Equity Analysis /

Vietnam Textile & Garment Sector: Two sides of a coin

    Thao Dang
    Thao Dang

    Food & Bev, Textiles

    Rong Viet
    16 September 2019
    Published by

    In this 18-page report on Vietnam's textile & garment sector, we provide detailed analysis of Song Hong Garments (MSH), Century Synthetic Fiber (STK) and Thanh Cong Textile Garments (TCM).

    Vietnam’s textile & garment export value reached USD18bn in 1H2019, up 9% YoY. However, growth momentum has been slowed by the escalation of the US-China trade war, causing the industry to fall into a defensive state and negatively affecting production and consumption in its main export markets.

    Differentiated growth rates in each segment

    • Fabric showed the highest growth rate of 27% YoY,
    • Apparel rose by 9% YoY, mainly driven by increasing demand from the US (+10%YoY),
    • Yarn faced difficulty, up just 2% YoY compared to double-digit growth of the previous years due to selling price dumping from China and India, and delayed purchasing from customers.

    Trade war effect is a key driver in the short run

    Shifting of orders from China to Vietnam continues to increase. Fashion retailers are already shifting apparel orders to Vietnam and neighbouring countries. We believe that this trend will become more and more pronounced once the remaining USD300bn tax package takes effect.

    But there are still risks 

    • China is playing an increasingly critical role as a textile supplier for many apparel exporting countries, including Vietnam. Therefore, we cannot exclude the possibility that China could raise its export taxes on fabric products to Vietnam.
    • The US may conduct traceability of textile & garment products manufactured in Vietnam to restrict materials originating from China.