by Jennifer Johnson, Investors Chronicle, September 11, 2024
If the geopolitical chaos of the past five years has taught multinationals anything, it’s that the only stable supply chain is a diversified one. Although China remains the world’s manufacturing superpower, its status among major western companies took a serious knock during the pandemic. Its government’s zero-Covid policy meant factories and logistics operations were at a standstill long after other major economies had loosened their own restrictions..
Vietnam has been a major beneficiary of this shift: foreign direct investment was up 32 per cent last year to nearly $37bn (£28bn). Meanwhile, the country’s export revenues rose 14.5 per cent year on year in the first half to $190bn and industrial production increased by almost 11 per cent. Given these factors, it’s not surprising that Vietnam’s GDP growth is projected to be around 6 per cent this year – a prospect that probably sounds enticing to investors from more static, developed economies.
The simplest way for London’s investors to gain exposure to the country’s growth story is through three specialist investment trusts listed in the country: The Vietnam Opportunity Fund (VOF), Vietnam Holding (VNH) and Vietnam Enterprise Investments (VEIL).
In share price terms, Vietnam Holding is the clear standout in the year to date – with its stock climbing 16 per cent since January. That means it trades on the smallest discount to net asset value (NAV) of the group by quite some distance. And with a market capitalisation of only £102mn, it’s by far the smallest of London’s Vietnam-focused funds. By way of comparison, Vietnam Enterprise has a market cap approaching £1.1bn. Both funds are heavily exposed to the country’s financial services operators: banks make up 27 per cent of Vietnam Holding’s portfolio and Vietnam Enterprise has a 36 per cent weighting towards the sector..
“The Communist Party is still very much in charge, it has realised corruption is an issue and has been clamping down quite aggressively,” explained James Carthew, head of investment companies at QuotedData. “They’ve had two real goes at the property market where they caused a sudden halt in development, and that has undermined confidence among domestic investors.” Recovery hasn’t been rapid, but Vietnam Opportunity’s managers said last month that transaction values and volumes are now rebounding.
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