VPBS Market+outlook+report 2015 01 19 ENG

MARKET OUTLOOK REPORT
January 19, 2015
VN-Index long-term trends GDP growth: We forecast GDP growth of 5.3 percent for
Q1/2015 and 6.2 percent for the full year as the
1,200.0
manufacturing sector will be supported by lower production
1,000.0 costs thanks to declining global commodity prices.
Bubble
800.0
Balance of trade: Exports are expected to expand for to-be-
signed FTAs in 2015. However imports for machinery and
600.0
materials will grow stronger with further investment from
400.0 FIEs. With increasing amounts on both sides, we expect the
level of deficits to be marginal, reaching roughly USD1.0 to
200.0
1.5 billion.
-
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Government Deficit: Budget collection is expected to reach
Sources: Bloomberg, VPBS its yearly plan thanks to a sharp rise in export revenues
section while state expenditures might be squeezed slightly.
Ticker Q1/2015 2015F This will lead to lower government deficits in 2015. We
GDP growth (yoy) 5.3% 6.2% expect that budget deficits over total GDP will be lower than
Trade deficits (USD) 1.0-1.5 bn NF the annual target of 5.0 percent.
Fiscal Deficit / GDP <5% <5%
Interbank exchange 21,450 NF Foreign Exchange: The SBV devalued the Dong by one
rate (VND/USD) 21,550 percent on January 7, raising the interbank exchange rate to
Inflation (yoy) 3.6% 5.0% VND21,458 per USD. Therefore we believe the VND/USD will
5-year Gov. Bond Yield 6.3 6.6% NF be stable, fluctuating around VND21,450 21,550 per USD in
VN-Index 630 - 650 660 - 680 Quarter 1 2015.
Source: VPBS
Note: NF means no forecast Inflation: lower prices for goods and services encourage
consumers to spend more, which will support inflation in
GDP quarterly growth (% y-o-y) 2015. Through March, inflation is expected to be driven up by
the Tet (Lunar New Year) holiday, reaching 0.8 percent rise
% y-o-y GDP growth (YOY) GDP SA Trend
9 and an annualized inflation rate of 3.24 percent. For 2015,
inflation will remain stable around 5.0 percent.
8
7 6.96
6.5 Government Bond Yields: We believe the five-year bond
6 yield will reach a higher level of 6.3 to 6.6 percent by the
5 end of Q1 due to expectations of increases in inflation
4 later in the year which could push them a bit higher than
3 their closing 2014 levels.
2
Stock Market: With flat bond yields and stable economic
1Q2001
4Q2001
3Q2002
2Q2003
1Q2004
4Q2004
3Q2005
2Q2006
1Q2007
4Q2007
3Q2008
2Q2009
1Q2010
4Q2010
3Q2011
2Q2012
1Q2013
4Q2013
3Q2014
conditions, we expect P/E ratios to rise only modestly

while earnings growth could push the VN-Index to rise as
much as 25 percent to close at 660 to 680.
Sources: GSO, VPBS
Please see important disclosure information at the end of this report.
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TABLE OF CONTENTS
INTRODUCTION ............................................................................................................................................. 3
GDP GROWTH ................................................................................................................................................ 3
CONSUMPTION .......................................................................................................................................... 5
GOVERNMENT EXPENDITURES ............................................................................................................... 6
INVESTMENT .............................................................................................................................................. 8
NET EXPORTS ............................................................................................................................................ 9
DEVELOPMENTS WHICH MAY AFFECT THE ECONOMY .......................................................................... 11
OIL PRICE .................................................................................................................................................. 11
CIRCULAR 36 ............................................................................................................................................ 14
US ECONOMY .......................................................................................................................................... 15
SOE EQUITIZATION AND DIVESTMENT ................................................................................................. 16
GOVERTNMENT DEBT ............................................................................................................................. 20
MACRO INDICATORS .................................................................................................................................. 24
FOREIGN EXCHANGE .............................................................................................................................. 24
INFLATION ................................................................................................................................................ 25
BANK INTEREST RATES .......................................................................................................................... 27
CREDIT GROWTH AND M2 ...................................................................................................................... 28
GOVERNMENT BOND YIELDS ................................................................................................................. 29
STOCK MARKET........................................................................................................................................... 30
SECTORS WE LIKE ....................................................................................................................................... 34
REAL ESTATE ........................................................................................................................................... 34
LOGISTICS ................................................................................................................................................ 36
NATURAL RUBBER................................................................................................................................... 37
BANKING SECTOR ................................................................................................................................... 39
INTRODUCTION
Vietnam is entering a long-term growth phase
Ten years ago, as Vietnam was in the early stages of re-integrating to the global
economy, it was able to achieve very high GDP growth, in part because it was
building on a low base. Then the global financial crisis of 2007 - 2008 and European
sovereign crisis of 2009 2010 made the structural shortfalls in Vietnams economy
more apparent and the country entered into a five year period of decline growth
and economic instability. Finally in 2013, structural reforms began to stabilize
Vietnams economy, but growth was still down near five percent, which seems like
a recession for an emerging economy. It was not until 2014 that it began a new
period of what will hopefully be sustainable growth. Now, with structural reforms
increasing and global economic prospects (driven mainly by the US) improving,
Vietnam can benefit from strong FDI and rising exports. It is very possible that
Vietnam can maintain GDP growth of above six percent for the next few years and
that the growth will be built on manufacturing exports rather than government
spending. This should keep stock valuations relatively high as the prospects for
earnings growth improve across several sectors.
GDP GROWTH
2014 GDP surpasses the original target of 5.8 percent thanks to the
manufacturing and construction sector
Despite rising tensions in the East Sea during the second quarter, which caused
some domestic institutions to lower their forecasts on Vietnams economy for this
year, Vietnams economy managed to grow 5.98 percent for the full year 2014,
surpassing the target of 5.8 percent, which was set by the National Assembly and
the Government a year ago.
The GDP data released by the General Statistical Office on December 26 showed
growth that was higher than the previous three years of 5.89 percent (2011), 5.25
percent (2012) and 5.42 percent (2013), which not only proves that the economy
was not strongly affected by the East Sea tensions but also showed notable
improvements.
GDP structure (%) GDP quarterly growth (% y-o-y)

GDP growth
Agriculture % y-o-y GDP growth (YOY) GDP SA Trend
Manufacturing and Construction 9
Service
12
8
10 6.96
7
6.5
8 6
6 5
4
4
3
2
2
1Q2001
4Q2001
3Q2002
2Q2003
1Q2004
4Q2004
3Q2005
2Q2006
1Q2007
4Q2007
3Q2008
2Q2009
1Q2010
4Q2010
3Q2011
2Q2012
1Q2013
4Q2013
3Q2014
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources: GSO, VPBS
The service sector grew 5.96 percent y-o-y, accounting for 43.8 percent of GDP
growth, down from the contribution of 53 percent recorded in 2013. As usual, the
agriculture, forestry and fisheries sector posted the lowest growth among the three
sectors. However, this sector increased 3.49 percent in 2014, which is much higher
compared to last years level of 2.46 percent.
The manufacturing and construction sector was the main driver for this years
remarkable results, which performed above other sectors by increasing 7.14
percent y-o-y, up from 5.43 percent in 2013. This sector contributed 45.99 percent to
the growth of the GDP this year, which is higher than the 39 percent level of a year
ago.
The Index of Industrial Production (IIP) for the full year 2014 is estimated to have
risen by 7.6 percent y-o-y, well above 2013s level of 5.9 percent. As we mentioned
in the previous Quarterly report, the third quarters IIP figure is an impressive
improvement compared to that of the first and second quarters, which posted at
only 5.2 percent and 5.8 percent y-o-y, respectively. The last quarter of 2014 has
been even better, with IIP recorded at 10.1 percent. Notably, the manufacturing
segment rose 8.7 percent y-o-y, up from 7.3 percent in 2013, and contributed 81.6
percent of the growth to the whole industry sector.
Index of Industrial Production (%) Contribution to IIP growth by segments (%)
IIP m-o-m IIP y-o-y

20 10 1.3%
16.90 6.6%
Mining
15 8
10.5%
10 6 Processing and
manufacturing
5.30 4.60
5 4.60 4
2.00
1.20 1.90 81.6% Production/distributio
0.50 0.20 -0.40
n of the electricity
0 2
Water supply, sewage

-5 0
and waste
-6.20 management
-10 -2
-10.30
-15 -4
Sources: GSO, VPBS

HSBC: Vietnams PMI recorded at the highest level since April 2014
The HSBC Purchasing Managers Index (PMI) for December posted at 52.7, up from
52.1 recorded earlier in November. This marks the highest level in eight months
and the 16th consecutive month reading above 50. The growth was supported by
accelerated output and new orders.
Customer demand is reported to increase from both domestic and international

markets, leading to higher production requirements and then again reflating via
greater purchasing. Employment expanded for a fourth consecutive month thanks
to increasing demand and new orders.
Lower shipping costs and supplier prices due to the cuts of gasoline prices drove
the average input prices to decline at the strongest rate since July 2012. Given the
declines of input prices and competitiveness, output prices were reduced
accordingly.
Outlook:
We believe the ongoing declines of global commodity prices, which help to lower
production costs, will continue supporting the manufacturing sector. Therefore,
outputs are expected to carry on their upward trend, except for February in which
production will be affected due to the Lunar New Year. We forecast GDP growth of
5.3 percent for Q1/2015 and 6.2 percent for the full year.
CONSUMPTION
Total retail sales of commodities and services reached VND2,945 trillion, rising by 10.6
percent y-o-y, lower than that of 12.6 percent in 2013. However in inflation adjusted
terms, it improved to 6.3 percent, up from 5.6 percent in 2013.
Retail sales growth y-o-y (%)
Nominal growth Real growth
30
25
20
15
10
0
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
Sources: GSO, VPBS
The retail sales growth increased slightly thanks to the recovery of consumer
confidence. According to ANZ-Roy Morgan survey, the Vietnams consumer
confidence index reached an average of 137 in the fourth quarter, which was above
the 2014 average of 133 points. The index went sharply to 141 points in November
due to the majority of the respondents feeling positive upon Vietnams economic
outlook in 2015.
ANZ-Roy Morgan Vietnam Consumer Confidence Index (CCI)
145
140
135
Points
130
125
120
Sources: ANZ-Roy Morgan, VPBS
If we look into structure:
Total 2014 (trillion VND) Growth y-o-y (%)
Retail sales of commodities (75%) 2,216 11.3
Hotels and restaurants (12%) 356 12.6
Tourism (1%) 32 31.0
Other services (12%) 341 27.2
Sources: GSO, VPBS
Growth in retail sales of commodities, a proxy for consumption estimated at VND2,216

trillion (USD104 billion), an increase of 11.3 percent y-o-y. This was mainly
contributed to retail automobiles sales this year (+27.9 percent y -o-y).
Tourist arrivals, although accounting for the least of total retail sales of commodities
and services, saw the highest growth of 31.0 percent. Chinese tourists contributed
roughly a quarter of total revenues from tourism but with a modest growth of 2.1
percent y-o-y. Compared to 2013, tourists from Germany and Hong Kong increased the
most with 45.7 percent y-o-y and 42.7 percent y-o-y. Tourists from Russia ranked third
with 22.4 percent y-o-y rise. In 2015, due to weaker economic conditions in those
countries, there is significant chance they will decline in 2015. Therefore we should see
the number of tourists from those nations decrease, which will lower the revenues of
total retail sales of commodities and services.
Outlook: Nominal growth edged down somewhat but real growth rose in contrast,
showing that domestic demand has rebounded but still at a low level. Lower fuel prices
have decreased transportation costs, which helped lower prices of local goods. We
expect inflation to remain low, though probably a bit higher than 2014 (see analysis
below). Consumer confidence remains strong. Hence, we expect retail sales to grow by
11.0 11.5 percent in nominal terms and 6.0 6.5 percent in real terms y-o-y during
Q1/2015.
GOVERNMENT EXPENDITURES
Total state budget revenues and grants through December 15 are estimated at VND814.1
trillion (USD38.3 billion), equivalent to 104 percent of the annual plan. Of these, domestic
revenue was estimated at VND551.4 trillion (102.3 percent of the plan). Revenue from
crude oil was VND98.1 trillion (115.2 percent), while revenue from import and export
activities was VND160.3 trillion (104.1 percent).
Total state revenues and annual plan Total state expenditures and annual plan
Total state revenues Annual plan Total state expenditures Annual plan
1,200,000 1,400,000
1,200,000
1,000,000
1,000,000
800,000
VND billion
VND billion
800,000
600,000
600,000
400,000
400,000
200,000 200,000
- -
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Sources: MoF, VPBS
State expenditures reached VND968.5 trillion (USD45.59 billion) in the same period,
accounting for 96.2 percent of this years plan, of which expenditures on infrastructure
investment were VND158 trillion (97 percent) and expenditures on principal payments
were VND120 trillion (100 percent).
As a consequence, the state budget deficit amounted to VND154.1 trillion (USD7.25

billion) as of December 15. The state budget over GDP therefore is only 3.9 percent of
GDP, declining significantly compared to that of 5.5 percent in 2013. Below-target deficit
number is positive as it may slow down the speed of public debt increase. However, we
should look also at spending that is not recorded in the state budget, such as investment
using government bonds, which in our opinion, if counted would raise the budget deficit
to a very high level. The public debt is projected to approach the cap of 65% of GDP next
year, which would signal more sovereign risk, and if so, expected bond yields will
increase then.
Budget deficit and budget deficit over GDP
Budget deficit Budget deficit/GDP

250,000 6.0%
5.5% 5.4% 5.5%
5.0%
200,000
VND billion
4.4% 3.9% 4.0%

150,000
3.0%
100,000
2.0%
50,000
1.0%
- 0.0%
2010 2011 2012 2013 2014
Sources: MoF, VPBS
On November, 2014, the National Assembly approved the Resolution on the State
budget for 2015. Accordingly, total state revenue and total state expenditures are
projected at VND911.2 trillion and VND1.147 trillion, respectively. The total state budget
deficit is therefore estimated for next year at VND226 trillion (USD10.6 billion),
accounting for over five percent of the GDP.
In order to balance next years state budget, repay existing debts projects and finance
development, the MoF recently revealed a plan to issue about VND441 trillion of
Government bonds in 2015. Of these, VND226 trillion will be used to finance the budget
deficit, VND130 trillion will be for debt repayment and VND85 trillion will be for new
projects.
Outlook: Due to declining crude oil prices, the state budget might suffer some losses. If
oil prices were to remain at USD50 per barrel, this would reduce State revenues by
approximately VND50,000 billion (USD2.34 billion) assuming the quantity of oil sold
remained constant with Q4/2014. However we think that the budget will continue to
reach the yearly plan as revenues from import and export activities are expected to rise
substantially in 2015.
(i) Import duty rates for oil and gas will be raised from 27 percent to 35 percent
according to the Circular 03/2015/TT-BTC newly issued by the Ministry of Finance
on January 6, 2015. This is considered a positive move for the state budget.
(ii) At the 2014 annual conference, the Vice Prime minister, Mr Nguyen Van Ninh, set
a target for the Customs Department to collect State budget revenue of
VND275,000 billion in 2015 (USD12.9 billion)
(iii) As the government bond yields are at their record low, the government has
decided to raise the number of bond issuance in 2015 to reduce interest
payments. This will help save the budget expenditures for this year.
INVESTMENT
FDI pledge surpass the years target thanks to Samsung

Thanks to Samsung, newly registered and added foreign direct investment (FDI)
reached USD20.23 billion as of December 15, which is 6.5 percent lower compared
to that of the same period last year but it is 19 percent higher than this years
target. FDI disbursement increased 7.4 percent y-o-y to USD12.35 billion, and is 2.9
percent higher compared to the target.
FDI Registered and Disbursement (USD bn)
FDI registered FDI disbursement

25.00
21.63
20.23
20.00 18.59
14.70
15.00 13.01
12.35
11.00 11.50
11.00 10.46
10.00
5.00
0.00
2010 2011 2012 2013 2014
Sources: FIA MPI, VPBS
The processing and manufacturing sector - the main driver for the growth of the
economy this year, attracted the highest proportion of FDI, with newly register and
added capital recorded at USD14.49 billion, accounting for 71.6 percent of the total
FDI pledge. Meanwhile, real estate and construction recorded a notable amount of
capital inflows, with registered and added capital reaching USD2.55 billion and
USD1.06 billion, accounting for 12.6 percent and 5.2 percent, respectively, of the
total inflows.
Investment by country FDI by sector
Korea 5.2% 10.6%

Processing and
25.0% manufacturing
36.2% HongKong
12.6% Real Estate
Singapore
10.1% 71.6%
Construction
Japan
13.8% 14.8%
Others
Others
Sources: MoF, VPBS
Korea is the biggest among 60 countries which invested in Vietnam in 2014 with
new and added capital of USD7.32 billion, accounting for 36.2 percent of total FDI.
Hong Kong occupied second place with USD3.00 billion, followed by Singapore
(USD2.79 billion) and Japan (USD2.05 billion).
Samsungs domination
Three out of four projects that have registered capital of USD1 billion and above
belong to Samsung, bringing the total capital that Samsung registered to invest in
Vietnam in 2014 to USD5.4 billion. These include: Samsung Electronics VietNam
Thai Nguyen Project second phrase with registered capital of USD3.00 billion,
Samsung CE Complex in Ho Chi Minh city (USD1.4 billion), Samsung Display Bac
Ninh (USD1.00 billion). The fourth project is Hong Kong - Dewan International Ltd,
with registered capital of USD1.25 billion
Samsung is the leading foreign investor in Vietnam with accumulated registered

capital of USD12.6 billion as of the end of December 2014. According to the
Ministry of Planning and Development, Samsung is planning to invest in various
projects in Vietnam and if the current projects show favorable results, by the end of
2017, registered FDI from Samsung will probably reach USD20 billion.
Outlook: Stable macroeconomic environment, well-controlled inflation, young and

energetic workforce and low labor costs will continue making Vietnam a more
favorable investment destination compared to other countries in the region.
Besides Samsung, Intel also targets to make Vietnam their manufacturing hub,
aiming 80 percent of Intels global CPU will be produced in Vietnam in 2015. In
August 2014, Microsoft Nokia revealed plans to relocate most of Nokias
smartphone production lines from some other countries to Vietnam
Additionally, Vietnam Korea FTA and Vietnam Customs Union of Russia, Belarus
and Kazakhstan FTA negotiations were successfully concluded. TPP, Vietnam
European Union FTA are also projected to be settled soon. These upcoming FTAs
and TPP will allow foreign investors to enjoy great benefits when they invest in or
expand their businesses in Vietnam.
Therefore, we believe Vietnam will continue to attract massive FDI inflows in 2015.
NET EXPORTS
Export turnover values increased 13.6 percent y-o-y to reach USD150 billion. Of these,
top export items were: mobile phones and accessorizes (+10 percent y-o-y), textiles (+18
percent y-o-y), computer and accessories (+7 percent y-o-y) and shoes and sandals (+25
percent y-o-y).
Vietnams imports rose by 12.1 percent y-o-y to USD148 billion. Of these, top import
items were: machinery and spare parts (+20 percent y-o-y), computers and spare parts
(+5 percent y-o-y) and gasoline (+15 percent y-o-y). Most notably, imported whole car
saw the fastest growth in 2014. The total import number was 62,000, up 100 percent
compared to 2013 and up 110 percent in terms of value.
Total trade balance Breakdown of Vietnam exports
Export Import Trade balance Domestic sector FIEs

USD mn
145 16,000
14,000
95
12,000
45
10,000
USD bn
-5 8,000
6,000
-55
4,000
-105 2,000
0
-155
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources: GSO, VPBS

This led to a total trade surplus of USD2.0 billion in 2014.
The FDI sector contributed the majority of 68 percent of total exports in 2014, creating a
surplus of USD17 billion (including crude oil). This number was about three-fold
compared to last year. Meanwhile, the domestic sector continued to see a trade deficit of
USD15 billion (+200 percent y-o-y).
The US is the largest export market of Vietnam with total export turnover of USD28.5
billion (+19.6 percent y-o-y). The European Union and ASEAN market ranked second and
third with USD27.9 billion and USD19 billion, respectively (+14.7 percent and +3.1
percent y-o-y).
In terms of import market, China is still Vietams largest partner with total value of
USD43.7 billion (+18.2 percent y-o-y). Total trade deficit from China reached roughly
USD29 billion, up 22 percent y-o-y. Imports from the ASEAN sector accounted for 15.6
percent of total imports with USD23.1 billion (+8.2 percent y-o-y).
Imports and Exports by trade partners (by proportion - %)

Export
2012 2013 2014
The US 17.3 18.2 19.0

The EU 17.1 18.0 18.6
ASEAN 15.1 13.7 12.7
China 10.8 10.0 9.9
Japan 11.4 10.3 9.8
Import
2012 2013 2014
China 25.3 28.0 29.5

ASEAN 17.7 15.6 15.6
The US 4.2 4.0 3.9
The EU 7.7 7.1 6.0
Japan 10.2 8.8 8.6
Sources: GSO, VPBS
Outlook:
Vietnams trade balance is still subject to some limitations:
(i) Fairly dependent on FIEs while domestic sector continued to see trade deficits
(ii) Exports have been strong but they remain dominated by low-value products,
which do not add much value to the global chain
(iii) Trade partners depend on individual markets. For example, about 50 percent of
total imports were from China and ASEAN market. In terms of export markets,
the US, the EU and Japan accounted for 40 percent of total export turnover
values.
The trade surplus recorded at USD2.0 billion for 2014, accounting for only 1.5 percent of
total exports. Which means only a small increase in imports will obviously shift Vietnam
to trade deficits. According to forecasts from the World Bank and Asian Development
Bank, Vietnam is expected to see trade deficits in 2015. We also agree with this view.
Exports seem to expand thanks to several free trade agreements to be completed

in 2015. Also, rising US consumer demand will lead to more exports from
Vietnam as US is our largest importers.
However, export values derived from the EU and Japan, our second and third
export markets, respectively, will be declining as these nations are taking their
own quantitative easing program. As a consequence, they will concentrate more
on exports for growth instead of imports. Additionally, the strength of the US
dollar against the Euro and Japanese Yen has reduced Vietnams export values
(which are USD denominated) from these two markets.
Imports, on the other hand, will dominate imports, leading to a trade deficit in
Vietnam in 2015.
Imports from machinery and equipment in the manufacturing sector are likely to
increase to take advantage of that free trade agreements should have brought.
Significant rise in whole automobiles demonstrated strong demand for this item
in 2014. And we believe this trend will continue in 2015, which will also raise the
total import turnover value.
In the first quarter of 2010 and 2011, Vietnams trade deficits recorded at over USD3.0
billion due to rising imports for commodities and materials. We think that Vietnam will
return to see trade deficits in the first quarter of 2015, however as exports also expand,
the level of deficits will be marginal, reaching roughly USD1.0 to 1.5 billion.
DEVELOPMENTS WHICH MAY AFFECT THE ECONOMY
OIL PRICE
Oil price declined from USD105/barrel as of July 2014 to USD56/barrel by the end of
2014, the strongest annual decline since 2008. According to projections of the U.S.
Energy Information Administration dated January 13, 2015, WTI crude oil average price
will be USD54.58/barrel during 2015, down from USD93.26/barrel in 2014.
Also, average price of Brent crude oil in 2015 will reduce to USD57.58/barrel, down from
USD99.02/barrel in 2014. How will this situation affect Vietnams economy? We will
consider the impacts in three aspects: real economy, foreign exchange rate and state
budget.
Impacts on real economy and foreign exchange rate
Vietnam is both an exporter of crude oil and an importer of crude-oil derived products.
The export proceeds, after being paid to foreign partners will be divided between
PetroVietnam and the state budget with a ratio of 25/75.
In 2014, according to GSO, crude oil production reached over 15.5 million tones, up 2
percent y-o-y. Exports of crude oil reached over 9.1 million tones, up 9 percent y-o-y,
with turnover of USD7.2 billion, down 0.7 percent y-o-y. The export price of crude oil
reduced from USD129/barrel in July 2014 to USD73.3/barrel in the last two months of the
year.
In the same period, Vietnam imported USD8.9 billion of crude oil, gasoline, and LPG.
Vietnam also imported a lot of production inputs that are derived from crude oil and
have their prices pegged to that of crude oil, including: over USD1 billion of crude-oil
derived products (e.g. asphalt), over USD9.5 billion of plastics materials and products,
over USD1.5 billion of synthetic fiber, USD6.5 billion of chemicals, USD654 million of
rubber materials and more than 2.0 million USD of fertilizer and pesticides.
Thus we can see Vietnam net imported oil products and the decline in oil price is more
beneficiary to Vietnam economy as a whole as the fall in revenue of the state budget and
PetroVietnam is less than the fall in the cost of energy for transport and industry and in
the cost of inputs for production, which will help improve income and consumption of
enterprises and the people.
However, at the time of this reports publication, oil price had plummeted to
USD48.78/barrel, equivalent to a decline of 12.9 percent compared to 2014 year-end.
According to the Mr. Chairman of PetroVietnam, average cost of big onshore oilfield is
around USD35/barrel, while that of offshore oilfield production may double to USD60-
70/barrel. When oil prices are below USD40/barrel, PVN may consider halting production
in the high-cost offshore oilfields (which contributed 1.6 percent of total production in
2014). Both the decline in price and the fall in production may reduce the exports
revenue significantly, reducing the trade surplus next year and exerting pressure on
further devaluation of VND.
In 2015, both the decline in oil price and the decline in the amount of crude oil exploited
may push down significantly the export turnover of crude oil. In the meantime, although
the price of oil-derived products may decline also, due to the demand of imports for
production projected to increase significantly, its forecasted that Vietnam will incur a
trade deficit of around USD6-8 billion in the year and this will create pressure on further
VND devaluation.
The drop in oil price is expected to have positive impacts on Vietnams CPI because
gasoline and oil together with transport cost account for significant portions in the CPI
commodity basket. However, since January 7, 2015, the new tariff of oil and gas import
taxes came into effect, based on which, when crude oil is priced under USD60/barrel, the
maximum tax rates of oil and gas will be 40 percent, 25-30 percentage points higher than
before.
For the world price of crude oil forecasted for 2015 and the new imported tariff, we
estimate that the domestic gasoline price will decline by 18 percent.
According to the Chairman of the National Financial Supervisory Commission, Vu Viet

Ngoan, its estimated in 2014 that, oil and gas and oil-chemical products accounted for
14.6 percent of the economys intermediate costs, equivalent to 8.8 percent of total
production. In 2015, if oil price is down 33 percent, industrial production costs will
reduce 3 percent.
According to the Minister of Planning and Investment, a 10 percent decline in domestic

petrol price will result in 0.57 percent of decline in production cost, 0.55 percent decline
of CPI and 0.91 percent of GDP growth. Based on these assessments, we estimate that
the decline in crude oil price will contribute 1.64 percent of GDP growth in 0.99 percent
of CPI decline in the year 2015.
By sector, many industries will benefit from the oil price decline, especially
transportation, plastics, textile and garment, chemicals, rubber processing and
agriculture.
Impacts on state budget
According to the estimate of the Ministry of Finance, in 2014, revenue from crude oil
exports reached VND107 trilion, down 11.2 percent y-o-y, contributing 12.6 percent to
total budget revenue. This is down compared to the ratio of 15 percent in 2011 and 19
percent in 2012 and 2013. The fall of oil price in the second half of the year did not affect
the turnover as average exporting price of crude oil of Vietnam stayed as high as
USD100/barrel.
According to the MOFs projection, a decline of USD1/barrel in the world price of crude
oil would result in a decline of VND1,000 billion in budget revenue. At the price of
USD85/barrel, the projected budget proceeds will fall by VND20,000 billion.
For 2015, the National Assembly ratified the budget revenue of VND911 trillion, of which
proceeds from crude oil exports achieves VND93 trillion, or 10.2 percent. This number is
calculated with the assumption that exploitation and production of crude oil would be
14.74 million tons, down 0.48 million tons over 2014; and crude oil is priced at
USD100/barrel on average.
However, now that oil price has plunged to under USD50/barrel, the budget revenue will
likely decrease by VND50 trillion. Still representative of the MOF affirmed that it would
increase domestic collection to offset the drop in proceeds from crude oil. There are two
major sources of domestic collection for the above namely tax debt and import taxes on
oil and gas. Currently, the outstanding tax debt is about VND70 trillion, of which VND45-
50 trillion is collectible. Further, since January 7, 2015, the new tariff of oil and gas
import taxes came into effect, based on which, when crude oil is priced under
USD60/barrel, the maximum tax rates of oil and gas will be 40 percent, 25-30 percentage
points higher than before. The increase in tax rates is expected to help improve state
budget, though it will adversely impact competitiveness of the production sectors
compared to foreign peers where domestic oil prices fall significantly.
In the meantime, on January 7, the State Bank of Vietnam adjusted the interbank
exchange rate up by 1 percent, from VND/USD21,246 to VND/USD21,458. Then on
January 12, the SBV returned to list its Bid and Ask rates at VND/USD21,350 and
VND/USD21,600 respectively, compared to the last rates posted at VND/USD21,200 and
VND/USD21,400 respectively. The devaluation of the VND compared to the USD helped
to boost oil exports value denominated in USD, which directly improves budget revenue.
Therefore for 2015, we believe that the government can manage to reach its target for
budget revenue.
Regarding budget and off-budget spending, we forecast that revenue and income of
many enterprises in the oil and gas industries will reduce quite significantly. On the
other hand, based on the revised plan of PetroVietnam for 2011-2015 as per Decision
1921/QD-TTg dated October 24, 2014, its planned that there will be a huge amount of
investment into PetroVietnams projects. We think, therefore, that the amount of
government bonds planned for issuance in 2015 will increase considerably for this
purpose.
CIRCULAR 36
On November 20, the State Bank of Vietnam (SBV) issued the Circular 36/2014/TT-NHNN
on safe operation limits and ratios of credit institutions (CIs) and branches of foreign
owned banks, to be effective since February 1, 2015. Circular 36 adjusted and revised
some articles of previous legal documents including Decision 03/2008/QD-NHNN,
Circular 15/2009/TT-NHNN, Circular 13/2010/TT-NHNN, Circular 19/2010/TT-NHNN and
Circular 22/2011/TT-NHNN. Circular 36 is expected to have a strong impact on the
businesses of credit institutions and branches of foreign banks as well as the stock
market and the bond market.
Impacts on the banking sector are substantial in various areas. First among them is
stricter restriction on lending activities. VPBS believes that the restrictions on lending by
CIs to major shareholders or management members and enterprises owned by them
would reduce manipulation of group interests, reduce the systematic risks in CIs
operation and significantly reduce the potential impact of a default by a CIs major
customer, which has been the cause of some scandals in the past. This is a positive step
in the long-term restructuring of the banking industry.
Second, the circular tightens control on cross-ownership among CIs. Among other
regulations, it limits CIs to hold equity securities in a maximum of two other CIs and
such holding can be for a maximum of 5 percent of the voting equity securities. These
regulations will force some shareholders of commercial banks to divest their bank
equities, which hence will increase the supply of banking stocks, and drive down the
prices of banking stocks. This may negatively affect the index of whole market. On the
other hands, this regulation may promote the merger and acquisition among domestic
banks to solve the crossholding situation. In addition, many cross-investments by, into
and among subsidiaries, affiliates and related parties of CIs will have to change the
ownership.
Regarding the stock market, even before the official release of the Circular, it already had
certain negative impacts on the stock market sentiment. Overall, Circular 36 limits banks
lending for stock investment. Particularly, Article 14 of stipulates that the proportion of
credit for equity investment must not exceed 5 percent of a banks charter capital (down
from the previous restricted level of 20 percent of charter capital for securities
investment). In addition, among other strict conditions applied, banks are allowed to
offer credit to customers to invest in stock only if their NPL ratio is below 3 percent.
The total charter capital of the whole banking system is currently VND435,243 billion. If
we exclude charter capital of foreign banks, who are not participating in margin lending
market, which is VND86,636 billion, the total charter capital of banks available to provide
credit for equity investment is VND348,607 billion. Before Circular 36, the ceiling level is
20 percent of the charter capital, and is estimated at VND69,721 billion. Now, we would
have to exclude charter capital of banks with NPL ratio above 3 percent, which is at least
above VND86,449 billion, the remaining charter capital of banks that are eligible to
provide credit for equity investment is VND262,158 billion. 5 percent of this amount of
capital is worth about VND13,108 billion, which down 81 percent compared to the prior
ceiling level of VND69,721 billion. The market reacted strongly to the expectation of
funding flying out of the market. The VN-Index lost 35 points (5.8 percent) within ten
days, from the 18th to 28th of November, 2014.
However, it is difficult to assess the impact of the new regulation on the banking system
and on the stock market due to the limitation of publicly available data as banks do not
disclose their lending for stocks/securities investment purposes. Officers of the State
Bank of Vietnam stated that the banking system as a whole has never used up to the 5
percent charter capital for stock investment. While some large banks have not been very
keen on lending to this area, we believe that some smaller commercial banks already
have their lending to stock investment much higher than 5 percent of their charter
capital. These banks will have to reduce their lending to stock investments, which may
negatively affect the market.
According to data published by the State Securities Commission (SSC), the total margin
lending outstanding balance as of end of October stood at VND17,000 billion. This figure
came from the balance sheet of securities companies, which is unlikely to include the
direct lending from banks to clients with stock as collateral. Whether the VND17,000
billion of margin lending mainly came from securities companies equity capital or their
borrowings from banks, it is another issue. According to our assessment of the largest
20 securities companies based on their charter capital, total borrowing (short-term and
long-term bank loans, corporate bonds) are only over VND5,600 billion, equals to one
third of total margin lending. This means that about two third of total margin lending
come from equity capital of securities companies.
In the future, securities companies may want to raise their equity capital in order to
enhance their capacity to make margin lending, which is capped at 200 percent of the
equity of broker firms as per Decision 637/2011 by the SSC, in order to partly offset the
fall in banking fund for securities investment. We expect securities companies to issue
new shares or increase borrowings (for joint stock firms) or be injected capital by mother
banks (for liabilities limited companies under banks). To facilitate this process, Circular
36 removed the cap of 25 percent of banks charter capital invested in subsidiaries. The
cap now for all investment of a bank is commonly 40 percent of its charter capital for all
equity investment. Therefore, banks are able to inject more capital to its securities arms.
US ECONOMY
The U.S. economy posted the biggest quarterly expansion in 11 years
The U.S economy has incredibly bounced back from 1st quarters contraction.
Thanks to consumer spending, the U.S. GDP was recorded to surge five percen t in
the third quarter of 2014, the strongest growth since the third quarter of 2003.
Household spending, which account for almost 70 percent of the economy, grew
3.2 percent, higher than the previous estimation of 2.2 percent.
U.S. Consumer spending is expected to accelerate further as cheaper gasoline
prices will leave more money in consumers pocket and will help to lower retail
prices.
The U.S is Vietnams largest export market with export turnover of USD28.5 billion,
accounting for 19 percent of the total export turnover in 2014. Rising U.S. consumer
spending, in conjunction with the TPP, which should soon to be ratified, will help to
boost Vietnams exports.
Other upbeat U.S. economic data includes:
(i) Employers added 321,000 jobs in November 2014, bringing the monthly
average to almost 241,000 jobs, which is the strongest gain since 1999.
(ii) The weekly average U.S jobless claim for the full-year 2014 was recorded at
308,500, the lowest level in 14 years.
(iii) The average Bloomberg Consumer Comfort Index hit 36.7 in 2014, the
highest in seven years.
These amazing results could lead the Fed to raise interest rate before mid-2015,
which may cause capital withdrawals from emerging markets, including Vietnam.
However, the upcoming quantitative easing of the European Union and Japan
might help to offset effect caused by higher U.Ss interest rate.
U.S Consumption expenditures (%) Bloomberg Comfort Index
4 46
3.6 3.7
3.5 3.2 43
3 2.8
40
2.5
2.5
2 37
1.9 1.9 1.8
2
34
1.5 1.3 1.2
31
1
0.5 28
0 25
01/12
04/12
07/12
10/12
01/13
04/13
07/13
10/13
01/14
04/14
07/14
10/14
01/15
Sources: NBER, VPBS Sources: Bloomberg, VPBS
SOE EQUITIZATION AND DIVESTMENT
Vietnam has been expressing its determination to carry out economic restructuring,
which includes three major pillars namely the restructuring of public investment,
financial sectors and state-owned enterprises (SOEs).
SOE restructuring is considered the most important one out of the three pillars, as
SOEs have been accounting for the largest part of the economy (28% of GDP
without state-owned banks, and 34% with state-owned banks included).
Divestment and equitization proceeds by owner office Divestment and equitization proceeds by sector
Securitie Insurance
Others s Real 4%
19% 3% estate
SCIC
2%
HCM City 25%
4%
Finance
Ministry of 19%
Transport
7% Vinacomin
22% Others
56% Banking
16%
Ministry of Vietnam
Constructi Rubber
on Group
16% 7%
Sources: MOF, VPBS

According to the Plan of SOE equitization, in the period 2011-2015, 531 SOEs are
targeted to complete equitization. However, in reality, the progress has been rather
slow.
During the 2011-2013 period, only 180 SOEs were restructured, of which 99 SOEs
were equitized and 81 SOEs were transformed by other means. As a result, the
government has set a target to equitize 432 state-owned enterprises (SOEs) over
the two year period of 2014 to 2015. SCIC is assigned to sell its stakes in 376
enterprises at the same time.
In 2014, the equivalent numbers are 167 SOEs restructured (up 65% y -o-y), of which
143 SOEs equitized (up 100% y-o-y). The proceeds to the government were
estimated to be VND8 trillion, up 500% compared to 2013, and equivalent to 1.3
times of the investment capital.
Equitization progress of SOEs under the Ministry of Industry and Trade up to

2015:
No. Corporation Planned Completed
1 The Vietnam National Textile and Garment Group 5 5
Vietnam National Coal - Mineral Industries Group-

2 8 3
Vinacomin
3 Vietnam National Chemical Group 6 3
4 Vietnam National Oil and Gas Group 3 1
5 Vietnam National Tobacco Corporation 1 0
6 Vietnam Paper Corporation 4 1

Sources: MOIT, VPBS
During Q4/2014, the government successfully completed several major equitizations,

such as Vietnam Airlines and PetroVietnam Camau Fertilizer, each of which raised
approximately VND1,200 billion (USD56 million). However, it is still behind schedule for
its total plan.
Divestment progress of SOEs under the Ministry of Industry and Trade up to

2014:
Proceeds
No. Corporation Planned Completed
(VND bn)
The Vietnam National Textile and Garment
1 37 21 1,012
Group
Vietnam National Coal - Mineral Industries
2 9 6 1,791
Group- Vinacomin
3 Vietnam Electricity Corporation 7 3 387
4 Vietnam National Chemical Group 13 7 407
5 Vietnam National Oil and Gas Group 10 3 474
6 Vietnam National Tobacco Corporation 8 1 20
7 Vietnam Paper Corporation 9 1 33
8 Machines and Industrial Equipment Corporation 3 1 13
Total 4,130
Sources: MOIT, VPBS
In order to accelerate the process, the relevant authorities issued numerous legal
documents. The most highlighted one was Decree No. 15/NQ-CP dated March 6, 2014 on
promoting equitization and divestment of state-owned enterprises (SOEs). Accordingly,
there are many new regulations to make the process much easier than before, such as
allowing the selling prices to be lower than book value, allowing package sales at
negotiated prices for some types of enterprises and public offerings of shares in public
firms, among others.
No. Legal document Date of issuance Content
Transforming 100% state-owned enterprises into
1 Decree 59/2011/ND-CP 18/7/2011 joint stock companies, replacing Decree
109/2007/ND-CP dated June 26, 2007.
Approving the Plan on "Restructuring SOEs, with
2 Decision 929/QD-TTG 17/7/2012 the focus on state corporation in the period 2011-
2015".
Some solutions to accelerate SOE equitization and
3 Resolution 26/NQ-CP 9/7/2012
divestment of state capital from some enterprises.
State capital investment into enterprises and the
4 Decree 71/2013/ND-CP 11/7/2013
financial management in 100% SOEs.
Functions, tasks and operating mechanism of the
5 Decree 151/2013/ND-CP 1/11/2013
State Capital Investment Corporation (SCIC).
Some measure to promote the equitization of SOEs
6 Resolution 15/NQ-CP 6/3/2014
and divestment of state capital.
Some regulations on divestments, equity selling
7 Decision 51/2014/QD-TTg 15/9/2014 and registering for transaction and listing in the
stock market of SOEs.
Conclusion of the Prime Minister at the Workshop
8 Notice 334/TB-VPCP 21/8/2014
on SOE restructuring.
9 Decision 37/2014/QD-TTg 18/6/2014 Criteria and categories for SOEs classification.
Law No. 65/2014/QH13 on
10 25/11/2014
Housing
Law No. 66/2014/QH13 on Real
11 25/11/2014
Estate Business
Law No. 67/2014/QH13 on
12 26/11/2014
Investment
Law No. 68/2014/QH13 on
13 26/11/2014
Enterprises
Law No. 69/2014/QH13 on the
14 Management and Use of state 26/11/2014
capital invested into enterprises
The government has taken special measures to encourage SOEs to divest of

investments in banks. The stakes may be bought by commercial banks with large
holding of the state, or the ownership may be transferred to the State Bank of
Vietnam. In case those measures fail, the SCIC is assigned to consider buying the
investments of state corporations in banks and insurance companies, and in other
areas at market prices, but not higher than book value net of provisions.
Another legal milestone was the issuance of Decision 51/2014/QD -TTg on some
regulations regarding divestments, equity selling and transaction registration and
listing in the stock market of SOEs. Accordingly, divestment under par value/book
value must minimize losses and preserve the state capital at the highest level. The
transfer of capital in the form of agreement shall be made only after the auction is
not successful or shares of state owned stocks have not fully sold out through the
auction.
If a sales agreement is not successful, the enterprise needs to make a request to the
State Capital investment corporation (SCIC) to acquire the remaining shares.
At the same time, enterprises are responsible for all additional provision of losses
from financial investments as prescribed.
The initial price for IPOs shall be determined based on the results of the authorized
assessment unit but cannot be lower than the book value minus the provision for
losses from financial investments.
Another important issue that was mentioned in this Decision is the registration and
listing of equitized state-owned enterprise. This is further regulated in Circular
01/2015/TT-BTC.
Accordingly, any State owned enterprise which is equitized after No vember 1, 2014,
must register (a) as a public enterprise, (b) register its shares at the depository
center (c) register for trading at the UPCoM and (d) do so within 90 days after
getting the certificate of business registration.
If any enterprise can meet the requirements for listing on the stock exchanges, the
equitized enterprise need to complete all procedures to get shares ready to trade
on the stock market within a year after the enterprise gets its business registration
certificate.
If any enterprise has officially transformed into a joint stock company before
November 1, 2014, the equitized enterprise must be registered and listed on the
stock exchange within one year from November 1, 2014. The enforcement of this
article will improve liquidity of IPO enterprises and therefore, encourage investors
to purchase the IPO shares.
In our opinions, the macro backdrop in 2014 was very favourable for the
equitization and divestment of SOEs as follows:
- Both deposit rates and the lending rates have fallen to the levels of 2005 to 2006.
At the same time, Circular 02/2013/TT-NHNN on the classification of bank assets
was delayed until 2015, reducing pressures on NPL provision and allowing banks to
extend credit. Credit growth was quite stagnant during the first q uarters of the
year, encouraging the funds from banks to flow into the stock market and
equitization.
- The government will raise capital at SCIC up to VND50 trillion as of 2015. By

September 9, 2013, equity of SCIC had been increased to over VND30 trillio n, up 8
times from VND3.7 trillion since its establishment in 2006. Of this amount, VND13
trillion was from its earnings. As per Decree 151 issued in late 2013, SCIC will
spend at least 70% of its portfolio in state corporations, as decided by the
government. And SCIC said in its report published early in 2014 that it would
promote buying the stake divested by state corporations for the year.
- We note that banks are buying stocks of SOEs to become their strategic partners.
In some cases, this is a form of restructuring of over-due loans repayments.
Banks SOE
CIENCO
Saigon Hanoi Bank CIENCO
Thang Long Construction Corporation
Vietcombank
Vietnam Airlines
Techcombank
Vietinbank Vinalies
Sources: Cafef, VPBS
Outlook: According to the Ministry of Finance, by the end of 2014, 90 out of 108
state corporations had their restructuring plans approved and there were still 18
state corporations that did not undergo their restructuring plans.
In 2015, the government will continue to review the list of SOEs to categorize them
in accordance with Decision 37/2014/QD-TTg. SOEs will be re-classified into groups
of different stake of the government.
An officer of the Ministry of Finance revealed that the number of SOEs to be

equitized in 2015 is quite significant, at about nearly 300 enterprises. In the list of
big SOEs to be equitized in 2015, these include Vietnam National Shipping Lines
(Vinalines), Vietnam Railways Corporation and Shipbuilding Industry Corporation
(SBIC the re-embodiment of Vinashin).
We believe that with the issuance of many legal regulations such as the Law on the
Management and Use of state capital invested into enterprises, the Law on
Investment, the Law on Estate Business and the Law on Housing, and with the
determination of the government and favourable macro conditions, the equitization
and divestment process in 2015 will be accelerated to meet the targets. We think
that there will be more commodities injected into the stock market. And when newly IPO
enterprises go to listing, the market capitalization will increase and there may be
changes in the stock basket of major stock indices in the current two stock exchanges.
GOVERTNMENT DEBT
The Ministry of Finance has recently revealed data to the public for the period
2010-2013.
Government debt 2010-2013 Government guaranteed debt 2010-2013
USD million Foreign debt Domestic debt USD million Foreign debt Domestic debt
80,000 20,000
70,000 18,000
16,000
60,000
14,000
50,000 12,000
40,000 10,000
8,000
30,000
6,000
20,000
4,000
10,000 2,000
- -
2010 2011 2012 2013 2010 2011 2012 2013
Sources: MOF, VPBS

Unit: %
2010 2011 2012 2013 2014E 2015F
Total public debt/GDP 56.3 54.9 50.8 54.2 60.3 64.0
Nation's external debt/GDP 42.2 41.5 37.4 37.3 39.9
Government debt/GDP 44.6 43.2 39.4 42.3 46.9
Government debt/budget revenue 158 162 172 184 253
Total government direct and indirect
liabilities/Budget revenue 23.1 22.3 24.4 25 26.2 30
Sources: MOF, VPBS
The year of 2014 witnessed major changes in legal regulations regarding the borrowings
of the government and guaranteed by the government.
Changes of plan of government borrowing in 2014

The Prime Minister issued Decision 477/QD-TTg dated April 7, 2014 approving the plan on
the borrowing and payment of debt by the government and offshore borrowings by the
nation. We have summarized the plan with those items set out in the Decision 689/QD-
TTg dated May 4, 2013 on a medium-term borrowing management program for 2013 to
2015 in the tables below.
Unit: VND bn
2014
2014 revised previously % change 2013 planned % change
planned
Total 462,800 303,702 52.4% 290,897 59.1%
Domestic borrowing 367,000 227,000 61.7% 222,000 65.3%
For budget 197,000 149,000 32.2% 135,000 45.9%
For investment 100,000 45,000 122.2% 60,000 66.7%
Debt roll-over 70,000
Foreign borrowing 95,800 76,702 24.9% 68,897 39.0%
Sources: VPBS
In domestic borrowings, the amount to offset budget deficit is up by 32.2%, due to

two reasons. Firstly, the budget deficit target was revised up from 4.8% of GDP to
5.3% of GDP since last year. Secondly, the GDP value was inflated by 9 to 10%
compared to itself after the new statistical methodology was applied since last year.
The amount of borrowings for investment was revised up by 122.2 % because of the
stimulus policy of the government to realize the GDP growth target of 5.8% this
year, realized by the plan for bond issuance of VND170 trillion for the period from
2014 to 2016.
With regards to domestic borrowings: the amount of domestic debt guaranteed by

the government was adjusted downward by 21.7% compared to the previous plan.
Instead, the government increases its borrowings by 52.4%, partly to compensate
for the decline in government guaranteed borrowings as the borrowing cost of th e
government has always been lower than that of other guaranteed entities, including
Vietnam Development Bank and Vietnam Bank for Social Policies, and Vietnam
Express Company.
Domestic borrowing guaranteed by the government

Unit: VND bn
2014 previously
2014 revised % change 2013 planned % change
planned
Total 70,492 90,000 -21.7% 70,343 0.2%
VDB bond 40,000 45,000 -11.1% 40,000 0.0%
VBSP bond 15,492 19,000 -18.5% 17,000 -8.9%
National
important
projects 15,000 26,000 -42.3% 13,343 12.4%
Regarding net foreign borrowings, the total national limit was raised by 11.2%
compared to the previous plan. While the limit for foreign commercial borrowings
without government guarantee was kept unchanged, the limit for government and
government-guaranteed foreign borrowings together was raised by 18% compared
to the previous plan.
Foreign borrowing
Unit: USD mn
2014
2014 2013
previously % change % change
revised planned
planned
Total 11,120 10,000 11.2% 9,200 20.9%
Government borrowings 4,520 3,500 29.1% 3,150 43.5%
Foreign commercial borrowings
guaranteed by the government 2,800 1,400 100% 1,350 107.4%
Foreign commercial borrowings
not guaranteed by the government 3,800 3,800 0% 3,500 8.6%
Short-term foreign borrowings 1,300 1,200
The current limits of public debt are decided in Decision 689 as follows:
Limit of public debt

2012 Actual 2020 2030
As % of GDP
Public debt (government debt, government guaranteed debt,
municipal debt) 56% < 65% < 60%
Government debt 43% < 55% < 50%
Nation's offshore debt 41% < 50% < 45%
Direct liabilities of debt repayment of the government (excluding

re-lending) out of the year budget revenue 15% < 25%
Direct liabilities of debt repayment of the government (including
re-lending) out of the year budget revenue 24%
Offshore debt repayment of the nation out of the year exports of
goods and services 4% < 25%
National foreign reserves out of total short-term foreign
borrowing > 200%
We note that the direct liabilities of debt repayment of the government, including the
on-lending have reached 25% of the budget revenue in 2013 and estimated to rise to
26.2% in 2014. Although the target of less than 25% was set for the repayment
excluding the liabilities arising from the on-lending amount, the later is in nature
related to the government itself and should be paid officially by the government in
the event of default by borrower. Therefore, the benchmark of 25% could be used for
the ratio of direct liabilities of debt repayment of the government, including the on-
lending over budget revenue in the year.
Amendment of G-bond issuance plans twice in the year
On November 10, 2014, the Assembly approved the Resolution 78/2014/QH13 on the
socio-economic development plan and the state budget estimate for 2015 with 89.54
percent of votes in favor. Accordingly, the projection of state budget deficit was about
VND226,000 billion, equivalent to 5% of GDP, up VND2,000 billion compared to that of
state budget deficit in 2014, but down 0.3% from the ratio of 5.3 percent to GDP in 2014.
Furthermore, from 2015 onwards, the government bonds shall issue the tenors with the
maturity more than 5 years, not mobilize the short-term loans (from 1 to 3 years) with the
purpose of offsetting the state budget deficit, reduce the loan to roll over the existing
debts.
Issued volume
1st Revised 2nd Revised
Difference compar-ed to Remain-ing
Initial issuance issuance plan issuance plan
between the 1st the 2nd revised issued volume
Tenor plan for whole for whole year for whole year
and 2nd plan issuance plan until the end of
year (VND bn) as at Aug 29, as at Nov 20,
(%) as at Nov 26, 2014 (VND bn)
2014 (VND bn) 2014 (VND bn)
2014 (%)
(1) (2) (3) (3) (2)
Less than 1 year 40,000 26,000 26,000 0% 100% -
2 year 55,000 34,000 34,000 0% 100% -
3 year 60,000 65,000 61,000 -6% 92% 4,742
5 year 40,000 67,000 80,000 19% 72% 22,362
10 year 10,000 30,000 41,000 37% 68% 13,180
15 year 5,000 10,000 20,000 100% 69% 6,132
Total 210,000 232,000 262,000 13% 72% 46,416
Sources: MOF, VPBS
Dealing with the increase of long-term issued bonds in 2015 and to take advantage of the
lowest yields ever recorded, in November 20, the State Treasury announced the revision
of bond issuance in 2014, up VND30 trillion compared to the first revision. Particularly, the
five-year tenors increased by VND13,000 billion, the ten-year tenors rose by VND11,000
billion, the fifteen-year bonds supplemented by VND10,000 billion and the three-year
tenros reduced by VND4,000 billion. Consequently, the State Treasury shall release the
total of VND262,000 billion government bonds this year with the aim of investment and
offsetting the budget deficit and debt rollover.
As of the end of 2014, the total value of issued government and government-guaranteed
bonds and bills reached VND267,343 billion (USD12.6 billion), up 16% compared with last
year. The growth rate of total bonds and bills issuance in 2014, however, slowed by half
of 2013, which was 23.5%. There were VND240,841 billion (USD11.3) of G-bonds issued
in 2014, up 24% year-on-year recording the largest amount since 2011. In addition the
State Treasury (ST) successfully mobilized VND26,502 billion (USD1.25 billion) of bills
falling 27% from last year.
Total issuance of government and government-guaranteed bonds in 2014 (VND tn)
ST VBSP VDB Growth y-o-y

250 120%
105%
100%
200
80%
150
60%
100
40%
24%
50
14% 20%
- 0%
2011 2012 2013 2014
Sources: HNX, VPBS
Issuance of USD1 billion of international bond

On November 6, the government of Vietnam completed the very successful sale of
USD1.0 billion of 10-year bonds to the international markets. This was Vietnams third
issuance in its history and was done, at least in part, to refinance existing obligations.
Previously, Vietnam successfully issued 10-year bonds of USD750 million and USD1.0
billion in 2005 and 2010, respectively. Those outstanding notes due in 2016 and 2020
could be swapped into this new issuance or tendered for cash.
The bonds were priced at an attractive yield of 4.80 percent or 242 basis points over
similar-maturity US Treasuries with total registered bids of USD10.6 billion, more than 10
times the offered amount.
There were three reasons for the success of the offering: low US bond yields,
improvements in Vietnams macroeconomic environment and scarcity of Vietnam bonds.
In fact, the issuance was so successful that the government is rumored to be considering
issuing more bonds in 2015.
MACRO INDICATORS
FOREIGN EXCHANGE
Exchange rate
Ask Price - the OTC market Ceiling/floor price
22,000 Weighted Interbank Ask Price - VCB
21,800
21,600
21,400
21,200
21,000
20,800
20,600
20,400
01/13 03/13 05/13 07/13 10/13 12/13 02/14 04/14 07/14 09/14 11/14
Sources: Bloomberg, VCB, VPBS
The exchange rates quoted by Vietcombank and on the OTC have been on a rise since the
second half of October till December. During that time, the VND/USD eased in early
December as the SBV announced it had sold out USD1.1 billion. However, the exchange
rate on the OTC market rebounded shortly after that, trading in the range of VND/USD
21,570 21,580 on December 31 (+VND320 per side compared to October 15). The
exchange rate quoted by Vietcombank was more stable, fluctuating in a lower band of
VND/USD VND/USD 21,380 21,405 on December 31 (+VND150 compared to October 15).
The gap between the two markets rose to a high level of VND200, compared to that of
VND30 on October 15. We saw several valid reasons for the rise in the exchange rate as
follows:
(i) The US dollar index reached its 12-year high of 92.3 on January 7, 2015 and is still
in an uptrend. It has risen 14 percent compared to the same period last year. The
US currency strengthened mostly thanks to the nations recovery.
(ii) At the end of the year, exports companies need USD for loans payment and FDI
enterprises transfer profits to their home countries. Import corporations also need
foreign currency to pay for their partners. This all leads to higher demand for more
USD.
(iii) In late October, the State Bank of Vietnam reduced several key policy rates for the
second time in 2014. Specifically, the ceiling deposit rate for one-month to under
six-month deposits in VND fell by 0.50 percentage points to 5.50 percent/year. This
reduced the attractiveness of local-currency denominated assets.
(iv) Many banks speculate that the central bank will soon raise exchange rate at the
beginning of 2015, so they increased their USD purchasing, causing the exchange
rate to rise.
Outlook: The SBV Governor said that the VND will not be depreciated by more than two
percent during 2015. However, at the time we are writing this report, the VND/USD
interbank already rose one percent to VND21,458 per US dollar on January 7. As a result,
the room will be roughly one percent for the rest of the year. The governments ability to
defend the VNDs value against the USD will depend on several factors:
(i) The strength of exports: Back from 2009 to 2011 the Vietnam government
regularly devalued the VND to support exports. Today the situation is significantly
different. As we discussed above, we expect exports to remain strong in 2015,
especially due to strong consumer demand in the US. Although Vietnam may
record a trade deficit, much of the imports will be of machinery to increase
production. Therefore there should be no need to devalue the currency to support
exports.
(ii) The strength of the USD against other currency: Although the VND may have
weakened against the USD, most other currencies have done the same. As
Europe and Japan initiate quantitative easing programs, the VND should remain
strong against these currencies (Vietnams second and third largest export
markets). The SBV may be incentivized to weaken the currency to support exports
to these markets unless the US can make up for their shortfalls.
(iii) Levels of foreign reserves: Vietnam currently has more than USD35 billion of
foreign reserves. So long as Vietnam maintains high levels of foreign reserves, the
government will be able to defend the value of the currency. As discussed above,
we expect this to be the case. Even with a trade deficit, it can still attract reserves
from remittances and investment.
We think that the pair of VND/USD will continue to be weakened towards the end of 2015,
but the adjustment should not be much. For the Q1/2015, we expect it to remain
relatively stable at VND21,450 VND21,550.
INFLATION
2014 inflation recorded at 1.84 percent
The annual increase in the consumer price index (CPI) is estimated to be at 1.84
percent, the lowest level in more than 10 years, according to the National Financial
Supervisory Commission (NFSC). This years low level of inflation was mainly due t o
the drop of fuel prices. Besides, the decline of global commodity prices is also factor
leading to this years low inflation.
Inflation (%) Contribution of 11 sectors to CPI (%)

8 CPI MOM (R) CPI YOY (L) 1.60 Other goods & services
1.32 1.40
7 1.25 Cultural and Recreation items
1.06 1.20
Educational items
6 1.00
0.83 Telecoms
5 0.69 0.80
0.55 Transport
0.51
0.49 0.60
4 0.34 0.40 Healthcare. pharmaceutical items
0.27 0.30 0.40
0.20 0.23
0.22
3 0.11 Household appliancies
0.08 0.20
0.02
- Accommodation &
2
(0.06) (0.20) Garment. hats. footwear
1 (0.19)
-0.27-0.24 (0.40) Beverage & Tobacco
-0.44
0 (0.60) Food & Foodstuff
12/12
02/13
04/13
06/13
08/13
10/13
12/13
02/14
04/14
06/14
08/14
10/14
12/14
(6) (4) (2) - 2 4 6 8
Sources: GSO, VPBS
Crude oil prices have plummeted significantly by around 50 percent in the second
half of 2014 due to weak demand from Europe and China and ample supply from
America and OPEC members, especially Saudi Arabia.
Following the slump of global crude oil prices, since the end of July to December 22,
2014, domestic gasoline prices were reduced 12 times to VND17,880/liter from
VND25,640/liter RON92 (30 percent). The adjustments of domestic gasoline prices
caused CPI in the transport sector to drop 5.57 percent and CPI of accommodation
and construction materials (including electricity, water and fuel) to decrease 1.95
percent in the full-year 2014.
Gasoline prices - December 2013 to December 2014 (VND)

27000
26000 25,640
25,310
25000 24,51024,690
25,230 24,210
24,900 24,810
24000 24,210
23,560
23,740 23,710
23000 22,890
22,340
22000
21,390
21000
20000 20,250
19,930
19000
18000
17,880
17000
12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14 08/14 09/14 10/14 11/14 12/14
Sources: Petrolimex, VPBS
Prices of foods and foodstuff sector, which present almost 40 percent of the CPI
basket, increased only 2.61 percent, well below the 5.08 percent level of 2013. This
sector contributed nearly 60 percent to the increase of the CPI in 2014.
Education sector posted the highest increase at 8.25 percent in CPI basket due to the
significant surge in education fees for the new school year in September, while
telecom sector rose slightly 0.38 percent. CPI of other sectors increased within the
range of 1.86 percent to 3.77 percent.
Outlook:
Effect of stronger USD: According to the Ministry of Industry and Trade, the import
of machinery and equipment is projected to increase considerably in the coming
period thanks to higher demand for outputs, which will be driven up by the
upcoming FTAs. Given the recent devaluation of the VND, manu facturers need to
pay a higher cost for importing machinery and equipment, thus retail prices are
expected to be under pressure.
Generally, we project 2015s inflation to be stable at around five percent. The

ongoing downward trend of global commodity prices, especially crude oil, could
lower production costs and thus help to reduce goods and services prices. We
expect lower goods and service prices, in conjunction with the recent better-than-
projected macroeconomic results, high retail sales and consumer c onfidence figures
would stimulate demand in 2015.
As usual, first quarter inflation is expected to be driven up by Tet holiday. However,

this year, it will be partly offset by the effects of plummeted fuel prices. Thus we
expect the CPI to increase by 0.8 percent from January through the end of the first
quarter 2015, an annualized inflation rate of 3.6 percent. However, the possibility of
the recovery of crude oil in the second half of 2015 and some other seasonal factors
such as the increases of healthcare service prices and education fees will push up
inflation in the second half of this year.
BANK INTEREST RATES

On November 28, the State Bank of Vietnam (SBV) issued a series of decisions to reduce
the ceiling of deposit rates in VND and USD, the lending rates for short-term loans in VND
with a date effective from October 29. This was the second time in 2014 that the SBV took
clear action on lowering market interest rates while the first time came into effective since
this March. Low inflation supported the easing of bank interest rates in Quarter 4.
As guided in the Announcement on monetary policy and banking operation in 2014,

driven towards the management solution in 2015, the median of bank interest rates
dropped from 1.5 2 percent per annum compared to last year. Particularly, deposit rates
reduced from 1.5 2 percent per annum while lending rates fell by 2% per annum.
30/12/2013-3/1/2014 31/03- 4/4/2014 8-12/12/2014

Deposit rates in VND
Rates for no term deposits 1.0 1.2% 0.8 1.0% 0.8 1.0%
Rates for below 6 month term deposits 5.0 7.0% 5.0 6.0% 5.0 5.5%
Rates for 6 -12 month term deposits 6.5 7.5% 6.0 - 7.5% 5.7 6.8%
Rates for over 12 month term deposits 7.5 8.5% 7.5 8.3% 6.8 7.5%
Lending rates in VND
The State Bank of Vietnam
- For enterprises with normal core business
(medium-, long-term loans) 11.5 12.8% 10.5-11.5% 9.5 11.0%
- For small and medium enterprises, for
enterprises in agriculture, export industry
(medium-, long-term loans) 11.0 12.0% 10 .0 11.0% 9.0 10.0%
Commercial banks
- For enterprises with normal core business
(medium-, long-term loans) 12.0 13.0% 11.0 - 12.5% 10.0 11.0%
- For small and medium enterprises, for
enterprises in agriculture, export industry
(medium-, long-term loans) 11.0 12.0% 10.0 12.0% 10.0 11.0%
Sources: SBV, VPBS
The interest rates of existing loans continued to be actively adjusted to lower by credit
institutions. Particularly, loans with interest rates of 15%/year accounted for 3.90 percent
of the total outstanding loans in VND, lower than the contribution of 6.3 percent in
previous year. Loans with interest rates of 13% per year made up 10.65 percent of the
total, down from the proportion of 19.72 percent of last year. Reducing interest rates was
considered a positive action for businesses to invest in production and plan ahead for the
coming year.
In the open market, wining yields experienced a downwards trend through September
end, but improved in the last quarter of the year. Particularly, the winning rates of 91-day,
56-day and 28-day tenors via reverse repo transactions stood at 4.00 percent (+58 bps
from last quarter), 3.60 percent (+60 bps from last quarter) and 3.50 percent (+90 bps from
last quarter) respectively at year end.
Outlook: Given the projected inflation at 0.8 percent as at the end of the first quarter
2015, the policy rates will probably be reduced further in the first quarter. These include
the ceiling short-term deposit rate (down 0.5 percentage point) and lending rates in some
priority sectors (one percentage point). Therefore we believe interest rates will likely to be
kept stable through the whole year.
CREDIT GROWTH AND M2
Credit growth from December 24 increased by 12.62 percent y-t-d, higher than the level of
12.51 percent in 2013. As a result, the target growth of 2014 set by the State Bank of
Vietnam (SBV) was achieved. Several banking criteria y-oy:
2013 2014 Plan for 2015

Total payment methods 16.13% 15.99% 18%
Deposits 17.23% 15.76%
Credit growth 12.51% 12.62% 15%
Credit in VND 18.59% 12.59%
Credit in foreign currency -12.80% 12.80%
The credit growth rate of 2014 had same seasonal effects as previous years, when
increasing at low pace during firs quarters, but at higher rate in the last two quarters. 35
percent of the target growth was obtained in the fourth quarter as business activities
especially industrial production, were expanded. The industrial production index in 2014
grew by about 7.6 percent compared to last year. The upward trend moved at faster pace
toward last quarters of the year (5.3 percent in 1Q2014, 6.9 percent in 2Q2014, 7.8 percent
in 3Q2014 and 10.1 percent in 4Q2014). In addition, the credit growth in the last three
months was mainly due to increasing consumer demand before the Tet (Lunar New Year)
holiday.
In 2014, the State Bank of Vietnam (SBV) encouraged the growth of foreign credits which
normally have about four to five percent lower credit rates than domestic loans. Therefore
the foreign credits soared significantly by 12.8 percent as of the end of the year,
contributing 84.8 percent of total credit growth.
Contribution on total credit growth

Credit in foreign currency Credit in VND
140%
120%
100%
80%
60% 71.0% 75.2% 119.8% 84.8%

103.4%
40%
20%
29.0% 24.8% 15.2%
0%
-3.4% -19.8%
-20%
-40%
2010 2011 2012 2013 2014
Sources: SBV, VPBS
Outlook:
In 2015, the government issued the Decree 01/NQ-CP about the next-year economic plan.
Accordingly, the target growth of credit will be 13 to 15 percent in 2015.
As mentioned above, we predict that some of policy rates will be deducted further in the
first quarter, to boost cash flow into the market. This decision is considered as the first
effort of the government this year to achieve the target growth of 2015. We believe the
achievement is possible under thorough manipulation of the government.
Regarding foreign loans, the SBV issued the Circular 43/2014/TT-NHNN about providing
loans in foreign currencies of credit institutions, foreign bank branches for resident
borrowers, replacing the Circular 29/2013/TT-NHNN. In accordance with it, the foreign
loan duration for allowed borrower will be extended to one more year. Therefor we
believe that the growth of foreign loans will continue to rise substantially in 2015 under
control of the SBV.
GOVERNMENT BOND YIELDS
Yields rose from their historical lows
Bond yields in the primary market dropped continuously from the beginning of the year
till October 2014 before suddenly inching up during the last two months of 2014. Five-
year bonds fell sharply in October 2014, down an incredible 325 bps year-on-year and
reached the lowest level of 4.98% per annum in average ever recorded. Yields of ten- and
fifteen-year bonds; however moved sideways until dropping dramatically in October
2014, to 6.28% and 7.02% per annum respectively. However bond yields increased across
all tenors during the last two months of the year. The yields of five-year bonds in
December stood at 6.11% per annum, up 114 bps compared to two months prior,
equivalent to an average growth of more than 14 bps per trading week.
Winning yields by tenor (%) Yields over the tenor (%)

% 2 year 3 year 5 year 31/12/2014 30/06/2014 31/12/2013
10
10 year 15 year
10.0 9
9.0
8
8.0
7
7.0
6
6.0
5
5.0
4
4.0
3
1 2 3 5 7 10 15
Note: There were no auctions of two- and three-year bonds in Sources: HNX, VPBS
September and October
The continuous fall in bond yields during the first ten months of the year was driven by
improvements in macroeconomic indicators, which also led international rating agencies
such as Moodys and Fitch to raise their rating of Vietnam. These led Fitch to upgrade
Vietnams credit rating from B+ to BB- in November, which boosted the demand for
government bonds and caused bond yields to decrease at the fastest pace during that
time.
However, the effects of the Circular 36, abundant supply of bonds in the primary market
and a sharp fall in the oil price pushed up pressures on the State budget revenues and
strongly affected the bond market during last two months of the year. Circular 36
supplemented regulations restricting the proportion of the short-term capital banks could
use for bond purchases, which led some foreign banks to sell down their positions. In
addition, in accordance with the second revised plan of bond issuance on November
2014, the planned value increased by VND30 trillion bonds, mostly in mid- and long-term
bonds to take advantage of the current low yield levels. This however led bond yields to
soar dramatically toward the year end.
Outlook: According to Resolution 78/2014/QH13 on the State Budget in 2015, from
2015 onwards, the State Treasury shall only issue the government bonds with their
maturities above five years, not conduct short-term loans to offset the budget
deficit, consequently lowering the loans to rollover existing loans. It remains to be
seen whether banks, who were strong buyers of bonds with tenors below two -years,
will shift into five-year bonds. While inflation of 3.6 percent should not impact bond
yields, expectations of increases later in the year could push them a bit higher than
their closing 2014 levels. We expect the five-year bond yield to reach 6.3 to 6.6
percent by the end of Q1.
STOCK MARKET
VN-Index performance in 2014
Sources: Bloomberg, VPBS
Fourth Quarter 2014 Results
In our last Quarterly Market Outlook report, we predicted that the VN-Index would finish
the year between 600 and 620. It turns out that we were wrong. But we dont feel too bad
about it. The fourth quarter of 2014 was full of surprises that pushed the market to levels
no analysts expected.
During the quarter, the VN-Index gave up most of its gains for the year by falling 16
percent from its quarterly peak before rallying in the final two weeks to close at 545.63.
This gave investors a somewhat underwhelming eight percent gain for the year. The
HNX fared better. It fell eight percent in the fourth quarter but gained nearly 24 percent
for the year.
Near the beginning of the quarter, the US Federal Reserve terminated its QE3 program.
There were concerns regarding a potential exodus of the foreign investment but the
announcement seemed to have little impact on the market. First, it had been widely
anticipated for quite some time. Furthermore, although the Fed ended its stimulus
program, it was still hesitant to raise the interest rates so there was little movement of
institutional money back to US capital markets. Besides, the European Union and Japan
have begun their own easing programs for economic stimulus, which may offset some
impact of the US moves.
Two other factors, however, created significant market declines during the final quarter
which nobody, including us, predicted. We discuss both of these in our macroeconomic
sections above. The first was Circular 36. Even before the official release of the Circular, it
already had negative impacts on the stock market sentiment due to fears of declining
liquidity for the market.
VN-Index performance and VN-Index performance w/o GAS
(%)
w/o
EX GAS
MEMBER VN-Index
index
4
0
10/1/14 10/11/14 10/21/14 10/31/14 11/10/14 11/20/14 11/30/14 12/10/14 12/20/14 12/30/14
-2
-4
-6
-8
-10
-12
-14
-16
The second factor pushing down share prices was the steep drop of oil prices to below
USD60/barrel. Lower oil prices immediately affected the oil and gas sector especially
those in the mid- and upstream companies. The stock prices, therefore dipped to low
levels with the most significant declines coming from GAS and (PGS). This substantial
loss made a big impact on the psychology of investors and created fears of increasing
government deficits due to declining revenue from oil sales. However, we note that if we
excluded GAS the VN-Index would have merely fallen by just a far more modest, 4.1
percent.
The bright spot in the news during the fourth quarter came from the real estate sector. In
late November, the National Assembly approved the Housing Law (amended), which
allowed foreigners to own houses without any restrictions on the number of type of
housing. This legislation is one of the reasons that the property sector is one of our
featured industries below.
Unfortunately, we could not get similar good news regarding foreign ownership for stock
investors though. During the quarter, the chairman of the State Securities Commission
told Bloomberg that the new draft to increase foreign ownership limits of
Vietnamese stocks will not be summited until at least next October. The plan to lift
restrictions on foreign ownership limits to 60 percent from 49 percent in some industries
was one of the main factors to boost the stock market last year and the beginning of this
year. Such a long delay would seem likely to disappoint investors but did not seem to
have much impact on market activity since not much had been said about it for quite
some time. Foreigners were strong net sellers on that day but this may have been due to
other factors and the indices actually rose slightly.
Sector Mkt Cap P/B (12/31) P/E (TTM at % price change % price change % earnings
12/31) (12M at 12/31) (90D at 12/31) growth (12M
at 12/31)
Consumer 235,373 19.2 2.89 3.9 (3.9) -1.1%
Energy 179,820 11.3 3.03 14.1 (31.3) -2.7%
Financials 388,842 13.0 1.47 9.6 (0.1) -0.2%
Health Care 14,968 13.0 2.14 14.4 3.6 -3.1%
Industrials 76,902 11.9 1.11 27.5 (2.0) 33.5%
Materials 67,056 10.8 1.34 19.2 (2.4) -3.8%
Technology 31,378 10.1 2.72 67.6 (1.3) 4.4%
Utilities 19,673 10.6 1.39 24.8 7.5 -41.2%
Aside from energy stocks, most sectors recorded small losses for the quarter and utilities
actually gained. Technology stocks had the best performance for the year, but industrials
also posted solid gains backed by strong earnings growth.
Outlook for 2015
VN-Index long-term trends

1,200.0
1,000.0
Bubble
800.0
600.0
400.0
200.0
-
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
First we note that the declines in the fourth quarter put the VN-Index well below its long
term trend line. The question then is whether oil price declines and Circular 36 are long-
term game changers for Vietnam stocks and whether the markets overreacted on
sentiment. Our view is that, largely, it did. While Circular 36 will impact liquidity it will
also strengthen the balance sheets of the banks. The negative impacts have already been
felt in stock prices. The positives have not. While sustained lower oil prices may impact
some companies for the long-term, others will benefit. And we dont think this is a long-
term drag on the overall market. In fact, as we write this, GAS is already rallying due to
treasury share purchases. We therefore believe the market can return to its long-term
trend line.
VN-Index Performance Multiples
P/E (LHS) EPS LTM (RHS)

16 20%
14 15%
10%
12
5%
10
0%
8
-5%
6
-10%
4
-15%
2 -20%
0 -25%
Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14 Q3/14 Current
We maintain our thesis that stock prices are heavily influenced by interest rates both
government bond yields and bank lending and deposit rates. Fixed income instruments
provide an investment alternative to stocks. So as their yields fall more cash flows into
the stock market. As we note above, deposit rates fell significantly during 2014 and
continue to do so, which should benefit stocks.
Government bond yields have a more direct correlation with stock price earnings ratios
than with prices. The relationship is logical because the macroeconomic factors that
create lower bond yields have positive long-term effects on stocks: low inflation, stable
growth with strong foreign reserves, lower deficits, etc. We have seen very high negative
correlation over the past four years and this trend continued during the Quarter 4. As the
five-year government bond yield rose above six percent during the quarter, the P/E ratio
of the VN-Index fell from its peak of 16.3x on August 28 down to 13.2x at the end of the
year. While we expect inflation to remain low, at least for the first half of 2015, we see no
reason for bond yields to return to their record lows of 2014. In fact, we predict above that
the five-year government bond yield will be at 6.3 to 6.6 percent at the end of the quarter.
Accordingly, the market P/E ratio is likely to remain between 14x and 15x.
The one caveat to this relates to the governments stated intention to stop offering less-
than-five-year bonds. If this pushes banks into five year bonds then that could drive
yields. But we think its more likely that banks will shift into lending instead, which is a
good thing.
Bank lending rates are more related to earnings growth. We have seen several
companies who have recorded good earnings growth simply due to lower interest
expense during 2014. We expect that trend to continue into 2015. We also believe that
credit growth will be strong next year as lower interest rates make more projects feasible.
Hopefully, more borrowing for investment will contribute to earnings growth. Earnings
growth improved to near 10 percent for announcements made in the Quarter 4 and we
think it can be stronger next year. Of course, the earnings growth is likely to be unevenly
disbursed, just as it was in 2014. So investors should look to see where the growth is
coming from.
In summary, a five to 10 percent increase in P/E ratios (to between 13.9x and 14.5x)
accompanied by a 15 percent rise in earnings would result in a 26.5 percent increase in
the VN-Index to approximately 680 by the end of 2015. Of course, many things can
happen during a year, but this seems possible right now.
We also note that historically, the first quarter has been the strongest for Vietnamese
stocks. On March 24, 2014, the VN-Index hit 608, not far from its high near 640 in August.
The HNX actually did peak on the same date near 93. The markets recorded similar
trends in 2014 and other years. So we would not discount the possibility of breaking
through 650 during the first quarter with three quarters of ups and downs to follow.
There has been much talk that when TPP is signed that the index will shoot up even
towards 900. We are not so optimistic. But we will watch this closely. If negotiations can
come to a conclusion and the US Congress seems in a favorable mood to work with
President Obama on TPP (both very big ifs) then we may revisit our forecast.
SECTORS WE LIKE
While we are optimistic for stock price appreciation going into 2015, there will be
differentiation. Companies will need to demonstrate earnings growth, or at least strong
potential for earnings growth soon to come, in order to see their shares rise. With this in
mind, we present here sectors that we like:
REAL ESTATE
In 2014, property stocks outperformed the market as the stock price index gained 37%,
higher than VN-Index (8%) and HNX-Index (22%). The 20 largest market capitalization real
estate firms recorded the median of 29% and 18% in 9M2014 revenue and net income
growth, respectively.
Real estate stock price index performance Top 10 market capitalization

% growth from
Peer Index Market Debt to LTM LTM
1/1/2013 #REF! Ticker 9M2014 net income
100 cap equity P/E P/B
VN-Index
VNDbn VNDbn % y-o-y % target
HNX-Index
80 VIC 68,510 2,824 -52% 63% 172% 18.7 3.72
KBC 6,197 165 NM 103% 68% 16.9 1.19
60 ITA 5,751 97 618% 116% 22% 33.6 0.73
IJC 3,729 51 16% 16% 52% 22.1 1.29
40
FLC 3,338 240 421% 91% 23% 11.4 0.88
SJS 2,506 28 -19% 28% 129% 39.4 1.54
20
DIG 2,342 22 -13% 24% 63% 45.7 0.98
0 PDR 2,187 8 483% 21% 191% NM 1.52

01/13 04/13 07/13 10/13 01/14 04/14 07/14 10/14 01/15 HDG 2,183 61 6% 36% 2% 17.3 2.81
-20 NLG 2,142 (17) NM NM 42% 52.6 1.27
Data as of 1/13/2015. Sources: Bloomberg, Companys financial statements
2014 Home buyers are coming back to the market

According to preliminary statistics of Savills, in 2014, sales volume in HCMC was
approximately 11,600 units, up 100% y-o-y, which are mostly from affordable and mid-
end segments, accounting for 62% and 35% of total sold units, respectively. Meanwhile,
sales volume in Hanoi during the year surged 150% y-o-y to approximately 11,120 units.
Q4/2014 saw the highest absorption rate in HCMC with 22% while Hanoi maintained high
rates of 38% in the two past quarters. The segment with the most liquidity is small- and
medium-sized apartments which have reasonable prices, good quality and construction
progress and are built by reputable developers.
Sold units and absorption rate by grade in HCMC Sold units and absorption rate by grade in Hanoi
Units High-end Mid-end High-end Mid-end
Units
Affordable Absorption rate Affordable Absorption rate
6,000 24% 6,000 60%
5,000 20% 5,000 50%
4,000 16% 4,000 40%
3,000 12% 3,000 30%
2,000 8% 2,000 20%
1,000 4% 1,000 10%
0 0% 0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011 2012 2013 2014 2011 2012 2013 2014
Sources: Savills Research Q1/2011-Q4/2014
Foreign investors are also coming back to Vietnam's property market. According to the
Foreign Investment Agency, in 2014, the real estate sector has been ranked second and
accounted for 12.6% of total registered FDI, with 35 projects approved and amounting to
USD2.5 billion, up 167% y-o-y.
The above positive signals have showed that domestic and foreign investors are
returning for real estate investment channels. However, the overall real estate market still
faces difficulties. According to the HCM City Real Estate Association (HoREA), HCMC has
around 1,400 housing projects; of which only 426 projects were complete, 689 projects
have stalled and 85 others have had their licenses withdrawn or canceled. In addition, the
disbursements in the VND30 trillion (USD1.4 billion) preferential home loan program have
remained slow.
2015 - The positive impact of new policies
The Government issued three new policies within two months of the end of 2014,
including the new Law on Hosing and Law on Real Estate Business (take effect on July 1,
2015) and Circular 36 (taking effect on February 1, 2015). We believe that the three policies
will have positive and important impacts on the real estate market and improve the
liquidity, supply and demand balance and the professionalism of the developers, then
support the stable development in the coming years.
(i) Law on Housing: We found no restrictions for overseas Vietnamese in house

ownership. Foreigners who have a visa to enter Vietnam as well as foreign
invested enterprises (FIEs) are allowed to buy project houses in Vietnam; however,
there are some restrictions, including (1) total house ownership may not exceed
250 separate houses in a ward or 30% condominium in an apartment building, and
(2) the ownership period is 50 years.
We also expect that the real estate will attract the remittance, which may flow less
into the bank saving channel as the USD saving rates are stable, low and under
control by the SBV in the past two years. In 2014, the remittances poured in HCMC
mainly in production and business segment with 71.4% (70.2% in 2013), followed
by property with 22.1% (20% in 2013).
(ii) Law on Real Estate Business: It issued several regulations to protect the interests
of home buyers and help the market develop more professionally in the future.
Notably, the developer who wants to presell future projects must obtain a bank
guarantee for its obligation to complete and hand over the future projects. The
developers only collect the advance payments from customers when the pilling of
the building must be completed, the projects construction certificate has been
issued and the technical infrastructure surrounding the project must be
completed. The first mobilization may not exceed 30% of the purchased price, and
total mobilization may not exceed 70% (or 50% if the developer is an FIE).
(iii) Circular 36: The SBV has sent a message extending the credit growth for the real
estate sector. Accordingly, the SBV eased two important rules of Circular 13/TT-
NHNN such as banks are allowed to reduce the risk factor from 250% to 150%
applicable to lending for real estate investments and increase double the portion
of short-term capital for medium-term and long-term lending, from 30% to 60%.
We believe that this adjustment will help banks have more sources to disburse
loans for the real estate sector, while keeping the capital adequacy ratio (CAR) at
least 9%.
Bank deposit rates are currently at their lowest level since 2005 or six percent per year,
making real estate an attractive investment channel with rental yields stable at four to six
percent per year according to a survey by Savills. We expect low inflation to keep interest
rates down in 2015 and boost the real estate market.
LOGISTICS
During 2014, investors in logistics stocks gained 56%, which was higher than VN-Index
(8%) and HN-Index (22%). In terms of earnings, 9M2014 results of listed logistics
companies revealed that the revenues and net income increased by the median of 9% and
25% y-o-y, respectively.
Logistics stock price index performance Selected large-cap logistics stocks

VN-Index Market 3M 9M2014
% growth LTM LTM LTM
Logistics peer index USD / barrel Ticker cap price net
from 1/1/2009 P/E P/B ROE
Crude oil Brent (VNDbn) change income
300 140
Port sector % y-o-y
VSC 1,753 -13% 7.3 1.7 27% 0.5%
250 120 DVP 1,880 4% 8.8 2.3 29% 11.5%
CLL 768 -14% 10.1 2.1 21% -9.8%
200 100 Oil and gas shipping
PVT 3,505 -24% 12.1 1.1 9% 35.5%
VIP 851 -1% 23.0 0.9 4% -82.2%
150 80
VTO 686 9% 11.5 0.6 6% 71.6%
Container and bulk cargo
100 60 GMD 3,496 -12% 5.9 0.7 13% 221.5%
TMS 1,246 20% 10.6 1.8 18% 29.5%
50 40 VOS 882 5% n/m 0.7 n/m n/m
Other services
SFI 279 -5% 5.3 1.0 20% 91.1%
0 20 VNL 237 5% 7.6 1.4 19% 18.9%
1/09 10/09 7/10 4/11 1/12 10/12 7/13 4/14 1/15 VNT 263 24% 9.3 2.3 26% 5.9%
-50 0
2015 opportunities coming from expanded trade and reduction of oil prices
We expect logistics companies to benefit from the economic environment in 2015:
(i) Growth rate of import and export activities: Strong exports, especially to the US,
should continue strong growth through 2015. Multiple free trade agreements, such
as the Trans-Pacific Partnership (TPP), Vietnam-Korea free trade agreement,
Vietnam-EU free trade agreement and ASEAN economic community may further
support exports of the garment and textile and other industries of Vietnam. All of
these will drive the demand for logistics services.
(ii) Fuel costs: Fuel costs plays a major part in input cost of logistics companies.
Hence, thanks to the recent downtrend of oil prices, the companies will benefit a
lot, except the port companies as most now use electric equipment.
(iii) Quality of infrastructure: The government has been upgrading and structuring a
new level of infrastructure, leading to the improvement of quality of infrastructure
or reducing of transportation time. Hence, the quality of logistics services will
increase gradually.
For 2015, thanks to the growth rate of GDP and import and export activities, we believe
that the port companies will benefit the most as 90% of Vietnamese import and export
goods are delivered via port systems. Among the port system, ports in Haiphong and Ho
Chi Minh City will enjoy higher growth rate than the other areas as these are the key ports
for Vietnams international trade.
We believe that the fee of logistics companies will be reduced much lower than the
shrinkage of fuel costs in 2015. According to the General Statistics Office (GSO), 2014
transportation price index was up 3.1% y-o-y while the major part of input cost, oil prices
were reduced more than 25% (for gasoline RON92 and diesel fuel oil DO 0.25S). Hence,
the reduction of oil price, to some extent, will remain as a supportive catalyst for
investing in these stocks. However, oil price fluctuations tend to have different levels of
impact on the various sub-sectors of the logistics sector:
(i) Port operation: The impact is minor as most ports currently use electric-run
equipment rather than oil.
(ii) Oil and gas shipping: In both supply and demand side, the reduction of oil prices
will push up the demand for oil and gas transportation, leading to increased
revenues in the last quarter of 2014 and going into 2015.
(iii) Container and bulk cargo transportation: This is the group that benefits the most
as fuel costs normally account for a major part of total costs. Reduction of oil
prices will lead to higher gross margins and turn some loss-making companies
such as Vosco (VOS) and Vinaship (VNA), into profitable ones.
(iv) Airlines industry: Thanks to the price of jet fuel at below USD100 per barrel,
Vietnam Airlines and most South East Asian airlines will generate higher profits
for 2014 and 2015.
NATURAL RUBBER
In 2014, natural rubber share prices decreased by about 21%, mostly due to downward
trend of rubber prices, while the VN-Index and HN-Index increased by about 8% and 22%.
Natural rubber stock price index performance Listed companies in natural rubber sector
RSS3 USD/ton Natural rubber stock price index % 1Y growth Market cap 1Y Price LTM LTM
VN-Index Ticker
(VNDbn) change P/E P/B
2,700 RSS3 rubber price 25
2,400 20 PHR 2,001.5 -13.3% 5.7 0.9
2,100 15
DPR 1,564.9 -11.0% 5.8 0.7
1,800 10
1,500 5 TRC 830.1 -29.3% 4.7 0.6
1,200 0 HRC 742.2 -6.1% 13.9 1.5

1/14 3/14 5/14 7/14 9/14 11/14 1/15
900 -5
TNC 227.2 -7.8% 15.3 0.8
600 -10
300 -15 Average -13.6% 9.1 0.9
0 -20
In the latter half of 2014, many rubber companies had good business results for the first
half of 2014 but had to sell products at their production cost in the second half. For 2015,
if there is no recovery in rubber price, these companies must face a sudden decrease in
profitability. At present, some companies have adopted solutions to reduce cost of
production such as decrease labor, reduce salary, fertilizers etc. But these solutions seem
to be temporary and not designed for a sustainable business. However, we believe that
the market already reflected low rubber price in stock prices and from 2015 we expect to
see good news for the natural rubber industry from a steady recovery in price.
Natural rubber prices are at five-year low and forecast to recover from 2015
Natural rubber prices declined about 21% in 2014 and are at their five-year lowest level.
Supply increased after high record prices in 2010 spurred output, while demand slowed
as the pace of economic growth decreased in China, the biggest buyer accounting for 30-
40 percent of global natural rubber demand.
Comparison between supply, demand and natural rubber price
World production ('000 tons) World consumption ('000 tons)

RSS3 year-end price (USD/ton)
13,000 4,900
'000 tons
USD/ton
12,000 4,200
11,000 3,500
10,000 2,800
9,000 2,100
8,000 1,400
7,000 700
6,000 0
2001 2003 2005 2007 2009 2011 2013 2015F
Sources: Bloomberg, IFSG; value in 2014 and 2015 are estimated by IFSG
According to a report by the World Bank in October 2014, RSS3 average price is forecast
to bounce back to USD2,100 per ton in 2015 and continue increasing to 2025 with a CAGR
of 2.9%. While oil prices have suffered a sharp decrease in recent weeks, The Economist
Intelligence Unit (EIU) updated its estimates for natural rubber price with a small decrease
compared with its previous forecast price.
RSS3 average price (USD/ton) 2012A 2013A 2014E 2015F 2016F

World bank(reported October 2014) 3,380 2,790 1,980 2,100 2,160
EIU (reported December 16, 2014) 2,790 2,306 2,706 2,706
EIU (reported November 19, 2014) 2,790 2,369 2,731 3,379
Sources: World Bank, EIU
Thailand, Indonesia and Malaysia, which produce 70 percent of the worlds natural
rubber, agreed to cut exports from 2015 to drain supplies and support prices. Despite
their efforts, they will encounter resistance due to the recent decline of crude oil price,
from which its substitute - synthetic rubber is produced. But we believe that low oil prices
will also stimulate the tire industry leading to a significant increase of total rubber
consumption and natural rubber as well.
Relation between natural rubber price and crude oil price
USD/barrel WTI Crude oil price RSS3 price in TOCOM USD/ton

160 6,000
120 4,500
80 3,000
40 1,500
0 0
BANKING SECTOR
In 2014, banking sector stocks mostly underperformed but eventually catched up the VN-
Index during the final weeks of the year with return of approximately 8%.
Banking stocks index performance 2014 Listed banks 9M2014 key ratios
Banking Sector VNINDEX Market Cap
30 (tn)
Credit TTM TTM
25
Ticker 01/13/2014 Growth NIM NPL P/E P/B
20
VCB 98.07 10.16 2.45 2.54 20.14 2.26
15
CTG 56.97 6.00 3.22 1.75 11.96 1.04
10
BID 45.26 5.47 2.80 1.93 10.12 1.42
5 STB 21.71 12.58 4.68 0.98 8.83 1.33
0 MBB 16.58 5.30 3.93 3.06 6.87 1.09

EIB 16.35 -3.94 2.12 3.36 31.87 1.11
-5
01/14 02/14 04/14 06/14 08/14 10/14 12/14 ACB 14.92 5.57 2.91 3.07 27.34 1.23
SHB 7.89 25.61 1.87 3.69 9.74 0.76
Sources: Bloomberg, Banks FS
2014 Positive signals towards year end
(i) Credit growth: Despite a slow start for the 1H2014, credit growth recently picked
up and already reached 12.62% as of December 22, 2014. With this result, the
target 12% for 2014 has been achieved. Meanwhile, total deposits grew 15.15%.
For 2015, the target credit growth is set from 13% to 15%.
(ii) Reduced NPLs: The NPL ratio of the banking system was cut to 5.3% by the end of
November, which was substantially lower than the 9.1% reported at the beginning
of the year. These NPL ratios were calculated applying CICs loans classification.
During the year, VAMC has bought about VND83.000 billion of bad debts,
achieving its 2014s target. However, only VND4,000 billion NPLs were resold ,
which were inconsequential.
(iii) Stable outlook: Thanks to enhanced economic stability and a reduction of liquidity
stress, the outlook on Vietnams banking system was revised to stable in
December 2014 by Moodys.
(iv) Big banks report high profits: Several major banks have officially reported
impressive business results for 2014, including Agribank, BIDV, and Vietcombank.
Some smaller banks, such as Tien Phong Bank, Nam A bank also announced they
had exceeded targeted business results.
2015 Higher growth, improving assets quality and bankings M&A boom are
expected
(i) GDP growth of 2015 is expected to be 6.2%, which is higher than the last few
years. Therefore, credit growth will also likely be higher to accommodate GDP
growth.
(ii) Balance sheet quality of banks has been improving with NPLs and NPL ratio
declining thanks to aggressive provisions. Revised real estate laws which allowed
foreigners to own property in Vietnam and long awaited expecting Circular 53
revisions which provide the VAMC with more autonomy will facilitate the selling
of NPLs. Although there are still uncertainties regarding balance sheet quality of
banks once Circular 02 and Circular 09 become fully effective, we believe that
these concerns have already been factored into bank stocks prices.
(iii) With the Governments determination to hasten the restructuring of the credit
institution system, M&A activities in the banking sector were projected to boom in
the coming years. Representative of the SBV announced on January 12, 2014 that
2015 was expected to witness six M&A deals to eliminate weak banks, while
enhancing the banking systems condition. According to the roadmap for
restructuring credit institutions, the number of commercial banks would be
reduced from over 30 to some 15 to 17 by the end of 2017. Besides the two deals
that have been approved last year but yet to be implemented (Sacombank and
Phuong Nam Bank; Maritime Bank and Mekong Development Bank), the four deals
that have generated rumors in the market recently, some are more certain than
the others and include: (1) Vietcombank and Saigon Bank, (2) BIDV and Mekong
Housing Bank, (3) LienViet Post Bank and Global Petro Bank, and (4) Vietinbank
and Ocean Bank, and PG Bank.
These factors are likely to be key drivers to push banking stocks to perform better in 2015.
CONTACT INFORMATION
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VPBS research department:
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Head of Research
barryw@vpbs.com.vn
Nguyen Thi Thuy Linh

Director Macro and Financials
linhntt@vpbs.com.vn
Hoang Thuy Luong Pham Tran Huong Giang Nguyen Bao Ngoc
Research Analyst Research Analyst Research Assistant
luonght@vpbs.com.vn giangpth@vpbs.com.vn ngocnb@vpbs.com.vn
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Vo Van Phuong Domalux

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phuongvv@vpbs.com.vn domalux@vpbs.com.vn
+848 6296 4210 Ext: 130 +848 6296 4210 Ext: 128
Tran Duc Vinh Nguyen Danh Vinh

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Brokerage Sales & Brokerage
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+848 3835 6688 Ext: 369 +848 3823 8608 Ext: 146
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MARKET OUTLOOK REPORT

January 19, 2015

conditions, we expect P/E ratios to rise only modestly

Please see important disclosure information at the end of this report.

Vietnam is entering a long-term growth phase

GDP structure (%) GDP quarterly growth (% y-o-y)

Sources: GSO, VPBS

Index of Industrial Production (%) Contribution to IIP growth by segments (%)

IIP m-o-m IIP y-o-y

Water supply, sewage

Sources: GSO, VPBS

Customer demand is reported to increase from both domestic and international

Retail sales growth y-o-y (%)

Nominal growth Real growth

Sources: GSO, VPBS

ANZ-Roy Morgan Vietnam Consumer Confidence Index (CCI)

Sources: ANZ-Roy Morgan, VPBS

Growth in retail sales of commodities, a proxy for consumption estimated at VND2,216

Sources: MoF, VPBS

As a consequence, the state budget deficit amounted to VND154.1 trillion (USD7.25

Budget deficit and budget deficit over GDP

Budget deficit Budget deficit/GDP

4.4% 3.9% 4.0%

Sources: MoF, VPBS

FDI pledge surpass the years target thanks to Samsung

FDI Registered and Disbursement (USD bn)

FDI registered FDI disbursement

Sources: FIA MPI, VPBS

Investment by country FDI by sector

Korea 5.2% 10.6%

Sources: MoF, VPBS

Samsung is the leading foreign investor in Vietnam with accumulated registered

Outlook: Stable macroeconomic environment, well-controlled inflation, young and

Export Import Trade balance Domestic sector FIEs

Sources: GSO, VPBS

Imports and Exports by trade partners (by proportion - %)

The US 17.3 18.2 19.0

China 25.3 28.0 29.5

Exports seem to expand thanks to several free trade agreements to be completed

DEVELOPMENTS WHICH MAY AFFECT THE ECONOMY

According to the Chairman of the National Financial Supervisory Commission, Vu Viet

According to the Minister of Planning and Investment, a 10 percent decline in domestic

Impacts on state budget

The U.S. economy posted the biggest quarterly expansion in 11 years

U.S Consumption expenditures (%) Bloomberg Comfort Index

SOE EQUITIZATION AND DIVESTMENT

Sources: MOF, VPBS

Equitization progress of SOEs under the Ministry of Industry and Trade up to

No. Corporation Planned Completed

1 The Vietnam National Textile and Garment Group 5 5

Vietnam National Coal - Mineral Industries Group-

4 Vietnam National Oil and Gas Group 3 1

5 Vietnam National Tobacco Corporation 1 0

6 Vietnam Paper Corporation 4 1

During Q4/2014, the government successfully completed several major equitizations,

Divestment progress of SOEs under the Ministry of Industry and Trade up to

5 Vietnam National Oil and Gas Group 10 3 474

6 Vietnam National Tobacco Corporation 8 1 20

7 Vietnam Paper Corporation 9 1 33

8 Machines and Industrial Equipment Corporation 3 1 13

The government has taken special measures to encourage SOEs to divest of

- The government will raise capital at SCIC up to VND50 trillion as of 2015. By

An officer of the Ministry of Finance revealed that the number of SOEs to be