THE FUND:

The fund decreased 3% in April compared to the benchmark index that declined 5% Net (SEK). Profit taking in blue chips, which have been upbeat for past few months, and the fund’s underweight in these names was the primary driver of the positive relative performance. A lower than expected result in Vinamilk and lack of a trigger in Masan (post IPO of Techom bank) encouraged the selling of these stocks. They have the highest weightage in the benchmark. FLC Faros was also a positive contributor as reduced by the ETF and was lacking in fundamental reasons to buy. (Recall: we wrote about ROS VN in November 2017, pointing towards suspected price manipulation here). In addition, the fund maintained higher cash levels ~14%, which also helped our performance in April. Ahead of the long holidays, excessive margin lending triggered selling by local investors in Vietnam’s market. Our overweight in Hoa Sen (HSG VN) and Saigon Securities (SSI VN) performed negatively due to lower than expected results and reduced margin lending. The fund added HD Bank, one of the leading banks in consumer financing in Vietnam, which is likely to benefit from economic development and rising income levels. The fund gradually reduced cash levels towards the end of the month.

MARKET:

Vietnam finally had its profit taking month in April when FTSE Vietnam was down 5% Net (SEK), underperforming MSCI Emerging Markets and MSCI Frontier Markets which increased 2.8% Net (SEK) and 0.4% Net (SEK) respectively. Foreigners remained net buyers to the tune of USD 65m while liquidity remained decent at ~USD 251m. Margin lending reached an all-time high during April triggering selling pressure from local investors as brokers cautiously reduced margins. A rumour that the State Securities Commission will increase minimum collateral rate for margin borrowing from 50% to 60% also created some panic in the market. The trade war between US and China was also a concern as (i) in export categories Vietnam is similar to China, and (ii) Chinese goods may be dumped in Vietnam at low prices hurting local manufacturers. Despite rising global crude prices, the Energy sector was one of the worst performers as Vietnam halted an important oil drilling project in the “Red Emperor” block in the South China Sea following pressure from China. The field was estimated to recover nearly 45m barrels of crude oil, 172bn cubic feet of natural gas, and 2.3m barrels of condensate. This was the second time in less than a year that Vietnam had to suspend a major oil development in the busy South China Sea waterway under pressure from China. The market is also looking to deploy some of its freed cash in upcoming large IPOs (Vinhomes, Techcom Bank, FPT Retail). This is likely to absorb part of cash flow going out of the market. It is also rumoured that a majority of the chunk has been taken up by the large foreign investors. Listings of Vinhome and Techom Bank are expected within a month, where the estimated value of each IPO is ~USD 15bn and ~USD 6.5bn respectively. Given that there is no material change in Vietnam’s economic trajectory, we feel that the market correction is healthy and will allow long-term investors to take positions at reasonable valuations.

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.