THE FUND
The fund gained 12.7% Net (SEK) in November, over performing the benchmark index which increased 11.5% Net (SEK). The fund’s overweight in Financials, Information Technology and Consumer Discretionary contributed the majority of the relative positive return. Normally the last quarter of the year witnesses the highest credit growth, and the government’s push to achieve 21% target should add to the sector’s performance. A stake in one of our off-benchmark bets in Information Technology (FPT) will be sold by the state in December and expectations of a good auction price resulted in decent price performance. On the negative side, our natural underweight in Real Estate (Vingroup) and Consumer Staples (Vinamilk and Masan Group) contributed negatively to the relative performance. Corporate actions in these names appear to have stretched valuations in the short term. The fund increased its exposure in selective Energy names improving the sector’s outlook as Vietnam mulls over increasing oil production. The Fund also increased its position in Vincom Retail, a leader in retail leasing property with 60% market share in Vietnam. Currently, it has 41 commercial centers that are likely to be increased to 200 in 5 years across the country. Vincom Retail aims to capitalise on the booming middle class and increase in income levels.
THE MARKET
Vietnam continued its upward trend in November as corporate actions in blue-chips and privatisation of state-owned entities kept the investor interest alive. The State Capital Investment Corporation (SCIC) divested 3.3% stake in Vinamilk at 20% premium to the market price. The entire block was bought by Singaporean conglomerate Jardines Matheson Group. It accumulated another 6% through the open market to reach roughly 10% stake (USD 1.3bn in value). After a successful listing of Vincom Retail, Vingroup shared its USD 1.5bn fund-raising plans for a new automobile business arm. The SCIC published its divestment schedule according to which 53% stake of its largest brewery, Sabeco, will be auctioned on December 12th, 2017 at a floor price of VND 320k/share (30% higher than average share price YTD). The fully subscribed issue will result in USD 5bn+ for the government, which should bode well for the government’s significant infrastructure investment plans.
The proceeds from Vinamilk quickly found their way back to the market and were used to buy other stocks, primarily blue-chips. Surplus liquidity in the market post Vinamilk’s sale and easy margin available to the local investors led to increased turnover. The average daily traded value stood at USD 336m. Foreign investors remained net buyers to the tune of USD 468m during November. The market gained 11.5% net (SEK) compared to -0.2% in MSCI Emerging Market Net (SEK) and 0.7% of MSCI Frontier Market Net (SEK)
Vietnam’s macroeconomic situation remained encouraging on many fronts. Investments made in export sectors during previous years appear to be generating results with exports growing to USD 194bn (up 21% YTD) and a trade surplus of USD 2.8bn. As a result, foreign reserves are near record levels at USD 46bn. Inflation also remained modest, inching up 0.13% from last month while averaging 3.6% for 2017.
