Interim results and outlook from Vietnam Holding

VietNam Holding (VNH)’s total return NAV grew up by 2.0% over the six-month interim period to  31 December 2019 – this was in line with the Vietnam all share index. 

Over the ten-year period ending 31 December 2019 the NAV increased by 6.7% per annum, compared to a 2.8% per annum increase in the Vietnam All Share Index in USD terms. 

VNH follows a high-conviction approach with a portfolio concentrated around 23 positions, with the top-ten positions making up 68% of the portfolio. the trust says its  top holdings performed well in the second half of 2019.

  • FPT (13.2% NAV) gained 31.3%, Phu Nhuan Jewelry (11.2% NAV) gained 19.7%,
  • Mobile World (8.1% NAV) gained 23.6%, and
  • MB Bank (6.5% NAV) gained 8.1%. Two of VNH’s top ten positions fared poorly due mainly to low liquidity:
  • Thien Long Group (3.7% NAV) declined by 14.5% and Saigon Cargo Services (5.7% NAV) declined by 23.6%.

Small-cap and mid-cap stocks, accounting for about 47% of the portfolio underperformed the broader market.

We initiated coverage on VNH last December – you can access the note here.

Vietnam’s Economy

The extracts that follow come from management report (Dynam Capital).

“Vietnam’s macro position became the envy of much of Asia during 2019. Vietnam was seen as a winner in the trade war between the US and China, with an increase in the market share of exports to the US pushing the trade surplus to a record level of USD 10 billion, and the country attracted record levels of Foreign Direct Investment (FDI). The FDI, trade surplus and the strong levels of inward remittances from the overseas Vietnamese diaspora, led to a surge in the foreign reserves which ended the year at around USD 80 billion.

Underlying GDP grew by approximately 7% for the full year, one of the highest growth levels in Asia. Much of the growth is from expansion in the manufacturing sector. At the end of the year an adjustment was made in the calculation of the GDP, effectively lifting the absolute level of GDP by around 25%, and taking the per capita GDP to USD 2,800 per capita, which is close to the level at which consumerism accelerated in other Asian markets. The Vietnamese Dong has been relatively stable against the US Dollar in the period under review. Headline inflation has risen slightly, partly due to increase in pork prices as a result of African Swine Fever, but core inflation remains low and under control. The State Bank of Vietnam has kept credit growth under strict control at around 14%, in line with its targets.”


“Vietnam is expected to see more attention from foreign funds in 2020 due to the overweight position in the MSCI Frontier Market index that will arise when Kuwait is upgraded to Emerging Market status in May 2020. Vietnam’s inclusion in the MSCI Emerging Market index is still probably a couple of years away. In the meantime, a New Securities Law, expected to be effective from January 2021, provides some measures to address the constraints of Foreign Ownership Limits. Market innovations on the horizon include new ETFs, which may be introduced soon based on the three new indices introduced by the Ho Chi Minh City Stock Exchange, and in the longer term potentially the introduction of Non-voting Depository Receipts (NVDRs), which are under consideration as a means to address access to stocks that are already at the Foreign Ownership Limits.”


“Since mid-January 2020 when an outbreak of novel Coronavirus, now classified as COVID-19, first appeared in the city of Wuhan, in central China’s Hubei province, the number of reported COVID-19 cases has risen to an estimated 120,000 globally, with more than 4,300 deaths. The number of infections in China appears to have moderated, and 61,000 people have recovered from the virus. In late February, however, the number of new cases outside China had risen significantly and quickly, particularly in South Korea, Iran, Italy and Japan. In total 120 countries and territories are currently affected and on March 12 2020 the World Health Organisation declared COVID-19 to be a global pandemic. In Vietnam the initial cases were reported in late January, shortly after the outbreak in China, and a few weeks after all 16 people initially reported as having contracted the virus recovered, several new cases emerged as a result of people entering the country with the infection.

Vietnam has taken swift preventative steps to limit the spread of the virus, curtailing transport with those countries affected, putting people in quarantine and extending the school holidays. The authorities have also been active in informing the public on a daily basis about the virus, through social media and traditional media, and raising awareness of practical steps its citizens can take: such as washing hands and wearing masks.

Vietnam is an increasingly open economy and is a key part of Asia’s manufacturing supply chain. Manufacturing accounts for about 16% of total GDP, and any disruption to the flow of intermediate and finished goods between Vietnam and China, Korea and Japan, representing 56% of the total imports of Vietnam, and 31% of its total exports, will impact GDP growth. That said, given Vietnam’s manufacturing capability, relatively low labour cost, and transport connections, some companies are already looking at expanding their operations in Vietnam, as part of a “China-plus-one” strategy. The other sectors most likely to be hit the hardest include tourism and aviation. In recent years Vietnam has emerged as a favourite destination for tourists, particularly from China and South Korea. In 2019 Vietnam received 18 million international arrivals, and in the first month of 2020 it welcomed 1.9 million, including 644,000 from China, 468,000 from Korea, and 79,000 from Japan. For as long as travel restrictions are in place, tourist arrivals will be severely impacted. As result, the Ministry of Planning and Investment has forecast Vietnam’s GDP growth to fall to a seven-year low of approximately 6% in 2020.

Domestic equity investors have naturally reacted with fear to the uncertainties caused by COVID-19 and the indices and the portfolio valuations have been hit hard as a result in February and the first few weeks of March. As a global pandemic, COVID-19 poses a wide-range of risks to the global economy. Although it is not clear how widespread the direct impact of COVID-19 will be for Vietnam, or how long disruptions will persist, when normality eventually returns, there is likely to be a rebound in domestic confidence, which would likely be reflected favourably in the domestic equity markets. Patience is required in these difficult market conditions.

On a practical point, Dynam Capital and its wholly owned Vietnam Subsidiary have robust Business Continuity Plans (BCP) in place, including segregating teams and using remote working infrastructure when and if necessary. We have also verified that all the key service providers have appropriate BCPs in place.”

VNH: Interim results and outlook from Vietnam Holding

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