A month ago, we wrote about the initiation of a nationwide lockdown in Vietnam, despite very low infections and zero Covid-19 deaths. We drew the conclusion that even in countries with a successful healthcare response, and it is hard to find one as successful as the official data in Vietnam suggests, the negative economic impact of social distancing could not be avoided.
The Vietnam lockdown is now easing. Of course, there is plenty of evidence of economic damage: according to the Government Statistics Office, 85% of companies have been negatively affected and 5mn workers have been furloughed or lost jobs (mainly in manufacturing, retail, and hospitality).
The next test is whether the gradual restart of social and economic activity drives any new spike in infections. Because of the incidence of a four-day weekend (Reunification and Worker Days) and the mass urban to rural migration this has sparked, a pretty stern version of this test is occurring straight away.
In the month of April, Vietnam equities, measured by the HCM Stock Index, are up 17%, well ahead of the MSCI EM, FEM and FM indices (up 9%, 7%, 6%, respectively). Trailing price/book and price/earnings are both about 25% below the 5-year median. Vietnam remains our favourite equity market in global small EM and FM, although low foreign ownership room remains a constraint.
Merely 270 Covid-19 cases, 45,000 people still in quarantine, but zero deaths
Ho Chi Minh City exodus for Reunification and Workers’ Day (30 April-1 May) public holidays