External forces outmuscle fundamentals as Vietnam Enterprise delivers negative return – Vietnam Enterprise Investments (VEIL) delivered its first negative NAV return since 2011 in the year to December 31, 2018. Total return USD NAV shed 7.1%, which was 2.4% better than the VN Index benchmark. VEIL is managed by Dragon Capital, the largest independent asset manager in Vietnam, with $3bn invested in the country.
The company is not perturbed as it believes the local economy is in strong shape. The trade surplus and FDI inflows grew in 2018, which helped drive up the size of the stock market, which ended the year up $17m to $172bn. The June-December 2018 sell-off in the local market was attributed to external forces, such as the build up in trade tensions between the US and China and the wider sell-off in emerging markets as investors pulled out of riskier assets. On a relative basis, VEIL pointed to food & beverage sector was the biggest contributor to performance in 2018 owing to an overweight holding in Sabeco which rose 8.1% over the year and a underweight position in Vinamilk which fell 30.4%.
Value to be had if domestic forces wrestle back control
Chairman of VEIL, Wolfgang Bertelsmeier, said: “We remain positive on the 2019 outlook for Vietnam despite uncertainties in global markets. A number of key metrics favour strong domestic performance, which, when supported by key catalysts including the possibility of opening foreign ownership limits and the potential inclusion in MSCI emerging market’s index watch list, all bodes well for the future. GDP growth for the year is expected to reach 7.1% while inflation is anticipated to remain well below the 4.0% government target. Further to this our local currency remains stable thanks to both the strong trade surplus and high foreign exchange reserves.
With our top 60 companies expect to deliver 10.1% EPS growth of 12.9x forward earnings in 2019, below regional peers such as Thailand, the Philippines, Malaysia and Indonesia, we are able to offer investors good downside protection amidst sensitive global macro factors.”
VEIL: External forces outmuscle fundamentals as Vietnam Enterprise delivers negative return