THE FUND:

A sign of the times – Landmark 81, Vietnam’s tallest building (world top 10) inaugurated in August.

The fund increased 8.4% in August outperforming the benchmark index which gained 6.3%. The fund’s overweight in Financials, Information Technology, and Consumer Discretionary was the prime reason for its positive relative performance. Higher credit growth and better than expected quarterly reports also resulted in higher than market returns in banking stocks. Our off-benchmark bets in HD Bank and Vietin Bank performed well for the fund. Strong market volumes (Ready and Future markets) also kept our brokerage stocks (mainly VND Securities) in the limelight during August. Our off-benchmark bet in Information Technology, FPT Corporation, was an alpha generator on the back of a better than expected result. In addition, our overweight in Consumer Discretionary (Danang Rubber, Phu Nhuan Jewellery), Energy (PV Drilling, PV Transport) and underweight in Real Estate (Vincom, Nova Land) contributed positively. On the other hand, our underweight in Consumer Staples and overweight in Materials brought in negative relative performance for the fund in August. Investors concentrated on mid-cap stocks due to a strong correction in previous months and attractive valuations. The fund has a tilt towards mid-caps and structural growth stories that are likely to benefit from the economic growth and consumerism. No new additions were made to the fund during August.

THE MARKET:

Vietnam’s market bounced back strongly in August, gaining 6.3% Net (SEK) compared to MSCI Emerging Market Net (SEK) increasing 1.1% while MSCI Frontier Markets xGCC Net TR (SEK) was down 3.4%. Positive returns are partially explained by a strong US Dollar against the Swedish Krona, appreciating by 3.9%. Local investors were cheered by news that the U.S. and China were entering into talks to avoid a full-blown trade war. The Chinese Yuan seemed to calm down after a strong devaluation in the previous month, which helped the Vietnamese Dong to stabilise as well. Local investors re-entered the market to grab bargain deals as valuations became more attractive. On the whole, foreigners remained net sellers to the tune of USD 71.6m. An analysis of foreign flows offers a comforting perspective as the main sell-off came from Vingroup stocks (Vincom, Vinhomes, Vincom retail) with a total value of USD 126m. This means that foreigners were net buyers otherwise.

The latest macroeconomic numbers continue to signal positive momentum as geopolitical risks seem to be at bay. The Vietnamese Dong stabilised after being devalued 1.5% in July. Given the positive trade surplus of USD 2.75bn YTD, the currency depreciation was an adjustment by State Bank of Vietnam designed to protect exports as peer currencies depreciated. FDI continues to grow with total disbursed FDI for the first eight months USD 11.25bn (up 9.2% yoy), while registered FDI was recorded at USD 24.35bn. The manufacturing sector attracted the most FDI, followed by Real Estate and Consumer Retail. Inflation in August inched up by 0.45% M/M (3.98% yoy) mainly due to an increase in Food prices. In light of growing inflationary pressures, the State Bank of Vietnam re-confirmed the application of 17% credit growth target in the banking system in 2018 rather than lifting the limit for certain banks as has been seen in previous years. This decision raised concerns among several banks that have almost reached the quota

The head of the State Securities Commission (SSC) mentioned that the government would do its best, in terms of policy making, to help Vietnam secure a place in the MSCI Emerging Market Index within 2 years. The Energy and Financial sectors were the top performers during August. Rising global oil prices coupled with a recent decision by the Prime Minister to expedite drilling activities, a prime project of Petro Vietnam (PVN) that could provide decent workload in both upstream and downstream energy companies for next 3-4 years, helped matters along. Higher GDP and credit growth were the main drivers for the Financial sector’s strong performance.

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.