London-listed Vietnam funds have continued to struggle against the extraordinary market rally led by stocks in the conglomerate Vingroup.
Annual results from Vietnam Holding (VNH) show it made an underlying 4.5% investment return in the year to 30 June, underperforming the 32.4% rise in the Vietnam All Share index. Shares in the £62m investment company returned 4.7% and ended the financial year on a 10.2% discount to net asset value (NAV).
Half-year results from Vietnam Enterprise (VEIL) showed a 3.7% decline in NAV per share in US dollars in the first half of the year with the sterling shares down 4.2% against a 5.2% rise in its Vietnam Index benchmark.
The £888m investment company stood at a 13.3% discount at 30 June, having narrowed the gap to NAV from 21.2% at the start of last year.
Charles Cade, VEIL’s interim chair, said: “The six months under review was a challenging period for active investors in Vietnamese equities due to concerns over the impact of the war in the Middle East on energy prices and global growth, as well as the degree to which the performance of the Vietnam Index was driven by Vingroup and its subsidiary companies.”
“However, the board remains optimistic about the company’s future returns and has continued to take steps to narrow the share price discount to NAV through a programme of tenders and share buybacks.”
VNH chair Hiroshi Funaki said Vietnam’s rally had been “extraordinarily concentrated” with a “substantial portion” of the market’s gains from Vingroup which surged by 356.9% and Vinhomes by 104% during the year. “This momentum was driven by the country’s more than twelve million domestic retail investors, while foreign investors remained net sellers throughout the year,” he said.
Funaki said it was a “disappointing” performance but, having delivered 2.6% compound annual NAV growth in the past five years, VNH’s 20-year-old portfolio traded on 11.9 times forecast 2026 earnings and offered some of the strongest expected earnings growth in the Vietnamese market.
“The board believes that maintaining investment discipline during periods of unusually concentrated markets ultimately serves shareholders better than pursuing short-term momentum,” he said.
Our view
Matthew Read, senior analyst at QuotedData, said: “There is no doubt that, in relative performance terms, this was a painful year for Vietnam Holding. However, the market’s progress was very concentrated, with Vingroup rising 357% and accounting for almost a fifth of the index by the year end. VNH deliberately avoided this company because of concerns around valuation, governance and the complexity of the wider group. Clearly that decision has been costly to relative returns in the short term, but we would prefer to see the managers stick to their investment discipline than changing tack to chase a momentum-driven rally that they do not believe is supported by fundamentals.
“Looking forward, the portfolio looks cheap – around 10 times forecast 2026 earnings versus approximately 13 times for the index – and the backdrop for Vietnam remains encouraging. The country’s upgrade to FTSE Russell Secondary Emerging Market status could also help broaden market leadership as international capital returns and, if that happens, VNH’s focus on profitable, liquid and reasonably valued companies should have a better chance to perform.”
