VinaCapital Vietnam Opportunity (VOF), the second largest of the three London-listed Vietnam funds, hopes a rebound in the past three months will continue after posting disappointing annual results partly weighed down by the turmoil over US tariffs.
The £616m US dollar-based investment company saw net asset value (NAV) fall 4% to $7.13 in the year to 30 June, according to today’s annual report, although with 14.5 cents of dividends included, the total portfolio decline was reduced to 2.2%. Shareholders, however, saw a 5.3% fall in dollar returns as the share price discount, or gap, to NAV widened.
Unfortunately, in sterling terms UK shareholders fared worse. The weakening of the dollar against the pound meant the underlying NAV fell by 9.7%, while the shares dropped 12.7% in response to the widening share price discount that prompted the company to buy back 16.8m shares, or 11% of its capital, at a cost of $96.8m.
The shares currently trade 24% below asset value and over five years have generated a 58.7% total return, behind rivals Vietnam Enterprises (VEIL), up 60.5%, and Vietnam Holdings (VHN), which has shot up 156%.
By comparison, the VN, or Vietnam Ho Chi Minh Stock, index, the country’s main stock market benchmark, returned 9.8% after making a rapid recovery from the tumble in early April when US President Trump threatened swingeing tariffs against Vietnam and many other countries. In its case, these were reduced to a more manageable 20% in July.
Against the advance in the index, the 2.2% dollar decline in the portfolio represented a 12% underperformance.
Chair Huw Evans, who will step down in December after nine years on the board, said VOF had lagged the rebound in the VN index because the benchmark’s recovery was largely driven by its two biggest stocks, which VinaCapital fund managers did not hold believing them over valued.
In addition, there had been a substantial reduction in IN Holdings, the unquoted conference centre and wedding venue operator that has struggled in recent years after recovering from the Covid pandemic.
That setback was partly offset by a significant writeup in the private real estate developer NovaGroup.
Within quoted equities, which make up 83% of the portfolio, the standout performer was house builder Vinhomes. Its shares have doubled in the past year to a $16.1bn valuation on the back of enthusiastic domestic investor buying.
The company accounts for 4.9% of VOF, which holds 20% in real estate alongside 33% in financials, 12% in materials and nearly 11% in consumer discretionary stocks.
Evans, who will be replaced by Kathryn Matthews, former Fidelity Asia Pacific chief investment officer, said the economic growth story in Vietnam remained “exciting and compelling”. VOF had enjoyed a strong start to the new financial year with NAV and share price up 12.4% and 13.3% in dollar terms in the three months to 30 September.
Portfolio manager Khanh Vu, who has become the face of the investment team since the death of chief investment officer Andy Ho last year, said many details of US tariffs had yet to be determined. Nevertheless, he expected their impact would ultimately be “fairly muted”.
He explained: “As long as tariffs on goods made in Vietnam are no more than 10% higher than regional competitors, the advantages that the country has in the quality of its workforce, costs, demographics and location for supply chain and manufacturing should continue to apply.”
A planned 40% increase in government spending on infrastructure combined with the real estate revival should boost consumer confidence, he said. He added that the Communist administration had passed a “landmark” directive in May aiming to emulate South Korea in forging 20 national champions from the private sector in the next 20 years.
The recent decision of index provider FTSE Russell to upgrade Vietnam from frontier to emerging market from next September should encourage further overseas investment, in particular from tracker funds, Vu added.
Our view
Matthew Read, senior analyst at QuotedData, said: “VOF’s annual results capture the short-term turbulence caused by the Trump administration’s April tariff announcements, which initially hit Vietnam harder than expected and triggered a sharp sell-off in local equities. Markets later recovered as negotiations produced a better-than-feared outcome, and that rebound has continued into the current financial year. A weaker US dollar – a policy aim of the new administration – also weighed on reported returns.
“Vietnam’s still largely retail-driven market remains volatile but can turn rapidly when sentiment shifts. While tariffs dented confidence temporarily, they would need to rise much further to undermine Vietnam’s cost and supply-chain advantages, and the country continues to benefit from structural tailwinds – notably higher infrastructure spending and reforms aimed at strengthening the private sector.
“VOF’s emphasis on negotiated positions in leading financial, property and consumer companies provides strong exposure to the recovery, while its active buybacks – 11% of shares repurchased last year – should continue to enhance value for shareholders at current discount levels.”
