THE FUND
The fund rose 4.7% in July, compared to the fund’s benchmark FTSE Vietnam TR (SEK), which rose 6.7%. Negative contributions accrued from our underweight in Vingroup. Rumors of capital raising in Vinhomes at a premium to the market and better than expected earnings resulted in excitement among investors. Vinhomes earnings grew by 75.6% Y/Y in Q2 (21.7% Y/Y in 1H2019) due to higher than anticipated delivery of residential real estate to buyers. Vincom Retail saw a decent revenue growth in Q2 (+30.8% Y/Y) from the expansion of its commercial centers. Three new shopping malls were opened in the last quarter, taking total number of Vincom’s malls to 69 across the country. Vingroup´s net profit also rose +120% Y/Y in 1H2019 owing to good performance of Vinhomes, Vincom Retail, and other business arms such as healthcare and education (its 1H2018 was a low base though). In addition, the fund’s off-benchmark bet in TNG Investment retreated after a significant outperformance in the past 12 months which added negative relative performance.
Further on, our off-benchmark bets in Consumer Staples (Kido Frozen Foods), Banks (Lien Viet Post Bank, Vietinbank), Information Technology (FPT Corporation) and Consumer Discretionary (Phu Nhuan Jewelry) performed well and contributed positively to the relative performance of the fund. The fund increased its exposure in Real Estate in July.
MARKET
During the month, the market had a decent run, increasing 6.7% net (SEK) compared to a 1.9% and a 3.5% return in MSCI Emerging Markets Net TR (SEK) and MSCI Frontier Markets xGCC Net TR (SEK) respectively. The main trigger for improved sentiment in the market was that the US and China returned to the discussion table over the prolonged trade war. Liquidity improved to USD177m as measured by average daily trading value. Foreign investors were net buyers of USD89m in July, mainly led by ETFs.
In July, most of the companies released their quarterly earnings and posted better than the street’s consensus. The banking sector posted double-digit growth in Q2 on the back of higher credit growth and an increase in non-interest income. Despite the regulatory challenges in the property market in the financial capital of Vietnam, Ho Chi Minh City, developers were able to hand over the previously booked properties. Vinhomes led the stack on the back of higher deliveries in Hanoi and Ho Chi Minh City. On the negative side, lower turnover and muted investment banking activities, the brokerage sector had another tough quarter. Earnings of the brokers dropped significantly (HCM -59.2%, VND -46%, SSI -55.2%) and resulted in poor stock performance.
The Vietnam market continues to attract foreign capital and the latest was a recent launch of a Hong Kong-based ETF with an initial size of USD 20m. In a strategic direct investment, Korean KEB Hana Bank signed an agreement to buy 603 million shares (15% stake) of Bank of Investment and Development of Vietnam (BIDV) via a private placement. The deal size is expected to be USD871m, making it one of the biggest transactions this year.
The macro numbers remain positive despite geopolitical headwinds around Vietnam. Disbursed FDI inched up by 7.1% to stand at USD 10.6bn YTD. However, committed FDI contracted by 13.4% to USD 20.2bn due to a high base in the same period last year. July’s CPI remained in check and increased by 2.61% Y/Y. During the month, PMI increased to 52.6, indicating expanding manufacturing sector and economic resilience. Trade numbers remain encouraging with YTD trade surplus of USD 1.8bn (however down from USD 2.6bn in 7m2018).
On August 1st, the US imposed another 10% on USD 300bn imports from China, which was taken negatively by the global markets. Any escalation in the trade war between the two countries is likely to impact the positive sentiment in the market and is the biggest risk factor in our opinion.
DISCLAIMER:
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.
