PP 7767/09/2010(025354)

Vietnam
Economic Highlights
•MARKET DATELINE

1 March 2010

Economic Activities Were Mixed In February

◆ Vietnam’s industrial production unexpectedly fell by 1.3% yoy in February, after picking up to +28.4%
in January and compared with +13.4% in December. This was due partly to shorter working days as a result of
festive season and partly to a higher base effect. We believe the country’s industrial production will likely bounce
back in the months ahead, in line with an improvement in global demand.

◆ Exports slowed down sharply to 0.1% yoy in January-February, after rising by 28.1% in January, due to
shorter working days as a result of festive celebration. Imports also slowed down to 39.6% yoy in January-
February, but growth remained strong, pointing to a resilient domestic demand.

◆ Retail sales, however, strengthened to 27.4% yoy in January-February, from +23.1% in January and
compared with +20.6% in the corresponding period of 2009. This suggests that consumer spending in Vietnam
continued to gain momentum, as economic growth improves.

◆ In tandem with a pick-up in economic activities, Vietnam’s headline inflation rate accelerated to 8.5% yoy
in February, from +7.6% in January and +6.5% in December. This was the sixth straight month of picking up
and the highest in ten months, suggesting that the country is facing upward price pressure. We are keeping to our
view that the key policy rate will likely be raised by around 200 basis points to 10% by end-2010.

◆ As a whole, February’s key economic data could be distorted somewhat by shorter working days. We believe
economic activities will likely bounce back in the following months, in tandem with a sustainable recovery in the
global economy. As a result, the Vietnamese economy will likely improve in 1Q 2010, after recording a faster
growth of +6.9% yoy in the 4Q. Notwithstanding the gradual shift to tighten its policy, we expect the country’s
economic growth momentum to be sustained into 2010 and the Vietnamese economy will likely expand by
6.4% in 2010, compared with +5.3% in 2009.

Vietnam’s industrial production Table 1

unexpectedly fell by 1.3% yoy in Industrial Output At Contant 1994 Prices
February, after picking up to +28.4% in 2009 2010
January and compared with +13.4% in Sep Oct Nov Dec Jan Feb YTD
December (see Table 1). This was due partly %yoy
to shorter working days as a result of festive Total 13.8 11.9 13.0 13.4 28.4 -1.3 13.6
season and partly to a higher base effect. State Sector 8.5 6.8 6.1 6.5 23.1 -6.6 8.1
We believe the country’s industrial production Centrally Managed 9.8 9.6 8.4 8.6 24.9 -2.0 11.2
will likely bounce back in the months ahead, Locally Managed 3.1 -4.0 -2.8 -1.6 16.2 -21.9 -3.0
in line with an improvement in global Non-state Sector 16.5 15.7 17.3 17.0 31.1 0.4 15.1
demand. The decline in production was due FDI Sector 15.0 12.1 13.9 14.9 29.1 0.2 15.4
to a sharp slowdown in the non-state and FDI Oil and Gas 15.9 2.1 -3.3 -8.6 -16.6 -13.8 -11.4

sector’s output, which eased significantly to Other 14.9 13.3 16.1 18.2 36.7 2.3 19.5

0.4% and 0.2% yoy respectively in February, Source : The General Statistics Office of Vietnam
from the corresponding rates of +31.1% and

Peck Boon Soon

(603) 9280 2163
Please read important disclosures at the end of this report.
bspeck@rhb.com.my

A comprehensive range of market research reports by award-winning economists and analysts are Page 1 of 4
exclusively available for download from www.rhbinvest.com
 1 March 2010

29.1% in January. The latter was on the back of a slowdown in non-oil & gas related production, which was mitigated
by a smaller decline in the production of oil & gas during the month. These were made worse by a decline in the state
sector’s output, which contracted by 6.6% yoy in February, after strengthening to +23.1% in January. This was attributed
to declines in output in the centrally-managed and locally-managed sub-sectors. Mom, industrial production fell by a
larger magnitude of 18.9% in February, compared with -4.9% in January, due probably to shorter working days.

Similarly, Vietnam’s exports slowed down sharply to 0.1%

Table 2 External Trade
yoy in January-February, after rising by 28.1% in January,
due to shorter working days as a result of festive celebration Exports Imports Trade
(see Table 2). This was reflected in a slowdown in the exports Balance
of rubber, wooden products and footwear, which eased to (YTD, % yoy) (YTD, US$m)
64.5%, 29.2% and 4.0% yoy respectively in January-February,
from the corresponding rates of +210.0%, +37.0% and +6.3%
‘09 J-Mar 2.4 -45.0 1,647
in January (see Table 3). Similarly, the exports of electronic
J-Jun -10.1 -33.7 -2,108
& computer parts and machinery equipment & parts moderated
J-Sep -14.3 -24.9 -6,542
to 30.6% and 75.1% yoy respectively in January-February,
J-Dec -9.7 -14.7 -12,246
from the corresponding rates of +56.4% and 139.9% in January,
while the exports of precious stone fell by a larger magnitude ‘10 Jan 28.1 86.6 -1,300
during the period. These were made worse by a slowdown in
J-Feb 0.1 39.6 -1.745
the exports of coal (+3.3% yoy in January-February versus
+68.6% in January) and a decline in the exports of crude oil 2 0 0 9 (Jan-Feb) -5.1 -42.3 -188
(-15.4% yoy in January-February versus +24.5% in January). 2 0 1 0 (Jan-Feb) 0.1 39.6 -1,745
In the same vein, agriculture & fishery product exports such
as coffee and rice fell, while the exports of fishing products Source : The General Statistics Office of Vietnam

slowed down during the period. Imports also slowed down

to 39.6% yoy in January-February, from +86.6% in January. Despite the moderation, growth remained strong,
pointing to a resilient domestic demand.

Table 3
Cummulative Exports And Imports By Commodity
2009 2010
J-Sep J-Oct J-Nov J-Dec Jan J-Feb
Exports: (YTD, %, yoy)

Agriculture
Fishing -9.5 -8.7 -6.2 -6.7 27.9 19.2
Coffee -19.7 -17.3 -17.4 -19.0 -4.7 -26.8
Rice -7.8 -7.8 -5.8 -8.0 50.6 -6.8
Mining
Coal -21.2 -19.4 -11.3 -4.5 68.6 3.3
Crude Oil -45.6 -43.0 -41.7 -40.0 24.5 -15.4
Manufacturing
Rubber -41.0 -41.2 -32.4 -25.2 210.0 64.5
Wooden Products -14.2 -14.0 -11.1 -9.9 37.0 29.2
Clothing -1.0 -1.5 -1.1 -1.3 3.9 16.8
Footwear -13.7 -16.1 -15.9 -15.8 6.3 4.0
Precious stones/Metals 278.6 269.3 264.0 243.1 -87.1 -98.1
Electronics/Computer Parts 0.0 0.1 1.1 5.1 56.4 30.6
Machinery Equipments/Parts 0.0 -0.4 2.3 9.1 139.9 75.1

Imports:
Petroleum -52.6 -47.9 -45.3 -43.8 53.0 20.1
Raw Plastic -13.7 -10.9 -7.4 -4.1 114.3 46.0
Fabrics -8.7 -8.6 -6.9 -5.2 65.8 9.3
Footwear Materials -23.7 -23.2 -20.8 -17.8 68.5 12.5
Electrical/Computer Supplies -0.6 -0.3 3.2 5.9 123.5 59.7
Auto -23.9 -12.0 -3.6 2.5 156.6 115.3
Machinery Equipments/Parts -15.4 -13.0 -10.3 -5.6 42.3 14.5

Source : The General Statistics Office of Vietnam

A comprehensive range of market research reports by award-winning economists and analysts are Page 2 of 4
exclusively available for download from www.rhbinvest.com
 1 March 2010

The country’s retail sales, however, strengthened to 27.4% yoy in January-February, from +23.1% in January
and compared with +20.6% in the corresponding period of 2009 (see Table 4). This suggests that consumer spending
in Vietnam continued to gain momentum, as economic growth improves. Higher retail sales were reflected in a pick-
up in sales at private and collective controlled enterprises, which strengthened to 37.6% yoy each in January-February,
from the corresponding rates of +25.0% and +19.2% in January. This was boosted by a turnaround in retail sales at
state controlled enterprises, which rebounded to increase by 12.8% yoy in January-February, from -1.0% in January.
These were, however, offset partially by a slowdown in retail sales at FDI and individual controlled enterprises, which
eased to 20.1% and 24.9% yoy respectively in January-February, from the corresponding rates of +24.3% and +27.1%
in January. In terms of sectors, the pick-up in retail sales was across the board, from trade to hotel & restaurants,
tourism and services sectors.

Table 4
Cumulative Retail Sales
2009 2010

J-Jun J-Jul J-Aug J-Sep J-Oct J-Nov J-Dec Jan J-Feb

( YTD, % yoy )

Total 20.0 18.3 18.4 18.6 18.0 18.5 18.6 23.1 27.4
By Ownership
State -3.7 -3.4 -1.3 0.5 -1.5 -1.2 1.4 -1.0 12.8
Collective 14.9 12.7 14.2 15.1 17.6 17.5 18.8 19.2 37.6
Individual 22.8 20.9 20.4 20.0 21.3 19.4 22.9 27.1 24.9
Private 23.7 22.0 22.5 23.5 20.9 25.4 20.3 25.0 37.6
FDI 19.7 15.9 14.2 12.4 0.6 6.7 9.5 24.3 20.1

Source : The General Statistics Office of Vietnam

In tandem with a pick-up in economic activities, Vietnam’s headline inflation rate accelerated to 8.5% yoy in
February, from +7.6% in January and +6.5% in December (see Table 5). This was the sixth straight month of picking
up and the highest in 10 months, suggesting that the country is facing upward price pressure. The pick-up in inflation
rate was due to a faster increase in prices of food & foodstuffs, which strengthened to 9.1% yoy in February, from +7.6%
in January and +5.8% in December. This was made worse by a pick-up in the costs of transport, which accelerated
to 18.8% yoy in February, from +12.7% in January and +12.5% in December. Similarly, faster increases in prices of
beverage & tobacco, textiles & footwear, housing & construction materials and household appliances as well as the costs
of healthcare and education and sports & entertainment, also contributed to higher inflation rate during the month. These
were, however, mitigated by a sharper decline in the costs of communication, which fell by 3.9% yoy in February,

Table 5
Weights In The CPI
2008 2009 2010 2010 2009 2010
Jan Feb Jan Feb (Jan-Feb) *
Group: %,yoy %,mom %,yoy %,Cumyoy

Food and footstuffs 22.9 6.1 +2.1 +3.1 7.6 9.1 24.8 7.8
Food 29.7 11.2 +4.4 +2.9 12.3 14.7 36.9 13.5
Foodstuffs 20.3 3.6 +1.7 +3.5 5.4 7.2 19.2 6.3
Beverages & cigarette 4.5 5.7 +1.1 +2.3 6.8 8.3 12.6 7.5
Garment, footwear, hat 3.9 3.5 +1.2 +1.4 5.8 6.8 12.5 6.3
Housing/Construction materials 8.5 10.3 +1.7 +1.8 13.6 13.8 6.3 13.7
Household appliances 2.7 1.3 +0.6 +0.9 4.9 5.1 12.4 5.0
Medical products/Healthcare 3.6 0.4 +0.3 +0.4 3.1 3.1 9.2 3.1
Transport 12.0 10.3 +0.5 +1.5 12.7 18.8 2.1 15.7
Education 0.8 2.3 +0.3 +0.1 6.3 6.4 6.7 6.3
Culture, sport, entertainment 2.6 2.5 +0.3 +1.2 0.8 2.1 10.8 1.4
Other consumer goods & services 5.1 7.4 +2.2 +2.5 11.6 12.2 11.5 11.9

TOTAL CPI 13.5 5.3 +1.4 +2.0 +7.6 +8.5 16.1 8.0

Source : The General Statistics Office of Vietnam *: estimates

A comprehensive range of market research reports by award-winning economists and analysts are Page 3 of 4
exclusively available for download from www.rhbinvest.com
 1 March 2010

compared with -3.7% in January. Despite the pick-up in the headline inflation, the State Bank of Vietnam kept its key
policy rate unchanged for the third straight month and at 8.0% in March. We believe it would not be able to avoid further
increase in interest rates to cool down inflation. Hence, we are keeping to our view that the key policy rate will likely
be raised by around 200 basis points to 10% by end-2010. Meanwhile, the State Bank of Vietnam removed a
cap and allowed banks to set lending rates for some loans effective 25 February after some banks started charging clients
extra fees for loans following an increase in deposit rates. The central bank had previously prohibited such a move and
interest rates on business loans were not allowed to exceed 150% of the key rate regulated by it.

As a whole, February’s key economic data could be distorted somewhat by shorter working days. We believe economic
activities will likely bounce back in the following months, in tandem with a sustainable recovery in the global economy.
As a result, the Vietnamese economy will likely improve in 1Q 2010, after recording a faster growth of +6.9%
yoy in the 4Q. Notwithstanding the gradual shift to tighten its policy, we expect the country’s economic growth momentum
to be sustained into 2010 and the Vietnamese economy will likely expand by 6.4% in 2010, compared with +5.3%
in 2009. Earlier, the central bank has imposed a credit limit growth of around 25% for 2010, lower than +37.7% in 2009
to control economic growth and inflation. At the same time, the country had discontinued the interest-rate subsidy
programme for short-term loans by the end of 2009. Meanwhile, the State Bank of Vietnam devalued the Dong by
another 3.3% against the US dollar from 17,941 to 18,544 on 10 February. This was the second devaluation in three
months, after the central bank shaved 5% off the value of the Dong on 27 November. We expect the Dong to depreciate
by another 3% to 19,100 by end-2010.

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of
RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution
only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are
based on generally available data believed to be reliable and are subject to change without notice, and may differ or be
contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and
criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein.
RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement
by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time
have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual
financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable
for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and
encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will
depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees
or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and
financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its
trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may
trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of
any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding
company and the respective directors, officers, employees and agents of each of them. Investors should assume that the
“Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities
have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been
reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,”
including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report
have received compensation based upon various factors, including quality of research, investor client feedback, stock picking,
competitive factors and firm revenues.

A comprehensive range of market research reports by award-winning economists and analysts are Page 4 of 4
exclusively available for download from www.rhbinvest.com