HANOI: As the global trade tensions from tariff hikes imposed by US President Donald Trump escalate, investors find themselves at a critical juncture this year.
The hostilities, marked by the United States imposing an astonishing 46% tariff on Vietnamese exports, has sent shockwaves through financial markets.
The benchmark VN-Index closed at 1,132.79 points on Tuesday, down 77.88 points, with over 250 counters on Vietnam’s southern bourse hitting bottom limits.
This development has forced investors to look again at their portfolios and strategies as the landscape shifts beneath them.
Experts said, in this climate of uncertainty, the imperative for investors is to remain composed and strategically agile, rather than succumbing to panic-driven decisions.
Changing focus
Analysts widely advocate that investors should redirect their focus towards robust companies with strong fundamentals – corporations that possess the capacity to withstand the economic storm brought about by trade disputes.
Analysts from Saigon–Hanoi Securities JSC (SHS) see a prevailing sense of caution within the market.
The complexities of the global economic dynamics this year highlight Vietnam’s emergence as a pivotal player in the restructuring of global supply chains. However, the increased trade surpluses simultaneously create pressure for necessary adjustments.
Such complexities indicate that the challenges posed by tariffs are not only about policy discussions, but also serve as a critical test for the country’s economic resilience and adaptability.
SHS pointed out the pressing uncertainty surrounding potential shifts in US trade policy under President Trump’s administration, now termed Trump 2.0.
The spectre of instability weighs heavily on investor sentiment, casting a shadow over the economic outlook.
According to Nguyen Minh Hanh, director of the SHS Research Centre, the phrase “Timing is everything” succinctly encapsulates the essence of investment strategy for this year.
Long-term investors often place less emphasis on timing.
However, amid the current market conditions, a more short-term, proactive approach is warranted to navigate the choppy waters ahead.
As the VN-Index approaches potential turbulence, investors are strongly advised to steer clear of underperforming stocks.
Do Bao Ngoc, vice-general-director of Vietnam Construction Securities JSC, pointed out five promising sectors that are forecast to show robust profits in the first quarter of this year.
The sectors, including retail, technology and domestic banking, are viewed as safer havens for investors seeking to mitigate risk during uncertain times.
The high tariffs are likely to hit exporters of textiles, leather, wood, steel and electronics hard. All are vital components of Vietnam’s economy.
Analysts project that the tariffs may compel Vietnam to renegotiate trade balances and enhance bilateral negotiations with the United States to alleviate the adverse economic impact.
Investors are advised to pay close attention to government actions and international market signals as positive developments in trade negotiations may provide a glimmer of hope.
Any favourable shifts, or a compromise regarding tariffs, could inspire renewed confidence and encourage a market recovery.
Domestic buffers
On the other hand, Vietnam’s substantial internal economic advantages, such as an expanding consumer base and favourable demographics, could act as buffers against external shocks, contributing to a more resilient economic environment.
For those considering where to invest in turbulent times, a focus on domestic consumer-oriented sectors may offer a winning strategy, according to the chief economist at SSI Research, Pham Luu Hung.
Companies with significant revenues generated from local markets are positioned to weather the storm more effectively than those reliant on volatile international trade.
Similarly, industries like retail and technology, which cater to the robust domestic demand, stand to benefit in the shifting landscape.
A recent report from Vietcombank Securities Co (VCBS) showed that the 46% tariff could affect nearly 100 enterprises across 17 industries.
In the construction materials sector, companies like Hoa Phat Holdings, Hoa Sen Group and Nam Kim Steel find themselves in a relatively stable position.
With a low export ratio to the United States, ranging from 2% to 10%, the companies face a neutral impact from the newly imposed tariffs.
However, steel products fall under a different category with a 25% tariff with which they must contend.
In contrast, Phu Tai, whose quartz stone products are primarily exported to the United States and Europe, faces a more dire situation due to its significant exposure to the new tariff regime, corresponding to a potential negative hit to revenues.
The textile sector presents an even more precarious scenario.
Companies such as Thanh Cong Textile, TNG and May Song Hong are grappling with potentially severe financial implications.
With May Song Hong relying on the US market for around 80% of its revenues, the heightened tariff threatens to undermine competitive advantages compared with countries like India and Bangladesh, which face lower tariffs.
The food sector showcases mixed impacts as well.
Vinh Hoan’s primary product, catfish, has approximately 32% of its exports directed at the United States, leading to a critical competitive disadvantage resulting from tariffs.
Conversely, firms such as Navico and IDI International Development & Investment Corp, which have a smaller dependence on US exports, may experience more moderate effects.
In the chemicals sector, Duc Giang reports minimal repercussions due to its product focus, while Cao su Da Nang may suffer adverse outcomes as its revenue from tyre exports to the United States make up 28% of its total revenue.
Logistics slump
Transportation companies like Gemadept and Vietnam Ocean Shipping JSC (Vosco) are also set to feel the pain, facing indirect impacts owing to decreased trade activity between the United States and its trading partners.
Interestingly, the banking sector is witnessing neutral impact, although banks with significant exposure to foreign direct investment (FDI) might face indirect challenges.
Meanwhile, companies in sectors such as oil and gas, retail, and real estate show a mixed outlook.
For instance, businesses involved in retail like Mobile World Investment Corp and FPT Digital Retail JSC may encounter indirect pressures due to fluctuations in import prices stemming from currency exchange variations caused by increasing tariff pressures.
While sectors such as construction and technology report minimal disruptions from tariffs, the overall sentiment remains cautious, as apprehensions over broader trade relationships loom. — Viet Nam News/ANN
