VietNam Holding ( VNH) provided an update for the month ended August 2023, highlighting the ongoing performance of the region which has boosted returns of VNH, with shares up 22% YTD.
Manager commentary – Vietnam’s moment in the sun
Vietnam enjoyed further stock market gains and GDP growth in August, setting up a shiny backdrop for US President Joe Biden’s recent milestone visit to Hanoi, where he said ties between the two countries have ‘entered a new stage’.
Not only have the economic reforms and commitments to stamping out corruption paved the way for Vietnam’s comeback this year, but the government also has been proactively enhancing its relations with several countries, including the US, its largest export market. Vietnam has what it calls a ‘comprehensive strategic partnership’ currently with China, Russia, India, and South Korea and is preparing to upgrade its diplomatic statuses with Australia and the United Arab Emirates (UAE) by the end of the year. These evolving agreements are already leading to increased FDI and manufacturing activity in Vietnam, with the August Purchasing Manager Index survey by S&P Global reporting the first month-on-month improvement in new export orders and production after five consecutive months of declines due to cooling global demand in key products, such as electronics and textiles.
Another moment in the limelight in August was when the electric vehicle maker VinFast made its celebrated debut on the Nasdaq’s Global Select Market, making it the largest Vietnamese company by market capitalisation. Its valuation briefly reached an extraordinary US$200 bn, on extremely thin float and trading, making it the same size as Toyota and 50% more than Boeing. It has since retreated to US$40 bn.
Despite stock fluctuations throughout the month, Vietnam’s equity market stood out compared with global bourses, which as a whole saw their second worst month of the year. The VN Index was up +19.2% for the first eight months of 2023, outperforming its neighbours by a long range with Thailand’s SET and Indonesia’s JCI down -7.1% and up only +3.4%, respectively, for the same period. Technology and financial services were Vietnam’s top performing sectors, though industrials, consumer, and real estate also extended strong gains (ongoing since May) and continue to be trading at attractive valuations versus peers in the region. VNH’s biggest holding, FPT, was the country’s best performing stock in August, rising by 12.3%. Year to date the Fund is up 24.3%, in line with the Vietnam All Share Index, but is significantly ahead of its London-listed peers.
We expect this positive momentum in the broader market to carry on given the continued low interest rate environment and improving company earnings for upcoming quarters. While high volatility is also expected to persist, given the significant participation of retail investors, we view this as a positive factor for the long-term development of Vietnam’s equity market. Although valuations have risen this year, this is offset by a positive outlook for earning’s growh through the rest of 2023 and into 2024.
Additionally, Vietnam’s stock exchange is accelerating the implementation of the new KRX trading system – expected by December 2023 – for facilitating the deployment of new products, facilitating even greater trading levels, faster settlement and enabling the eventual removal of ‘pre-funding’ of stock trading accounts. This is seen by many as one of the key steps for Vietnam getting its own upgrade from frontier to emerging market status and ever so sought after place in the MSCI EM Index.
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VNH : Momentum continues for VietNam Holding