THE FUND
The Fund fell 1.8% (SEK) in May, outperforming the benchmark index, which fell 2.3% (SEK). Positive contributions accrued from our underweight in Real Estate (mainly Vingroup stocks), Consumer Staples (Hoang Anh Gia Lai Group, Hung Vuong Group, and Vinamilk), and better stock selection in Materials (underweight Hoa Phat Steel).
Negative contributions accrued from the Fund´s overweight in Financials (VietinBank, HD Bank, Military Bank, and Lien Viet Post Bank) due to slower credit growth year-to-date, which had its toll on the banking stocks. In addition, our off-benchmark bet in Real Estate (Dat Xanh Group) did not perform well as it proposed a rights issue to finance real estate projects, causing concern among investors due to dilution risk and earnings being realized only in a couple of years. Kido Frozen Foods, after having a good run in previous months, corrected during May and contributed negatively to the Fund’s performance. The Fund reduced its exposure in Information Technology during the month.
MARKET
The Vietnam market maintained its bearish trend in May, witnessing a decline of 1.8% (SEK), while MSCI Frontier Markets xGCC Net TR (SEK) posted a positive return of 2.4% (SEK) and the MSCI Emerging Markets Net TR (SEK) declined 6.8% (SEK). Foreign investors remained net sellers in the broader market to the tune of USD 101m, however, SK group’s investment in Vingroup turned the foreign portfolio investment amount to positive USD 151m. With weak global markets and lack of triggers in Vietnam, both foreign and local investors remained relatively less active, and the average daily traded value decreased to USD 155m.
The month of May is usually a slow period in Vietnam from a local investors’ perspective as most of the companies´ earnings projections have been announced and no new triggers await. However, the no-deal between US and China on the trade issues further dampened the mood. Although Vietnam seems to be gaining from the situation as more FDI are committed to the country in the aftermath of the trade war, the uncertainty is making investors nervous. Vingroup, however, seems to be moving in its own direction as Korean SK Group invested USD 1bn in the company (154.3 million shares via a private placement and 51.4million secondary shares in the market) and has become the largest foreign shareholder with a 6% stake.
The Ho Chi Minh City Stock Exchange announced that they will introduce covered warrants in late June. As a result, brokers will be allowed to issue their own covered warrant products, using the 30 largest stocks as underlying assets. This could increase the liquidity in index stocks and provide foreign investors with an opportunity to take exposure in foreign restricted stocks.
The macro numbers showed a mixed trend where the trade numbers disappointed the most. In May, exports grew by 7.5% Y/Y and imports grew by 8.3% Y/Y, resulting in a trade deficit of USD 1.3bn during the month and USD 548m in 2019 year-to-date. The slowdown in exports can mainly be seen in the smartphone category as Samsung´s sales remain distressed globally, while the imports consist of machinery and equipment as a result of new FDI in Vietnam, which should eventually be reflected in economic growth and future exports from Vietnam. Further on, committed FDI had a phenomenal growth of 69% year-to-date standing at USD 17.7bn, while disbursed FDI grew by 7.8% to USD 7.3bn. As an aftermath of the US/China trade war, most of the FDI is coming from China (Hong Kong & China representing ~42% of the new FDI) as global manufacturers are looking for new production hubs to avoid higher US tariffs. Rising fuel and electricity prices pushed inflation to rise 2.7% Y/Y.
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Capital invested in a fund may either increase or decrease in value and it is not certain that you will be able to recover all of your investment. Historical return is no guarantee of future return. The Full Prospectus, KIID etc. are available on our homepage. You can also contact us to receive the documents free of charge. Please contact us if you require any further information: +46 8-5511 4570.
