Vietnam is a winner among Asia’s China manufacturing alternatives

 In Newsletter

Issue No. 108

Countries covered: Vietnam, India, Thailand, the Philippines, Malaysia, Indonesia

 

As China’s economy downshifts to a lower long-term growth trajectory and the costs of doing business in the country rise, companies are looking at other emerging Asian markets as alternatives.

 

While investors are concerned about how China’s slowdown will impact these smaller economies, multinationals are increasingly choosing to invest in manufacturing capacity in countries like Vietnam, Thailand, India and Indonesia. So far, it looks like Vietnam has benefited the most from the US-China trade war.

 

Our models call for GDP growth this year in six Asian emerging markets to be significantly lower than 2018’s levels, with growth staying pretty stable in 2020. Vietnam should outperform, with little change from 2018’s 7.1% growth rate.

 

In contrast, India should have the most marked slowdown this year (see second chart).

Philippines/Vietnam/Thailand GDP Annual Growth Rate forecast through January 2020

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India/Indonesia/Malaysia GDP Annual Growth Rate forecast through January 2020

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Moving beyond top-line growth, we see little chance of inflation pressure across emerging Asia next year, in line with trends of weaker inflation globally. This is a good sign for companies considering an investment in manufacturing capacity. Below we have forecasts for producer price inflation this year and next in large Asian emerging markets.

Philippines/Vietnam/Thailand Producer Price forecast through January 2020

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India/Indonesia/Malaysia Producer Price forecast through January 2020

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With its strong economy, our models have a rosy outlook for Vietnam’s equity markets early next year. Again, we see India lagging as short-term measures to boost growth wear off and investors look for more difficult, structural reform.

Vietnam Ho Chi Minh Stock Index forecast through January 2020

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India SENSEX Stock Market Index (SENSEX) forecast through January 2020

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Standardized, comparable economic and market forecasts like these — built on top of advanced machine learning algorithms and billions of data points — are helping global companies optimize spending and make better investment decisions.

 

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