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PYN Elite NOW
April 2025
Vietnam was knocked down, but the match has just begun
Vietnam’s export value in 2024 was USD 405 billion, of which exports to the USA accounted for USD 137 billion. Foreign companies operating in Vietnam accounted for 72% of these exports. This group includes, for example, Samsung and Lego, and these FDI companies employ approximately 8.5% of Vietnam’s workforce.
Vietnam’s total export value is large, and it has grown strongly over the past 20 years. However, a significant part of the export value is based on the import of raw materials and components. When calculating the actual impact of the export industry on the national economy, i.e., the actual value added, the value of related imports must be deducted from the export value. The actual contribution of the export industry to Vietnam’s GDP thus obtained is about eight percent. Other effects of the growth or decline of foreign trade mainly come through employment (consumer demand) and foreign FDI industrial investments (demand for industrial parks).
Among the agricultural products significantly affecting the gross domestic product, several fruits, vegetables, coffee, tea, spices, nuts, and rice are not central to Vietnam’s trade with the USA, as they are exported, for example, to China. To the United States, Vietnam exports, for example, laptops and other consumer electronics, machinery, furniture, clothing, and footwear. In these product categories, Vietnam’s key competitors are China, Mexico, South Korea, and Thailand.
US tariffs for comparison countries, according to Trump’s announcement, look like this:
- Vietnam 46 %
- China 54 %
- Mexico 25 %
- Thailand 36 %
- South Korea 25 %
If these tariffs remain in effect, the situation is unfavorable for Vietnam, as the average tariff for competitors would be 32%. In the export of wooden furniture, there have been claims that some of it consists of Chinese products merely brought through Vietnam to avoid the duties imposed by Trump on China during his first term. The share of furniture exports has indeed grown significantly in recent years, now amounting to approximately USD 9 billion. This phenomenon can be tackled quite easily in further negotiations with the Trump administration, and this so-called ‘pass-through’ is not central to Vietnam’s economic growth.
Everything is uncertain right now, but we know that a Vietnamese delegation, led by the country’s Deputy Prime Minister, is scheduled to meet with representatives of the US Department of Commerce on Sunday, April 6, 2025.
The situation will certainly evolve in the coming weeks, but with current information, we can assess how the 46% tariffs will affect Vietnam’s exports and economy. Vietnam’s exports to the United States could directly decrease by 10–15%. In addition, some production might shift to countries with lower tariffs, and this impact on Vietnam’s US exports could be 10–15%. We also assume that Trump’s tariff policy will contract global trade, which would in turn negatively affect Vietnam’s exports.
Even before Trump’s tariff decisions, the Vietnamese government was accelerating public consumption and in many ways stimulating domestic private sector demand. With the tariffs, these measures will certainly only intensify. Whether the announced tariffs are a negotiation tactic or a permanent economic policy line is still difficult to assess. Depending on the final tariff levels, we estimate they will reduce Vietnam’s 2025 GDP growth by 1–3 percentage points. This would mean the country’s GDP would still grow by approximately 4.5–6.5% instead of the previous 7–8%.
PYN ELITE PORTFOLIO
Banks have a 50% weighting. Foreign-owned FDI companies in Vietnam receive significant long-term tax incentives, and in return, foreign parent companies must finance the operations of the factories. For this reason, loans to these companies do not prominently appear in the loan portfolios of Vietnamese banks. Export companies manufacturing textile products, furniture, agricultural, and fish products use Vietnamese banks, but even their loans are small in relation to the loan portfolios of the banks financing them.
With Vietnam strongly focusing on increasing public consumption and the continued revitalization of the domestic market, we still expect good results from PYN Elite’s banks for 2025. The banks’ earnings growth was curbed in 2023 and 2024 by weak housing market conditions. Sacombank (STB) has a 20% weighting in the portfolio. We believe it will become a very interesting stock during 2025, as the bank’s balance sheet’s potential special entries may finally be realized.
Brokers account for 14% of the portfolio. These, of course, move sharply up and down during market disruptions. We still strongly believe that the stock exchange’s new trading system, KRX, will be implemented on May 5, and with it, stock exchange trading volumes may rise significantly.
Aviation companies ACV (8%) and Vietnam Airlines (6%). Changes in foreign goods trade affect these companies very little. The drop in oil prices reduces Vietnam Airlines’ fuel costs. Even under these circumstances, we believe Vietnam’s tourism will grow. International passenger numbers in January–February rose significantly, and a large part of the growth came from other Asian countries, such as India and China. Air cargo company SCS is in the portfolio with only a 1% share, and tariff decisions directly negatively affect it.
Fish fillet producer VHC is in the portfolio with a 2% share. VHC relies on US exports, and its outlook is uncertain, even though fish fillets are a sought-after, affordable, and healthy product even during weak economic conditions.
In late winter, we re-added Mobileworld Group shares to the portfolio. The company has large specialty retail chains in Vietnam, as well as a growing grocery store chain. MWG’s share in the portfolio is 4.3%, and we have bought more of it on Thursday and today, Friday. We expect promising earnings figures from MWG for Q1 2025.
Additionally, over the past week, we have accumulated shares of a certain Vietnamese domestic market company whose products are well-suited to the cycle of state infrastructure investments and the accelerating private construction that accompanies them. The company’s share in the portfolio is expected to settle in the 3–4% range.
Vietnam’s situation is serious if the 46% tariffs remain in effect. Vietnam’s exports to the United States may decrease by 20–25% during this year. Despite this, Vietnam’s economy will continue its growth in 2025. Vietnam’s debt-to-GDP ratio is low, and it has room for investments and accelerating consumption. Vietnam’s competitiveness is based on education, entrepreneurship, and free trade policy. Thanks to this, Vietnam will continue to fare well in global export markets and find new markets to compensate for losses in US trade.
The EUR/USD hedging of PYN Elite’s entire portfolio value provides us with additional funds for new stock purchases when the dollar weakens. We utilize funds in weak market situations to our advantage. Furthermore, we have made and will continue to make shifts between portfolio positions according to the relative price development of the stocks.
During the US presidential elections, an opinion poll was conducted in Vietnam, according to which 80% of Vietnamese supported Trump’s election. Yesterday, our PYN Elite team estimated that Trump’s support is close to zero.We hope that the tariffs do not remain in force in their current form. If the tariffs become reasonable, significant positive factors in the Vietnamese market could emerge to support the recovery of the country’s stock exchange. At the same time, investor capital flows may continue to shift from the US tech sector and its MAG7 stocks to other parts of the world, including Vietnam.
Sincerely,
PYN Elite
Petri Deryng
Portfolio Manager
