With strong GDP growth, a stable macroeconomic environment, increasing exports, and record levels of foreign direct investment, it is easy to see why Vietnam is considered among the world’s most exciting markets. Half of the population of 95 million is under age 35, and an expanding middle class has created a compelling domestic consumption story that has attracted the attention of companies from around the globe.
VOF gives investors access to a range of carefully selected investments in the listed and private companies that are participating in, benefitting from, and driving the sustainable growth Vietnam is experiencing today.
Latest commentary from our fund manager
October: Market Correction Offers Chance to Buy on the Dip
October saw a big drop for the markets globally and Vietnam was no exception, with the VN Index dropping 10.2% in USD terms and giving up all the gains it posted earlier in the year. As at 31 October 2018, the VN Index is down 9.6% for the year. The fund’s net asset value (NAV) per share fell to USD5.26 per share, a decline of 6.4% month-on-month (m-o-m), but declining less than the VN Index.
What triggered the correction is well known: the trade war, emerging markets contagion, and a slew of other issues, and for now at least, it seems that global macro news is going to dominate the headlines regardless of what is going on here in Vietnam. Most Vietnamese companies have reported third quarter results and on average they are showing a growth of 26% in net profit, which is fairly strong; we expect full-year results to show similar growth rates. However, from a valuation perspective, the trailing P/E multiple is now contracted from 19x at the beginning of the year to 15x as at the time of writing. Although the recent market drop is due primarily to global issues, local conditions may have played a small role. In the last six months, several companies in the financial sector have pushed valuations much too high, leading pre-IPO investors to lose 30-40% since these companies listed. This has had a negative impact on investors’ sentiment towards Vietnam, particularly amongst those who prefer IPO opportunities, as well as some retail investors who were forced to cut their losses. Moreover, the recently IPO’ed companies command a relatively large share of the overall VN Index and thus, have also contributed to the Index’s recent volatility.