VinaCapital Vietnam Opportunity Fund (VOF) announced its annual results for the period ended June 30, 2023. NAV total return in USD terms was -0.4% and the share price total return was -3.1%. While the VN Index is not a benchmark for the company, it serves as a useful comparison. Over the same 12-month period, the VN Index declined by 6.1%. The adviser notes that the NAV has outperformed the index over the year under review and the five-year period by 5.7 % points and 21.9% points respectively.
Discussing the results, the adviser noted that since VOF touched a high point at the end of February 2022, the Vietnamese equity market has been adversely affected by conditions in the global economy and international capital markets. In the second half of 2022, the negative sentiment was exacerbated by a crackdown by the Vietnamese government on corruption and poor business practices, particularly in the real estate sector.
Commenting on the outlook, chairman Huw Evans noted:
“The world is going through a difficult period as governments and central banks strive to control inflation. In setting interest rates, central banks continue to wrestle with the dilemma that higher rates may help to control inflation but at the same time reduce growth. Having increased interest rates significantly to protect the currency, the Vietnamese central bank has now reduced rates decisively to reduce the pressures in the real estate sector and help stimulate growth in domestic consumption.
“The real estate sector in Vietnam has liquidity problems and, as one of the largest sectors in the company’s portfolio, these continue to be of concern. However, we do expect the situation to improve over time as there is a shortage of supply and pent-up demand, particularly for apartments in the major cities. Elsewhere, there is evidence that manufacturers are beginning to receive increased orders and foreign direct investment remains strong. After slower growth in 2023, there are reasons to be optimistic that GDP growth in Vietnam will return to historic levels next year.
“While during 2023 the equity market has recovered some of the ground lost in 2022, listed Vietnamese equities are still trading at a low valuation compared with regional peers and their own past levels. With the usual caveat that returns are likely to be volatile and buffeted by extraneous events, combining the low valuation with continued economic growth gives cause for optimism for Vietnamese equities. It is hoped that the recent elevation of the relationship between Vietnam and the United States to a comprehensive strategic partnership will yield significant economic benefits over time.
“As the company looks to the future, the board believes that Vietnam will continue to offer interesting and rewarding investment opportunities for patient, long-term investors and, particularly in light of this year’s discontinuation vote, we thank you for your continued support.”
Outperformance in difficult year for VOF