VOF got a nudge this week with a recommendation in MoneyWeek magazine. As a long term holding, Vietnam looks to have quite a list of positives, such as trading below NAV, young demographic and liberalising government. I seem to recall that VOF and VEIL both had the same investments as their core holding.
McHattie's Investment Trust Newsletter in February, on the choice for an ISA and considering the Vietnam ITs, said ' . . . In performance terms, VEIL has been the clear winner over the last year, delivering a NAV total return of 49% against 29% for VOF and 23% for VNH . . . VEIL shares trade on a 13% discount . . . similar to VNH and slightly narrower than VOF, but we would say that gap is more than justified by the historic performance differential. VOF has a broader mandate that allows the managers to allocate more to unquoted investments and property . . . ' Unquoted investments may make NAV changes more lumpy when they are realised (or revalued), I suppose.
I tend to agree that this will take time to come about, but I don't think that this is a big negative, inclusion in the watchlist, indicated below as 2019 will increase interest and give time for foreign interest to build to eventual MSCI EM inclusion, by which time much of the positioning may have already happened. In any case VN looks like one of the best markets to be in for some time to come.
HÀ NỘI Việt Nams securities market has a 25 per cent chance of being upgraded to the emerging market status from its current frontier market level by 2021, according to Võ Trí Thành, senior economist at the Central Institute for Economic Management (CIEM).
The market status levels are regulated by Morgan Stanley Capital International (MSCI), the US independent provider of research-driven insights and tools for institutional investors. A review of any particular stock market and its reclassification carried out by MSCI would increase the attractiveness of that market to global investors.
However, Thành said there were three factors that would make it difficult for Việt Nam to get upgraded by 2021 as expected by market analysts, investors and regulators.
The challenges that Việt Nam has encountered so far are information disclosure or corporate and market transparency, openness to foreign investors and capital, and opening the capital and financial market to the private sector, he said.
While information disclosure is quite costly for both market regulators and traded firms, the two others would require the Government and its agencies to make stronger efforts to make trading standards more accessible for foreign investors, according to Thành.
Information disclosure has remained an obstacle for foreign investors if they want to make investment in Vietnamese companies as many companies have hesitated to make their business more transparent for highly-costly interpretation of financial and corporate reports.
In addition, foreign investors are allowed to own up to 100 per cent of a Vietnamese company if that firm does not operate in the sectors involved in national security and safety such as banking, property and transportation.
In such cases, foreign investors can have a maximum of 49 per cent ownership in the business. For commercial banks, the foreign ownership is limited at 30 per cent.
Thành delivered his cautious outlook for the Vietnamese securities market at a seminar held on Wednesday by the US Embassys American Centre and the Vietnam Executive MBA Programme in Hà Nội of the University of Hawaii (VEMBA Programme).
Cấn Văn Lực, chief economist at the Joint Stock Commercial Bank for Investment and Development of Việt Nam (BIDV), said "even if Việt Nam is determined to get approval from MSCI on promoting the status of its securities market, it will be quite challenging".
He said Việt Nam would have to be admitted onto MSCIs watchlist for a market reclassification, which is expected to occur in 2019. Then it would take the Vietnamese securities market at least two more years to become an emerging market as regulated by MSCI.
An upgrade of the Vietnamese securities markets status will attract more foreign capital, encourage local firms to make their business more transparent and motivate market regulators to standardise the markets trading regulations, he said.
"It also would prove that the Vietnamese securities market is among the most attractive in the world and encourage the Government to improve the economys investment and business conditions," Lực said.
Positive 2018 ahead
Việt Nams economy in general and its securities market in particular are showing positive signs and higher achievements are reachable in 2018.
Yes VOF is risky but over this last week many defensive stocks that I hold have fallen more than VOF. It's a weird financial world. One risk that is not apparent currently is if there is a sudden collapse of the markets, and interest rates rise in the US, foreign investment flows back to perceived safe havens such as the dollar and gold. However, VOF is a long term play and providing the Vietnamese government continues on its current economic strategy, Vietnam will qualify to emerging market status and will attract more foreign investment. VOF will be a beneficiary.
I also added a few at 339, not so many as I want to leave room to add more here and VEIL if they slip further.
The big dip followed by some recovery looks like a bit of panic creeping in, but I guess the 4+% drop in S&P etc will drag further on the VN index today.
My holding here is for the long term. Vietnam development and market is driven by a mix of construction, infrastructure investment and exports, with tremendous output of products like textiles and furniture. GDP growth was reported as 6.8% in 2017 and similar forecast for 2018.
Vietnam is classified as an MSCI Frontier market, which limits the number of overseas funds which currently invest. Re-classified as Developing Market has been on the cards for a while (requires some changes in regulation such as foreign ownership limits which are being relaxed) and could lead to a significant funds inflow.
Plenty of risks, but then many "low risk" UK stocks have taken a hammering of late!
The NAV has fallen about 3% since the last report on 29th of Jan but the sp fell over 7% earlier today so I have bought some more shares in VOF for 337p. Vietnam and Japan are the hot areas for investors atm according analyst and media reports.
""How stupid can you get?" was a question teachers often used to ask me. "How stupid do you want?" was always my reply.Over the last few years I have written articles about the attraction of Vietnam as an investment destination. Before proceeding ..."
I made a small speculative buy into VOF about a couple of years ago. A Communist State and regarded as a frontier market made me feel a little nervous. At first the share price fell back a little and was slow to move up. Once it did start to move up it was slow and steady and has been like that ever since. I have doubled my holding over 12 months ago and I now wish I had bought more, especially now that a dividend is being paid. I am contemplating adding some more this year as the frontier market could well be changed to emerging market that will allow a number of funds to invest here. If that occurs, the sp should see further increases.
Good post H2. I think this is now my 3rd or 4th largest IT holding. I initially followed a from Merryn writing in the Saturday FT - those were the days when I could order the Saturday FT at work for 'research purposes' most of it went into bin on the train on the way home on Monday! I tend to add to anything once it goes up by 5-10% so not surprising that the better performing shares have a large place in my portfolio, albeit that I haven't had the benefit of all the rise on all my holding. I will look at VEIL as you suggest. In the meantime I'm off to Vietnam next month so will get some impression, even as a tourist, and see how it compares with Thailand, Sri Lanka and Taiwan. - Strange isn't it how some of these places have "Socialist Republic" hard wired into their name, when they seem to be embracing capitalism right left and centre!
VOF had a great 2017 continuing a steady uptrend but since mid December has really taken off. VEIL had an even more impressive 2017, there is a fair bit of overlap in the portfolio and little to justify the performance difference which encouraged me to add to my VOF holdings over last couple of months.
Vietnam is certainly growing strongly, driven by real estate and continued foreign investment in manufacturing plants. It is not all low tech stuff, Samsung have very large telephone plants, Intel have been making chips in Vietnam for many years. The big worries are bank lending and corruption. There have been big moves on both these issues with bank debt having been placed into VAMC 'bad bank'. Many of these non-performing loans are now being re-bought by the original lender as the borrower positions and outlook improves. Many developments which were on put on-hold a few years ago when the money dried up (often part built) are now being completed.
On corruption, there have been a number of former directors of state owned businesses arrested and imprisoned (or worse in extreme cases), including a senior member of the politburo only the second in history to be removed from that position and the first to be arrested. This is encouraging but only part of the story as corruption is by no means eliminated and the activities of the people targeted were so egregious that it caused embarrassment to the Government.
The Country is stable, the Government maintains tight control without stifling entrepreneurship. The population is young, growing, relatively well educated and very motivated. The currency has been kept fairly closely pegged to the USD apart from a couple of minor devaluations (3% ish). 2018 GDP is forecast to rise around 6.7% (with the usual caveats for communist Govt stats).
Both VOF and VEIL underperformed the VN Index, but that has been inflated by some highly dubious floatations of late with the public piling in to buy stock driving prices to bubble proportions, mainly because the main shareholder floating the business is one of the most famous rich Vietnamese, but the business is generating little return. VOF and VEIL have fortunately avoided such dubious investments.
There have been many good IPOs in state owned businesses which are being progressively transferred into joint stock status and private companies like Vietjet. (Vietjet is held by VOF and VEIL, it has a terrific growth record with great reputation for customer service and innovation). The owner /CEO is a real celebrity and a $ billionaire. It is noticable that many of the most successful businesses in Vietnam are run by women, including Vinamilk (Vietnam Dairy Products JSC) which also has a tremendous record of growth and innovation, it is the biggest holdings in both VOF and VEIL.
VEIL is around 15% discount to NAV, VOF 17% although NAV can be somewhat subjective for non listed assets.
I will tempted to buy some VEIL and to add to VOF, but price currently looks a bit frothy so may wait for any dip.
Good luck for 2018, which is, oh dear it's the year of the dog.
Yes a dividend of around 2% p.a. I think, was announced a few weeks ago. They want the gap between share price and fund value to close.
Nav as reported toady is 366p, so potentially another 70p gain here.
Yes I picked up some VOF after the recommendation made in Money Week and it has not disappointed. Surprise, surprise when I saw the dividend this morning. Investing here has been one of my better decisions.
I too intend to hold. Good timing in investment is everything - unfortunately mine was terrible (or overly -optimistic when I invested back in 2006, depending on how you look at it). I have always been impressed with Vietnamese work ethics and capabilities - even if they can be rather difficult to work with at times. The comments on Cambodia come after living here (twice) over a 6 year period, opening a (by-now large) international firm and being driven insane by incessant corruption, the huge number of disruptive public holidays (over approx 40 a year - in addition to 'regular' leave....) and the general attitude shown to hard work (or its lack thereof). The ever-continuing donor community in Cambodia and its negative effects has a lot to answer for.
Have been a holder for several years and up over 100%. Continuing share buy backs are helping the share price although no dividends here.
This fund has been pushed by Money Week for some time and I think offers a good opportunity in an underdeveloped country with a well educated and young workforce.
I am continuing to hold.
Have held VOF since April 2016. I have history working in Asia since 1980. I recently returned from a month in Vietnam and was very impressed at what I saw and heard. It looks very much like a mini-China with lots of enterprise and hard work.
However, I would not put too much into Vietnam because 1. there is considerable corruption and antipathy towards the government, 2. there is little love between Vietnam and China and any problems between them (think South China Sea) could blow up the stock market if not the economy.
I share the reserves about Cambodia again due to corruption and the lack of the energy evident in Vietnam.
I bought a sizeable trade in Nov 2006 (...) at $2.85 and saw it fall to very, very little. I thought the investment a right off and put it down to youthful enthusiasm (I had worked in Asia, including Vietnam, in the 1990's). I basically forgot about the investment until a recent visit to Vietnam, wondered when I looked at it why it was now priced in GBP and was somewhat surprised that the price was actually higher than what I had paid (I thought it would be at near zero....). Good to see it's back in strength and hopefully it will go higher - Vietnam is a dynamic economy with hard-working people who are very business-oriented (when allowed to act freely). I believe that the fund can invest outside of Vietnam - I just hope management stays away from Cambodia (likely, given the poor relations between the two - the Cambodians are still angry that it was the Vietnamese who liberated them from the Khmer Rouge.......) which is a incompetent utterly corrupt basket-case of a country that continues to live on (free) Chinese and donor money.....
I was ;beginning to think that I was on my own here as well as RSE. I have held a position in VOF for more than 12 months when it was denominated in US dollars. When it was converted to gbp, the entry price was 160, which is now showing a phenominal rise. I have since topped up at around 250. The holding I have is not big, due to my cautious approach. Investing in a frontier market is risky after all. I am now considering increasing my holding further. My usual preference is to seek income but this one has given me a different slant.
That is also true for my holding in Riverstone(RSE). i also bought this over a year ago for around 820. The Company had a placing pitched at 800 and the sp duly slumped to around 750 and I nearly sold out. I decided to average down to 789. I have recently bought some more and, just like VOF, the current price is at a discount of at least 10% to NAV. The sp is around 1300.
VinaCapital Vietnam Opportunity Fund (VOF:LN) (5.1% of current portfolio):
Share Price: GBP 271p
Market Cap: GBP 560 Million (USD 705 Million)
Everything aligned for VOF in 2016 to deliver a blistering +70% return (in sterling terms): Its substantial capital markets (i.e. non/un-listed) portfolio allocation was a primary driver of a return that was nearly double that of the VN-Index, its NAV discount closed significantly, plus it enjoyed a dramatic boost from sterlings post-Brexit depreciation (VOF shares are now listed in GBP). The portfolio out-performance is particularly gratifying, as Id previously highlighted VOFs more diversified portfolio as a better long-term bet (vs. its peer closed-end funds/ETFs, which focus on listed equities), in whats still obviously a frontier market. [See blog comments here, for a comparison with the VanEck Vectors Vietnam ETF (VNM:US) which, extraordinarily, managed to lose money for its shareholders last year!?]
The underlying VN-Index return is also a reminder there has been little sign of over-heating in the market, which leads me to believe theres plenty more gas in the tank here. 2017 GDP growths expected to surpass the current 6.2% rate, retail sales are humming along at +10.2% yoy, inflation remains sub-5%, the USD/VND remains stable, the banks & the property market appear to be heading in the right direction again, and 10-15% EPS growth is expected yet Vietnam continues to trade at a 20-30% P/E discount to regional averages. As for VOF itself, it trades on a 0.81 Price/Book multiple, despite an aggressive & ongoing share buyback programme I see plenty of gains ahead in terms of NAV growth & discount compression, as Vietnam continues to leverage & benefit from its labour/cost export advantage, and (just as importantly) its burgeoning domestic consumer economy.
For this & other top picks, check/Google my latest 'Top Trumps For 2017...' post on the Wexboy investment blog.
Yes it has to be true, when Jeremy and the gang identify a new investment frontier even on two wheels, you have to jump in feet first. After all the stars and stripes Monkey bike was substituted for the Allegro, and we can all agree with that. May the Vietnamese prosper and do well, they work hard, are cheerful, and have excellent cuisine.
"At the start of this article I must come clean and own up to liking the cheerful, hard-working people of the Far East, and in particular Vietnam.I travelled there 55 years ago when in the Merchant Navy, and now my youngest brother is a doctor in ..."
I am very happy with the steady rise this year. Vietnam is one of the fastest growing economies in SE Asia. The share chart is a little misleading because of the conversion, but I have been a holder for 3 years and up 80% as of today which is all right in my book.
The price is ticking up well this week. One issue that will affect VOF is the strength of the US dollar. When it is strong, foreign investors leave emerging and frontier markets for the safe haven in the home market. The Fed has decided to keep the interest rate at its current level which is no surprise. Also unsurprising is that VOF has been tipped in quite a few places recently and I see today's volume is high.
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