Vietnam’s Manufacturing Slows

October 2, 2015.

Vietnam’s manufacturing sector is experiencing a downturn and it is expected to continue in the coming quarters. Vietnam’s September PMI(Purchasing Managers Index) was 49.5 as compared to 51.3 in August – the weakest reading in two years, where a PMI less than 50 indicates a contraction in the sector. At the same time, the non-manufacturing sector is taking up the slack, which drove Q3 GDP growth to 6.8% year-over-year from 6.5% in Q2, led by activity in the construction sector. On the back of strong credit growth and increased bank lending, GDP forecast in 2016 is raised to 6.7% from 6.5%. With the current economic conditions as they are with current oil prices and a depreciating Dong, we look for the central bank to deliver a 50 basis point hike in Q3 2016.

Louie Nguyen, CFA is the CIO of San Diego-based Soledad Investment Management. Soledad invests qualified clients’ assets in markets around the world, including Vietnam.