Vietnamese stocks, which led with a near 10% gain on Morgan Stanley Capital International’s Frontier Asian Index through April, continued buoyant ahead of a White House visit by Prime Minister Nguyen Xuan Phuc and a scheduled overseas listing by state airline Vietjet after a successful February public offering. He and President Donald Trump will discuss a possible bilateral free-trade agreement after the dozen-country Trans-Pacific Partnership was shelved. Other Asian signatories, including Malaysia and Singapore, recently met in Hanoi to consider a multilateral pact relaunch without the US, so the prime minister could pursue these dual tracks at the same time negotiations are under way on the China-led Regional Comprehensive Economic Partnership comprising Asean along with India, Japan, and South Korea. Banking shares have jumped as state-run Saigon Commercial Bank may sell half ownership to a strategic foreign investor, and bad debt levels dwindled to a reported 3% of portfolios after a shift to the central asset management company. Fitch Ratings raised the sovereign outlook to stable, while Moody’s and Standard & Poor’s affirmed the relatively high “B” range speculative grade on 6% average growth from good domestic consumption and manufacturing sector foreign direct investment. They cited the consistent current account surplus and manageable government debt at 55% of GDP, and a 10-place rise in the World Economic Forum’s Global Competitiveness Index in recent years. However, they cautioned about the chronic fiscal deficit around 5% of output, and Moody’s put banks’ capital shortfall at close to $10 billion. It suggested the NPL ratio was understated and could worsen with 20% medium-range annual credit expansion mainly to government borrowers, as investment bank Natixis warned in a separate report that private corporate debt, especially in energy and textiles, was also exploding and is already above 100% of GDP on higher leverage. Phuc can boast of over 6.5% growth and 4% inflation through April, but agriculture was up by only one-third that amount. Exports increased 15% and FDI 3%, with tourism a distinct bright spot as the country received 4 million visitors over the period for a 30% advance after getting a record 10 million last year. The oil rebound has helped but lawmakers, such as the head of the assembly’s economic committee, worry that planned crude mining projects are unsustainable as coal and petroleum activity dipped 4% in 2016. The brisk construction pace may augur another “property bubble,” and phone and spare part exports cannot maintain their near 20% surge with vagaries in the global supply chain, they add. A decade after joining the World Trade Organization, the Industry Ministry is trying to further improve administration, logistics, quality control and technology while forging stronger external linkages such as with the EU “new generation” pact under consideration also addressing labor and environmental practices. A regional private equity investor survey by consulting firm AT Kearney ranked Vietnam as the number two preferred destination, with the retail and beverage industries at the top of the list amid middle-class growth in the 95 million population. Almost 90% of respondents will increase exposure, and so-called “equitization” of state enterprises on and off the stock exchange will be a chief deal source. To hedge their positions, bond and equity futures will be available starting in June, when MSCI’s periodic review will also possibly chart a future path to index core market graduation. The central bank in May released an update on its four-year banking cleanup aided with development lender technical assistance. Ailing institutions transferred non-performing holdings to the Vietnam Asset Management Company (VAMC) but bank restructuring and loan settlement continue to confront numerous legal and practical obstacles, including a lack of resolution authority and land and mortgage handling procedures. In the first quarter, the three leading banks posted $100 million in post-tax profit as credit, which is why the main business line rose almost 5%, a 6-year high. The deputy prime minister has called on them to diversify into services to little avail and with better earnings BIDV, Vietinbank and Vietcombank will stick to their knitting. Under the government’s fiscal pinch the VAMC has begun urging banks to buy back warehoused bad debt, which would threaten another cycle of write-off delay. Foreign investors have not yet been allowed into the market, and post-TPP international trade relationships and airline flotation ignore this bumpy landing danger.