Red Sea tensions to have mixed effects on Vietnam: broker

By Anh Minh
Sun, January 21, 2024 | 8:07 am GMT+7

Tensions in the Red Sea will have a positive impact on a number of industries in Vietnam such as shipping, oil and gas, and aviation while exporters to Europe may feel contrary effects, Yuanta Securities Vietnam has said.

The Suez Canal, which connects the Red Sea, is the shortest sea route between Asia and Europe, and holds special importance for oil and liquefied natural gas (LNG) transportation. About 10% of global trade (17,000 ships/year) passes through the canal each year.

Container ships pass through the Suez Canal. Photo courtesy of the World Bank.

Container ships pass through the Suez Canal. Photo courtesy of the World Bank.

Experts say that the tensions in the Red Sea mean heightened risks to global trade flows and increased shipping costs. Data shows that the container shipping price index to China has now risen 124% compared to before the tensions broke out, similar to 2021 when the Panama Canal was obstructed.

According to Yuanta Vietnam Securities, these factors support exchange-listed Vietnamese transportation companies such as Hai An Transport and Stevedoring JSC (listed on the Ho Chi Minh Stock Exchange - HoSE as HAH), Vietnam Container Shipping JSC (HoSE: VSC), and Gemadept JSC (HoSE: GMD).

In addition, Red Sea tensions may lead to increases in oil and gas prices because 10% of seaborne oil and 8% of LNG are transported through the Suez Canal, according to Clarksons data. Oil shipments to Asia may be delayed while goods transportation may bear additional war insurance premiums. If the conflict expands into the Strait of Hormuz, near the Red Sea, the impact will be stronger.

In the past, Iran has several times threatened to and attacked cargo ships passing through the Strait of Hormuz, and the last two times caused Brent oil prices to rise in December 2011 (18 %) and in July 2028 (15%).

Therefore, higher oil prices will have a positive impact on some oil and gas companies such as PV Drilling (PVD), PV Technical Services (PVS), PV Gas (GAS), and CNG Vietnam (CNG).

In addition, the Red Sea incident has also resulted in a shortage of empty containers while demand for containers from the U.S. and Europe remains high. Container shipping rates from Shanghai to major cities in Europe and the U.S. have increased 8-25% in the past month.

Yuanta Securities Vietnam expects some companies to benefit from this, including HAH, VSC and the container business of Hoa Phat Group (HoSE: HPG).

Vietnamese aviation may be another beneficiary. Xeneta data shows that the global average air cargo spot rate peaked at $2.6 per kilogram in December 2023. However, the securities firm noted that this impact will not be significant.

On the contrary, rising transportation costs and extended shipping time could have a significant impact on trade between Vietnam and Europe, Yuanta Vietnam analysts say. However, they believe that the impact on Vietnam's import-export industry won’t be large because trade with Europe accounts for only 15% of the country’s total external trade.

The brokerage firm notes that Vietnam's key shipments to Europe such as textiles, footwear, and phones and components may be affected by a combination of extended delivery time, increased freight rates, and higher insurance costs, posing risks for export businesses.

It advises investors to be more cautious with large exporters to Europe if tensions persist.

Comments (0)
  • Read More
Dubai-based PDSI eyes $2.6 bln investment in tourism-golf course project in central Vietnam

Dubai-based PDSI eyes $2.6 bln investment in tourism-golf course project in central Vietnam

PDSI Group, a Dubai-based real estate and consulting firm, has expressed interest in developing a $2.6 billion commercial, tourism, and golf course complex in Binh Thuan, a south-central coastal province of Vietnam.

Real Estate - Thu, March 27, 2025 | 11:38 am GMT+7

S Korea's SK set to divest from Vietnam's giant Vingroup

S Korea's SK set to divest from Vietnam's giant Vingroup

South Korean chaebol SK Group is set to divest from Vietnamese conglomerate Vingroup, according to the former’s annual report 2024.

Companies - Thu, March 27, 2025 | 11:30 am GMT+7

StanChart adjusts USD/VND exchange rate forecast amid changing economic trends

StanChart adjusts USD/VND exchange rate forecast amid changing economic trends

Standard Chartered Bank has adjusted its USD/VND exchange rate forecast, reflecting shifts in global and regional economic conditions.

Economy - Thu, March 27, 2025 | 9:29 am GMT+7

Fund inflows help stabilize Vietnam's stock market: analyst

Fund inflows help stabilize Vietnam's stock market: analyst

As fund inflows are typically long-term investments, they play a key role in stabilizing Vietnam's stock market and preventing sharp fluctuations, according to Nguyen Duy Anh, Chartered Financial Analyst (CFA) at Vietcombank Fund Management Co., Ltd. (VCBF).

Finance - Thu, March 27, 2025 | 8:30 am GMT+7

VSIP begins work on industrial park project in northern Vietnam province Thai Binh

VSIP begins work on industrial park project in northern Vietnam province Thai Binh

Construction of the Vietnam-Singapore Industrial Park (VSIP) Thai Binh commenced on Wednesday in northern Vietnam, with the witness of Vietnamese Prime Minister Pham Minh Chinh and his Singaporean counterpart Lawrence Wong.

Industrial real estate - Wed, March 26, 2025 | 10:41 pm GMT+7

Vingroup starts building mega urban project in Vietnam's Mekong Delta

Vingroup starts building mega urban project in Vietnam's Mekong Delta

Vietnam’s leading private conglomerate Vingroup on Wednesday embarked on construction of the VND28 trillion ($1.1 billion) Vinhomes Green City, the first mixed-use urban development in its ecosystem in the Mekong Delta province of Long An.

Real Estate - Wed, March 26, 2025 | 10:11 pm GMT+7

Indonesia, China cooperate in digital technology

Indonesia, China cooperate in digital technology

Indonesia and China are expanding cooperation in the field of AI to promote digital transformation, especially in the fields of agriculture and smart cities.

Southeast Asia - Wed, March 26, 2025 | 10:01 pm GMT+7

Indonesia decides to join BRICS New Development Bank

Indonesia decides to join BRICS New Development Bank

Indonesian President Prabowo Subianto has announced the Government's decision to become a member of the New Development Bank (NDB), a multilateral development bank established by the five founding member states of the BRICS group.

Southeast Asia - Wed, March 26, 2025 | 9:57 pm GMT+7

Major Vietnamese broker SHS to double charter capital

Major Vietnamese broker SHS to double charter capital

Saigon-Hanoi Securities Corporation (SHS) plans to issue 894 million shares to increase its charter capital from VND8.13 trillion to VND17.07 trillion ($667.6 million), making it one of the top three securities firms in term of charter capital.

Companies - Wed, March 26, 2025 | 8:30 pm GMT+7

Elon Musk company okayed to pilot Starlink satellite internet service in Vietnam

Elon Musk company okayed to pilot Starlink satellite internet service in Vietnam

Vietnam has allowed the U.S.'s SpaceX to pilot Starlink low-orbit satellite internet service in the country on a pilot basis until January 1, 2031.

Industries - Wed, March 26, 2025 | 5:18 pm GMT+7

Danish toymaker Lego to open $1.3 bln Vietnam plant next month

Danish toymaker Lego to open $1.3 bln Vietnam plant next month

Denmark's Lego will officially open its factory in VSIP III Industrial Park in Vietnam's southern province of Binh Duong on April 9.

Industries - Wed, March 26, 2025 | 4:18 pm GMT+7

Top Singaporean firms earn high incomes in Vietnam

Top Singaporean firms earn high incomes in Vietnam

Singapore is the second-biggest foreign investor in Vietnam, with over $84 billion in registered investment capital as of end-January and many prominent investors raking in high incomes.

Companies - Wed, March 26, 2025 | 3:45 pm GMT+7

Vietnam, Singapore ink significant deals in Hanoi

Vietnam, Singapore ink significant deals in Hanoi

Vietnamese Prime Minister Pham Minh Chinh and his Singaporean counterpart Lawrence Wong on Wednesday witnessed the signing of many cooperation deals between agencies and enterprises of the two countries.

Economy - Wed, March 26, 2025 | 2:51 pm GMT+7

Vietnam's major policies are reshaping economic development

Vietnam's major policies are reshaping economic development

Major policies are reshaping Vietnam's approach to economic development, which focuses on science, technology, and private enterprises, said a leader at the Vietnam Chamber of Commerce and Industry (VCCI).

Economy - Wed, March 26, 2025 | 12:11 pm GMT+7

PM okays over $10 bln urban area project in central Vietnam

PM okays over $10 bln urban area project in central Vietnam

The over VND260.3 trillion ($10.16 billion) Cam Lam New Urban Area project in the south-central province of Khanh Hoa has received in-principle approval from Prime Minister Pham Minh Chinh.

Real Estate - Wed, March 26, 2025 | 8:58 am GMT+7

S Korea's KIM Fund raises stake in Vietnam's marine transportation firm VIPCO

S Korea's KIM Fund raises stake in Vietnam's marine transportation firm VIPCO

South Korea’s KIM Fund has increased its stake in Hai Phong city-based Vietnam Petroleum Transport JSC (VIPCO, HoSE: VIP) to 2.73%, making it the latter’s second-largest shareholder.

Companies - Wed, March 26, 2025 | 8:30 am GMT+7