,459.9 11.3 4%
DPM PETROVIETNAM FERT & CHEMICAL Chemicals-Diversified HCM 649.6 0.9 20.2 49 18,723.4 8.9 -21%
KBC KINH BAC CITY DEVELOPMENT SH Real Estate Oper/Develop HCM 602.5 na 15.7 49 20,057.2 18.2
VCG VIET NAM CONSTRUCTION & IMPO Building&Construct-Misc Hanoi 484.9 6.1 3.4 49 22,115.2 18.3 -13%
SJS SONGDA URBAN & INDUSTRIAL ZO Building&Construct-Misc HCM 423.1 3.9 23.5 49 10,805.2 4.9 10%
DIG DEVELOPMENT INVEST CONSTRUCT Building&Construct-Misc HCM 377.0 2.9 17.0 49 12,050.6 14.1 -11%
ITA TAN TAO INVESTMENT INDUSTRY Real Estate Oper/Develop HCM 364.8 2.0 28.0 49 7,664.1 23.1 -17%
PVS PETROVIETNAM TECHNICAL SERVI Transport-Services Hanoi 332.1 0.7 12.7 49 12,040.6 8.6 -16%
PPC PHA LAI THERMAL POWER JSC Electric-Generation HCM 329.8 0.9 17.4 49 10,412.0 6.8 -22%
KDC KINHDO CORP Food-Baking HCM 281.1 1.0 25.9 49 6,497.2 7.8 4%
SHB SAIGON - HANOI COMMERICIAL Commer Banks Non-US Hanoi 233.2 1.3 2.6 49 10,818.8 22.1 -16%
VPL VINPEARLLAND TOURISM JSC Resorts/Theme Parks HCM 223.5 0.1 16.2 49 7,326.7 74.9 -39%
GMD GEMADEPT CORP Transport-Services HCM 203.5 4.0 25.0 49 4,890.1 (21.2) -2%
Source: HSBC, Bloomberg (as of Feb 2, 2010)

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 Vietnam
Economics & Strategy abc
8 February 2010

FX Strategy
 The VND has stabilized but USD’s remain scarce; with poor
liquidity, USD hoarding will continue
 Rising inflation in 1H this year will continue to weigh on sentiment,
even as the trade balance stabilizes
 Expect depreciation pressure to persist for some time

Following a series of stabilization measures
announced at the end of last year (see Vietnam starts,
25 November 2009 and VND stabilization, 4
December 2009), early this year the authorities took
additional steps, ordering the close of gold trading
floors, and asking the state owned firms to sell their
excess stock of USD. Depreciation pressure has
since eased, though not disappeared. The NDF fix,
our preferred measure of the USD-VND market
clearing rate, has fallen to within 0.4% of the official
spot rate, which has been persistently constrained at
the ceiling of the trading band. This is the narrowest
NDF premium the market has seen since April 2009.
However, that there remains a premium in the NDF
fix belies an ongoing lack of confidence in the
VND, a shortage of USD in the market, and an
ongoing expectation of future official depreciation
(through the band mechanism either through an
adjustment of the mid-point or the width of the
band). This is due in-part to the ongoing rationing
of USD by the central bank, a practice we had
earlier expected to end alongside the package of
measures announced in early December (see VND
stabilization, 4 December 2009).
Without further proactive policy moves and
without fundamental FX regime reform, the VND
will likely face ongoing depreciation pressure.
Sentiment will continue to be weighed down by
rising year-on-year inflation rates, which we
expect to reach double-digits by 2Q. Meanwhile

1. USD-VND, trading band, and NDF fix 2. Trade deficit

19600 USD bn
19200 2. 0
18800 1. 0
18400 0. 0
18000 -1. 0
17600 -2. 0
17200
-3. 0
16800
-4. 0
Mar-09 Jun-09 Sep-09 Dec-09
05 06 07 08 09 10
Official Mid USD/VND
Ceiling NDF Fix
Source: Bloomberg, Reuters, HSBC Source: HSBC, CEIC

9
 Vietnam
Economics & Strategy
8 February 2010
the trade deficit is expected to remain large,
though more stable (see the Economics section for
more details on our inflation and trade balance
views). Given the interaction between the
widening trade deficit, rising inflation, and
currency depreciation in the last cycle in early
2008, sentiment is unlikely to improve until
inflation rates subside and the trade account
improves, something that is unlikely until at least
the second half of this year.
Going forward, we expect the official USD-VND
rate to remain more stable around current levels,
with our year-end forecast remaining at 18,400.
Depreciation pressure will likely continue to
manifest itself as market illiquidity, and in an
ongoing premium in the NDF fix above the
official spot rate.
10
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Ultimately, we continue to believe that USD
hoarding and market illiquidity will need to be
addressed with reform of the exchange rate regime.
Without it, exchange rate market illiquidity will
persist and result in more permanent spill-over
effects into the rest of the economy. For example,
recent discussions with foreign invested enterprises
suggest growing frustration at the inability to
conduct cross-border transactions. This effectively
raises the implicit cost of operating in Vietnam, and
could discourage future FDI. By allowing the
exchange rate to fully clear, rather than determined
through a system of de-facto price-setting and FX
rationing, expectations can be better anchored and
USD hoarding will subside, allowing the return of
de-dollarization and a better outlook for the VND.
Daniel Hui
 Vietnam
Economics & Strategy abc
8 February 2010

Disclosure appendix
Analyst Certification
Each analyst whose name appears as author of an individual chapter or individual chapters of this report certifies that the views
about the subject security(ies) or issuer(s) or any other views or forecasts expressed in the chapter(s) of which (s)he is author
accurately reflect his/her personal views and that no part of his/her compensation was, is or will be directly or indirectly related
to the specific recommendation(s) or view(s) contained therein.

Important disclosures
Stock ratings and basis for financial analysis
HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which
depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations.
Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities
based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon;
and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative,
technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating.
HSBC has assigned ratings for its long-term investment opportunities as described below.

This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when
HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at
www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this
website.

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research
report. In addition, because research reports contain more complete information concerning the analysts' views, investors
should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not
be used or relied on in isolation as investment advice.

Rating definitions for long-term investment opportunities

Stock ratings
HSBC assigns ratings to its stocks in this sector on the following basis:

For each stock we set a required rate of return calculated from the risk free rate for that stock's domestic, or as appropriate,
regional market and the relevant equity risk premium established by our strategy team. The price target for a stock represents
the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a
stock to be classified as Overweight, the implied return must exceed the required return by at least 5 percentage points over the
next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the
stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10
percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility
status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review,
expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily
triggering a rating change.

*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12
months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However,

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 Vietnam
Economics & Strategy abc
8 February 2010

stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past
month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,
however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

Prior to this, from 7 June 2005 HSBC applied a ratings structure which ranked the stocks according to their notional target
price vs current market price and then categorised (approximately) the top 40% as Overweight, the next 40% as Neutral and
the last 20% as Underweight. The performance horizon is 2 years. The notional target price was defined as the mid-point of the
analysts' valuation for a stock.

From 15 November 2004 to 7 June 2005, HSBC carried no ratings and concentrated on long-term thematic reports which
identified themes and trends in industries, but did not make a conclusion as to the investment action that potential investors
should take.

Prior to 15 November 2004, HSBC's ratings system was based upon a two-stage recommendation structure: a combination of
the analysts' view on the stock relative to its sector and the sector call relative to the market, together giving a view on the
stock relative to the market. The sector call was the responsibility of the strategy team, set in co-operation with the analysts.
For other companies, HSBC showed a recommendation relative to the market. The performance horizon was 6-12 months. The
target price was the level the stock should have traded at if the market accepted the analysts' view of the stock.

Rating distribution for long-term investment opportunities

As of 08 February 2010, the distribution of all ratings published is as follows:
Overweight (Buy) 46% (12% of these provided with Investment Banking Services)
Neutral (Hold) 37% (12% of these provided with Investment Banking Services)
Underweight (Sell) 17% (11% of these provided with Investment Banking Services)

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.

* HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures
1 This report is dated as at 08 February 2010.
2 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or
price sensitive information is handled in an appropriate manner.

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Economics & Strategy abc
8 February 2010

Disclaimer
* Legal entities as at 22 October 2008 Issuer of report
'UAE' HSBC Bank Middle East Limited, Dubai; 'HK' The Hongkong and Shanghai Banking The Hongkong and Shanghai
Corporation Limited, Hong Kong; 'TW' HSBC Securities (Taiwan) Corporation Limited; 'CA' Banking Corporation Limited
HSBC Securities (Canada) Inc, Toronto; HSBC Bank, Paris branch; HSBC France; 'DE' HSBC
Trinkaus & Burkhardt AG, Dusseldorf; 000 HSBC Bank (RR), Moscow; 'IN' HSBC Securities Level 19, 1 Queen’s Road Central
and Capital Markets (India) Private Limited, Mumbai; 'JP' HSBC Securities (Japan) Limited, Hong Kong SAR
Tokyo; 'EG' HSBC Securities Egypt S.A.E., Cairo; 'CN' HSBC Investment Bank Asia Limited, Telephone: +852 2843 9111
Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Telex: 75100 CAPEL HX
Singapore branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Fax: +852 2596 0200
Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; 'GR' HSBC Pantelakis
Website: www.research.hsbc.com
Securities S.A., Athens; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv, 'US'
HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler A.S., Istanbul; HSBC
México, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC, HSBC Bank Brasil S.A. -
Banco Múltiplo, HSBC Bank Australia Limited, HSBC Bank Argentina S.A., HSBC Saudi Arabia
Limited.
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otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited. MICA (P) 177/08/2009

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GEMs Research Team
Multi-asset Equity
Global CEEMEA
Philip Poole Europe
Global Head of Emerging Markets Research Will Manuel
+44 20 7991 5641 philip.poole@hsbcib.com Head of CEEMEA Company Research
Economics +44 20 7992 3602 will.manuel@hsbcib.com
Latin America John Lomax
Jonathan Heath Head of Equity Strategy, GEMs
Chief Economist, Latin America +44 20 7992 3712 john.lomax@hsbcib.com
+52 55 5721 2176 jonathan.heath@hsbc.com.mx Herve Drouet
Ramiro D Blazquez +44 20 7991 6827 herve.drouet@hsbcib.com
+54 11 4348 5759 ramiro.blazquez@hsbc.com.ar Sergey Fedoseev
Lorena Dominguez +44 20 7991 6831 sergey.fedoseev@hsbcib.com
+52 55 5721 2172 lorena.dominguez@hsbc.com.mx Veronika Lyssogorskaya
Javier Finkman +44 20 7992 3684 veronika.lyssogorskaya@hsbcib.com
+54 11 4344 8144 javier.finkman@hsbc.com.ar Wietse Nijenhuis
Tatiana G Gomes +44 20 7992 3680 wietse.nijenhuis@hsbcib.com
+55 11 33718183 tatiana.g.gomes@hsbc.com.br Anisa Redman
Andre Loes +44 20 7991 6822 anisa.redman@hsbcib.com
+55 11 3371 8184 andre.a.loes@hsbc.com.br Sub-Saharan Africa
Sergio Martin Umulinga Karangwa
+52 55 5721 2164 sergio.martinm@hsbc.com.mx +44 20 7992 3685 umulinga.karangwa@hsbcib.com
Jorge Morgenstern Marcel Mballa-Ekobena
+54 11 4130 9229 jorge.morgenstern@hsbc.com.ar +44 20 7991 6809 marcel.mballa-ekobena@hsbcib.com
Asia Turkey
Qu Hongbin Cenk Orcan
+852 2822 2025 hongbinqu@hsbc.com.hk Co-Head of Turkey Equity Research
Frederic Neumann +90 212 376 4614 cenkorcan@hsbc.com.tr
+852 2822 4556 fredericneumann@hsbc.com.hk Bulent Yurdagul
Robert Prior-Wandesforde Co-Head of Turkey Equity Research
+65 6239 0840 robert.prior-wandesforde@hsbc.com.sg +90 212 376 4612 bulentyurdagul@hsbc.com.tr
Janus Chan Levent Bayar
+852 2996 6975 januschan@hsbc.com.hk +90 212 376 4617 leventbayar@hsbc.com.tr
Seiji Shiraishi Erol Hullu
+886 81 5203 3802 seiji.shiraishi@hsbc.co.jp +90 212 376 4616 erolhullu@hsbc.com.tr
Christopher Wong Israel
+852 2996 6917 christopherwong@hsbc.com.hk Avshalom Shimei
CEEMEA +972 3 710 1197 avshalomshimei@hsbc.com
Kubilay Ozturk Yonah Weisz
+44 20 7991 6045 kubilay.ozturk@hsbcib.com +972 3 710 1198 yonahweisz@hsbc.com
Alexander Morozov United Arab Emirates
+7 49 5721 1577 alexander.morozov@hsbc.com Kunal Bajaj
Murat Ulgen +971 4 507 7458 kunalbajaj@hsbc.com
+90 212 376 4619 murat.ulgen@hsbc.com.tr David Lepper
Simon Williams +971 4 423 6932 davidlepper@hsbc.com
+971 4 423 6925 simon.williams@hsbc.com Ankur Khetawat
Credit +971 4 423 6930 ankur.khetawat@hsbc.com
Dilip Shahani David Kinsey
+852 2822 4520 dilipshahani@hsbc.com.hk +971 4 423 6928 david.r.kinsey@hsbc.com
Keith Chan Vikram Viswanathan
+852 2822 4522 keithkfchan@hsbc.com.hk +971 4 423 6931 vikramviswanathan@hsbc.co.in
Sheldon Chan
Egypt
+852 2822 3232 sheldonchan@hsbc.com.hk
Ahmed Hafez Saad
Olga Fedotova
+202 2529 8436 ahmedhafezsaad@hsbc.com
+44 20 7992 3707 olga.fedotova@hsbcib.com
Alia El Mehelmy
Devendran Mahendran
+852 2822 4521 devendran@hsbc.com.hk +202 2529 8438 aliaelmehelmy@hsbc.com
Shirin Panicker
Mary Ellen Olson
+202 2529 8439 shirinpanicker@hsbc.com
+852 2822 4524 mary.ellen.olson@hsbc.com.hk
Zhiming Zhang Saudi Arabia
+852 2822 4523 zhimingzhang@hsbc.com.hk Tareq Alarifi
Keerthi Angammana, CFA +966 1 299 2105 tareqalarifi@hsbc.com
+44 20 7991 5431 keerthisri.angammana@hsbcib.com Aybek Islamov
Currency +966 1 299 2102 aybek.islamov@hsbcib.com
Marjorie Hernandez Raj Sinha
+1 212 525 4109 marjorie.hernandez@us.hsbc.com +966 1 299 2100 raj.sinha@hsbc.com
Daniel Hui Aleksandar Stojanovski
+852 2822 4340 danielpyhui@hsbc.com.hk +966 1 299 2104 aleksandar.stojanovski@hsbc.com
Perry Kojodjojo
+852 2996 6568 perrykojodjojo@hsbc.com.hk Asia
Clyde Wardle Research Management
+1 212 525 3345 clyde.wardle@us.hsbc.com Chris Georgs
Richard Yetsenga +852 2996 6753 chris.georgs@hsbc.com.hk
+852 2996 6565 richard.yetsenga@hsbc.com.hk Herald van der Linde
Fixed Income +852 2996 6575 heraldvanderlinde@hsbc.com.hk
Real Estate
Pieter Van Der Schaft
Louisa Fok
+852 2822 4277 pietervanderschaft@hsbc.com.hk
+852 2996 6629 louisawmfok@hsbc.com.hk
Virgil Esguerra
Michelle Kwok
+852 2822 4665 virgilesguerra@hsbc.com.hk
+852 2996 6918 michellekwok@hsbc.com.hk
Pablo Goldberg
Ashutosh Narkar
Head of Latin America Fixed Income Strategy
+91 22 3023 1474 ashutoshnarkar@hsbc.co.in
+1 212 525 8729 pablo.a.goldberg@us.hsbc.com
Alvin Wong
Gordian Kemen
+852 2996 6621 alvincmwong@hsbc.com.hk
+1 212 525 4326 gordian.x.kemen@us.hsbc.com
Alejandro Mártinez-Cruz
+52 55 5721 2380 alejandro.martinezcr@hsbc.com.mx
Hernan M Yellati
+1 212 525 6787 hernan.m.yellati@us.hsbc.com

1
 abc
GEMs Research Team (continued)
Banks Small & Mid-cap
Todd Dunivant Suman Guliani
Head of Banks, Asia-Pacific +91 80 3001 3747 sumanguliani@hsbc.co.in
+852 2996 6599 tdunivant@hsbc.com.hk Sandeep Somani
Sarah Hung +91 22 2268 1245 sandeepsomani@hsbc.co.in
+886 2 8725 6026 sarahychung@hsbc.com.tw Latin America
Kathy Park Patrick Boucher
+82 2 3706 8755 kathypark@kr.hsbc.com Head of Research, Americas
York Pun +1 212 525 7632 patrick.j.boucher@us.hsbc.com
+852 2822 4396 yorkkypun@hsbc.com.hk Alexandre Gartner
Shary Wu Head of Equity Research, Brazil
+852 2996 6585 sharywu@hsbc.com.hk +55 11 3371 8181 alexandre.gartner@hsbc.com.br
China Juan Carlos Mateos
Ken Ho Head of Equity Research, Mexico
+852 2996 6593 kenho@hsbc.com.hk +52 55 5721 3607 juan.mateos@hsbc.com.mx
Elaine Lam Consumer Brands & Retail
+852 2822 4398 elainehlam@hsbc.com.hk Manisha A Chaudhry
Insurance +1 212 525 3035 manisha.a.chaudhry@us.hsbc.com
John Russell Francisco J Chevez
+852 2822 `4321 john.russell@hsbc.com.hk +1 212 525 5350 francisco.j.chevez@us.hsbc.com
Industrials Pedro Herrera
Sumeet Agrawal +1 212 525 5126 pedro.herrera@us.hsbc.com
+91 22 2268 1243 sumeetagrawal@hsbcib.in Diego Maia
Transport / Conglomerates +55 11 33718192 diego.t.maia@hsbc.com.br
Mark Webb Lauren Torres
+852 2996 6574 markwebb@hsbc.com.hk +1 212 525 6972 lauren.torres@us.hsbc.com
Sachin Gupta James Watson
+91 22 2268 1079 sachin1gupta@hsbc.co.in +1 212 525 4905 james.c.watson@us.hsbc.com
Parash Jain Financials
+852 2996 6717 parashjain@hsbc.com.hk Victor Galliano
Eric Lin +1 212 525 5253 victor.galliano@us.hsbc.com
+852 2996 6570 ericpklin@hsbc.com.hk Mariel Santiago
Azura Shahrim +1 212 525 5418 mariel.x.santiago@us.hsbc.com
+852 2996 6976 azurashahrim@hsbc.com.hk Transportation & Logistics
Natural Resources Vanessa Ferraz
Daniel Kang +55 11 3371 8190 vanessa.c.ferraz@hsbc.com.br
+852 2996 6669 danielkang@hsbc.com.hk Murilo Freiberger
Chris Chan +55 11 3371 8197 murilo.freiberger@hsbc.com.br
+852 2996 6619 chris.chan@hsbc.com.hk Natural Resources and Energy
Gary Chiu Jordi Dominguez
+852 2822 4297 garychiu@hsbc.com.hk +1 212 525 3460 jordi.x.dominguez@us.hsbc.com
Steven Hong Xing Li Lucia Marquez
+852 2996 6941 stevenhongxingli@hsbc.com.hk +1 212 525 7669 lucia.x.marquez@us.hsbc.com
Sarah Mak Reginaldo Pereira
+852 2822 4551 sarahmak@hsbc.com.hk +55 11 3371 8203 reginaldo.l.pereira@hsbc.com.br
Scully Tsoi Anisa Redman
+852 2996 6620 scullytsoi@hsbc.com.hk +44 20 7991 6822 anisa.redman@hsbcib.com
Consumer & Retail Telecoms, Media & Technology
Jessie Guo Richard Dineen
+852 2996 6572 jessieytguo@hsbc.com.hk +1 212 525 6707 richard.dineen@us.hsbc.com
Percy Panthaki Equity Strategy
+91 22 2268 1240 percypanthaki@hsbc.co.in Garry Evans
Sean Yang Global Head of Equity Strategy
+852 2822 4342 seanyang@hsbc.com.hk +852 2996 6916 garryevans@hsbc.com.hk
TMT Vivek Misra
Tucker Grinnan +91 80 3001 3699 vivekmisra@hsbc.co.in
+852 2822 4686 tuckergrinnan@hsbc.com.hk Steven Sun
Steven C Pelayo +852 2822 4298 stevensun@hsbc.com.hk
+852 2822 4391 stevenpelayo@hsbc.com.hk Jacqueline Tse
Yogesh Aggarwal +852 2996 6602 jacquelinetse@hsbc.com.hk
+91 22 2268 1246 yogeshaggarwal@hsbc.co.in
Neale Anderason
+886 813 5203 3826 neale.anderson@hsbc.co.jp
Nam Park
+852 2822 6591 nampark@hsbc.com.hk
Rajiv Sharma
+91 22 2268 1239 rajivsharma@hsbc.co.in
Walden Shing
+852 2996 6751 waldenshing@hsbc.com.hk
Frank Su
+8862 8725 6025 frankkssu@hsbc.com.tw
Shishir Singh
+852 2822 4292 shishirkumarsingh@hsbc.com.hk
Wanli Wang
+8862 8725 6020 wanliwang@hsbc.com.tw
Tse-yong Yao
+852 2822 4397 tse-yongyao@hsbc.com.hk

15