Vietnamese economy set for strong growth in latter half of 2024: HSBC

Vietnam is poised for strong growth in the latter half of the year, driven by a rebound in the global electronics cycle and continued positive foreign direct investment (FDI), according to HSBC.

Production at Rang Dong Company in Hanoi. Photo: Hai Thanh/The Hanoi Times

This assessment is highlighted in a mid-year investment outlook report released by HSBC's Global Private Banking division. The report indicates that Vietnam is on a steady path to recovery, bolstered by the global electronics cycle.

The latest Purchasing Managers' Index (PMI) continues to show an expansion in manufacturing. Notably, electronics exports are performing exceptionally well, with consumer electronics leading the charge, contributing to 60% of export growth last month. HSBC suggests that the encouraging business results and outlook for Samsung’s Galaxy S24 phones are likely to further enhance this growth.

"In ASEAN, Singapore, Malaysia, and Vietnam are strengthening their leadership in the electronics industry," said James Cheo, Chief Investment Officer for Southeast Asia and India at HSBC Global Private Banking and Wealth.

Simultaneously, the outlook for FDI remains strong due to Vietnam's appeal as an investment destination. FDI attraction in the past five months has seen significant increases in both the number of projects and capital. There were 1,227 new projects with registered capital of $7.94 billion, up by 27.5% and 50.8%, respectively. Actualized capital reached $8.25 billion, the highest in five years, according to the General Statistics Office. Besides being a major R&D and manufacturing hub for Samsung, Vietnam has recently become one of the top choices in Southeast Asia for the "China + 1" strategy of various corporations. MacBooks, iPads, and Apple Watches are now being produced in Vietnam.

Speaking on CNBC, Yinglan Tan, CEO of Insignia Ventures Partners (Singapore), noted that Vietnam’s proximity to China makes it a preferred destination for supply chains, significantly reducing production costs.

Kai Wei Ang, ASEAN economist at BofA Securities, praised other advantages of Vietnam, stating that competitive labor costs and access to markets through numerous free trade agreements make exporting to other markets, such as the EU, much easier.

HSBC's report is also optimistic about Vietnam’s capital market. The stock market has been one of the better-performing markets in Asia this year. "Equity valuation is still undemanding. Corporate earnings remain resilient recovering from the trough in 2023. If earnings continue to be strong, the equity market uptrend can be sustained," Cheo remarked.

At the end of April, HSBC raised its GDP growth forecast for the last two quarters to 6.2% each. For the full year 2024, the bank predicts Vietnam's economy will expand by 6%, matching projections from the IMF and OUB.

Despite these positive trends, inflation remains persistent and is approaching the State Bank of Vietnam (SBV)'s ceiling of 4.5%. The Fed's delayed interest rate cuts have strengthened the USD in the short term, causing volatility for the VND. According to HSBC, depending on global central bank directions, the SBV may maintain a cautious stance on its interest rate policy.