THE FUND
The fund rose 2.2% net (SEK) in January, compared to the fund’s benchmark index FTSE Vietnam Total Return Index gaining 4.1% net (SEK). Foreign investors’s net buying resulted in an increase in blue-chip stocks during the month. The fund’s underweight position in the Real Estate sector (mainly in Vingroup stocks but also Vinhomes, and Vincom Retail) was the key factor for the fund´s relative underperformance. Further on, the fund’s underweight in Vinamilk also had a negative effect on the relative performance. Positive contribution accrued from our overweight in Consumer Discretionary (TNG Investment and Trading), Energy (PetroVietnam Transportation, and Southern Gas Trading), Financials (Military Bank and Vietnam Joint Stock Commercial Bank), Information Technology (FPT Corp.), and Materials (HaTien 1 Cement and Hoa Sen Group). The fund increased its exposure in the Financial sector in January.
MARKET
The Vietnam market gained 4.1% net (SEK) in January, compared to MSCI Emerging Markets, gaining 6% and MSCI Frontier Markets xGCC, gaining 6.9%. The market recovered well in January, considering the decline in December. The recovery was primarily due to improvements of external situations in which the US and China are getting closer to reaching a solution over tariffs and the FED is signaling a dovish stance on increasing interest rates. Foreign investors reverted to the net buying side and invested USD 73mn during the month. However, liquidity dropped to USD 132mn as local investors remained at bay before lunar New Year holidays.
Many companies announced their financial results in January where earnings remained impressive overall. FPT Corporation´s net profit rose 35% Y/Y (even after excluding one-off gain). The spin-off of the retail business in 2017 did help the IT giant to focus its resources on its core businesses of Software Outsourcing, Online Content, and Telecom. The dairy producer Vinamilk announced positive Q4 figures were profitability increased 32% Y/Y. However, the full year picture was less impressive as the company reported topline growth of 5% and a decline of 1% in net profit Y/Y. Further on, blue-chip companies such as Vingroup, Vinhomes, Masan, and Vietcombank also announced positive growth in earnings. Hoa Phat Steel saw an increase in revenue of 21% Y/Y and a 7% Y/Y growth in profitability. However, we saw earnings attrition in the Steel sector in Q4 as increased capacity and lower international steel margins finally took its toll on the profitability. Hoa Phat Group net profit declined 27% Y/Y in Q4.
The macro numbers in January depicted a mixed picture where domestic consumption and industrialization expanded, while inflation remained under control despite the increase in shopping prior to the Lunar New Year (inching 0.1% M/M). The trade data is however a cause of concern since exports fell by 1.3% Y/Y and imports increased by 3.1% Y/Y, resulting in a trade deficit of USD 800mn in January. The slowdown in exports in the mobile phones segment was the primary culprit, mainly caused by the decrease in Samsung´s export orders during the month. The slowing global mobile industry, where Samsung is one of the largest exporters in Vietnam (~20% of the total exports), can seriously distort the trade numbers going forward. New Foreign Direct Investments (FDI) in diversified sectors is likely to reduce reliance on Samsung. Disbursed FDI stood at USD 1.55bn, up 9.2% Y/Y.
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