Eight industries to benefit from China’s reopening: top broker

China's gradual easing of Covid-19 restrictions from the beginning of December and its full economic reopening expected from Q2/2023 will benefit eight industries in Vietnam, according to broker VNDirect Securities.

Topping the list is aviation as China is gradually reopening international air transport activities by minimizing entry restrictions for international visitors, it said.

Since the beginning of December, the world’s second largest economy has allowed Vietnamese airlines to operate regular routes with 15 flights per week instead of only two previously. As soon as China reopened, Vietnam Airlines, Bamboo and Vietjet quickly resumed flights to the neighboring country.

VNDirect expected the frequency of international flights between Vietnam and China to recover to 80% of the pre-pandemic level by Q4/2023.

"Chinese visitors accounted for 35% of Vietnam's total international arrivals before the pandemic. Therefore, China’s reopening will strongly support the recovery of Vietnam's international air transport,” the Vietnamese broker noted.

The second is seafood. Despite restrictions in H1/2022, the Chinese market remained the mainstay for Vietnam's pangasius exports. Vietnam's pangasius export turnover reached $2.1 billion in the first 10 months of the year, of which mainland China and Hong Kong accounted for nearly 30% or $638 million, a year-on-year rise of 58%.

VNDirect said that the reopening of China will be one of the biggest driving forces supporting the export growth of Vietnamese seafood enterprises next year.

The cement industry came third. China is Vietnam's largest cement export market, making up 54% of the latter's total export in 2021. China’s reopening will help resume construction activities and boost infrastructure investment, thereby recovering cement demand in the country.

Fourthly, the rubber sector will benefit from the reopening of China as it is Vietnam's largest natural rubber consumer, accounting for about 70-80% of total rubber export turnover. Vietnam is also one of the largest rubber suppliers to China with a market share of 16.7% in the first 10 months of 2022, just behind Thailand at 33.6%.

China's reopening will also help increase rubber prices due to a high demand for rubber for the country's tire production. VNDirect forecasts that industry leaders like Phuoc Hoa Rubber JSC (PHR) and Dong Phu Rubber JSC (DPR) will be the largest beneficiaries.

Fifthly, the resumption of construction activities and promotion of infrastructure investment will result in a recovery in construction steel demand in China, thus pushing up steel prices. Rising industrial production demand in China will also help restore global supply chains, indirectly benefiting galvanized steel exporters.

Leading companies such as Hoa Sen and Nam Kim will have opportunities to increase exports in the context of the recovery of global industrial production. Meanwhile, Hoa Phat is now able to export its steel products to China thanks to competitive production costs.

The sixth beneficiary is garments. China is Vietnam's main yarn importer, accounting for 48% of its total yarn export value. Therefore, China’s reopening will be a factor stimulating the demand for Vietnamese textiles and garments.

Moreover, VNDirect analysts also said that inflation in the U.S, which makes up 39% of Vietnam's total textile and garment export value, is forecast to fall to about 2-4% in 2023, helping Vietnam's clothing industry, especially the yarn segment, recover.

The seventh is the retail group. The Chinese move will make information and communication technology (ICT) retailers less impacted by the decline in consumption of Apple products. Among those are Digital World (DGW), FPT Retail (FRT), and Mobile World (MWG).

The last industry is rice. According to the broker, the value of Vietnam's rice exports to China currently accounts for about 12% of the country’s total, ranking second after the Philippines. So, with China’s reopening, the demand for rice will increase, thus positively impacting Vietnam’s rice exports to its neighbor.

VNDirect's analysts predict that the fertilizer industry will be negatively affected because China is the world's second largest fertilizer exporter and makes up about 13% of the total global export value. Therefore, its reopening will provide large supply to the market, causing fertilizer prices to continue falling.