Fund profile – listed Vietnamese equities with strong ESG focus

Further information on VNH can be found at the company’s website: www.vietnamholding.com

VNH is a closed-end fund, domiciled in Guernsey, that aims to provide investors with long-term capital appreciation by investing in a concentrated portfolio of high-growth companies in Vietnam that demonstrate strong environmental, social, and corporate governance (ESG) awareness.

VNH invests predominantly in publicly-traded companies in Vietnam, but it may also – subject to certain restrictions – invest in foreign companies if a majority of their assets and/or operations are based in Vietnam (up to a maximum of 25% of its net assets). It can invest in equity-like securities, such as convertible bonds, and may also hold private companies (up to a maximum of 20% of its net assets). More information on Dynam Capital, VNH’s investment manager, is provided on pages 24 and 25, while further information on the manager’s ESG-orientated investment process, including investment restrictions, is provided on pages 8 to 11.

VNH does not have a formal benchmark. However, for the purposes of performance evaluation, the manager has traditionally included comparisons against the VN All-Share, the VN 30 Index and the MSCI Emerging Markets Index in its literature. We have used these as well as the MSCI Vietnam Index in this report.

Market outlook and valuations update

Recent history and valuations

As is illustrated in Figure 1, global equities have surged ahead during the last three years, largely on the back of a small number of large-cap tech stocks that have ridden the boom in interest in AI, while Asian markets, including Vietnam, have lagged significantly. Trump’s “Liberation day” tariffs have impacted global markets, including Asia and Vietnam, making all three cheaper than they have been recently, despite the recovery since the announcement of the tariff pause. Vietnamese and Asian equities continue to be cheap versus broader global markets and are modestly cheap versus their own history, as illustrated in Figure 3 below.

Figure 3: Forward 12m P/E ratio stats as at 28 April 2025

Vietnamese growth drivers remain in place

We have discussed in depth Vietnam’s long-term growth drivers in our previous notes, and we would recommend readers see these for more details (see page 28 of this note). However, to recap: the themes of strong GDP per capita catch-up potential (with Vietnam’s GDP per capita well below the average of its ASEAN peer group and significantly below world and developed market averages) – aided by factors such as a favourable demographic profile, natural resource wealth, and strong agricultural and traditionally strong tourism sectors – remain intact.

Emerging market status remains a medium-term prospect

Vietnam continues to be the largest frontier market by some margin. With an equity market capitalisation in the region of US$300bn, around 1,800 companies listed and daily turnover in the range of US$1-1.5bn, it dwarfs the next largest, Romania, whose market cap comes in at around $80bn, with circa 370 listed companies and daily turnover in the US$10-20m range. It is not surprising that for many observers, Vietnam remains on their watch lists for an emerging market upgrade.

There are still some hurdles to be overcome – foreign ownership limits in its equity market remain the biggest obstacle – but there remains the medium-term prospect that Vietnam could be upgraded from frontier market to emerging market status. FTSE-Russell is evaluating a decision currently, with an announcement expected later this year. If Vietnam were upgraded to emerging market status, this would almost certainly generate a lot of interest in its equity market and lead to buying from index funds focused on the region.

Manager’s view – Vietnam, one of the most compelling backdrops

VNH’s manager continues to view Vietnam’s macroeconomic backdrop as one of the most compelling across emerging and frontier markets, citing the country’s continued high growth prospects (a major focus for the government which has set very ambitious targets), low inflation, low debt levels and strong FDI flows. It acknowledges that there is short term pain around rationalising the government (see below), and the market has faced short-term headwinds from foreign investor outflows but says that the country’s longer-term growth trajectory remains firmly on track, bolstered by pragmatic government reforms, a supportive energy transition strategy, and a favourable demographic and geopolitical position.

Figure 4: Vietnam FDI (US$bn)

Source: World Bank

VNH’s manager expects to see GDP growth gathering pace and has repositioned the portfolio to increase to areas such as banking and retail that it expects to benefit from this, which has been funded by trimming exposure to areas such as ports where the near-term growth prospects are less strong.

Trump and tariffs

Global markets remain unsettled, and Vietnam is no exception. Investors have been bracing themselves for the return of Trump-era tariffs, which were announced on 2 April. Previously, as a member of the WTO, Vietnam has benefited from most-favoured-nation (MFN) tariffs, with the average MFN being 2-3% on non-agricultural goods and 4-5% on agricultural goods. Many products from Vietnam entered duty-free, particularly electronics, footwear and apparel (though some textile categories had higher tariffs, for example 12%-20%) and furniture and machinery. Unlike China, Vietnam was not subject to Section 301 tariffs (punitive tariffs used in trade disputes) and there were no Trump-era-style tariff hikes imposed on Vietnam during Trump’s first presidency.

However, when details of the new tariff regime were originally announced on “Liberation day” on 2 April, Vietnam found that its goods entering the US would be subject to a 46% tariff, while goods from China, Vietnam’s largest trading partner, would be subject to a 54% tariff. While the announcement impacted global markets heavily, the level that was to be applied to Vietnamese goods was a particular surprise and sent shockwaves through the country’s manufacturing and export sectors. The Vietnamese government had already done lots of work in preparation for these, for example, by encouraging US investment in the country and looking at Starlink, and it wasn’t expecting Vietnam to be hit so severely.

VNH’s manager says that, despite the recent decision being particularly tough for Vietnam in the short term, the country is well-positioned to negotiate with the US and play a constructive role in the long-term game. It believes that years of government efforts to enhance the competitiveness of domestic private sectors, improve public sector efficiency, strengthen the domestic consumption market, and accelerate infrastructure development – aimed at creating new growth engines and rebalancing with the FDI sector – will soon bear fruit.

The manager also thinks that external pressures, such as the reciprocal tariff plan proposed by the US government, are likely to accelerate this transformation process. It adds that, while it is difficult to draw any concrete conclusions before 9 April, Vietnam – known as a capable negotiator, as even President Trump acknowledged – is expected to demonstrate its willingness to cooperate with the US on multiple fronts, including the trade deficit and the “China+1” strategy.

VNH’s manager comments that Vietnam’s exports to the US would not be as high as they are today if Trump had not targeted China so heavily in his first term – Vietnam’s exports to the US have grown significantly in the last five years – and that Vietnam is still an important strategic partner to the US in Asia, helping to balance the growing influence of China.

VNH’s manager acknowledges that US tariffs on Chinese products will clearly have an impact on Vietnam’s export to the US, but it believes that Vietnam’s growing competitive advantages have helped support its export growth over the last five years, not only to the US, but also to most other export markets. Short-term pains are inevitable, but the manager believes that viable solutions are within reach.

Structural overhaul to reduce bureaucracy and boost GDP growth

Vietnam’s government has embarked on a wide-reaching restructuring of the state apparatus, aimed at reducing bureaucracy and enhancing efficiency. This includes cutting the number of ministries, halving the number of provinces, and shifting more power to local authorities to accelerate decision-making and boost infrastructure development.

VNH’s manager views this as a classic case of short-term pain for long-term gain. There will be disruption in the near term, but the reforms should streamline government operations, reduce duplication, and better allocate state capital – all of which should support the country’s goal of lifting GDP growth beyond the current 8% target for 2025 (already one of the fastest globally) toward a more ambitious 10%+ trajectory. VNH’s manager comments that the country was comfortably on track to achieve this in the first quarter of the year, prior to the announcement of Trump’s “Liberation day” tariffs – manufacturing was recovering, the PMI was greater than 50, the government was also slashing bureaucracy and targeting significant infrastructure investment, and domestic consumption was recovering strongly supported by tourism from Korea, China, Japan and even Russia.

VNH’s manager says that even the 10% tariff will have an impact on Vietnam and the global economy more generally, whether through the direct impacts of tariffs or the indirect effects of slowing GDP growth and currency effects. It notes that there is already some boycotting of US goods in response, which could boost intra-Asia trade. Regardless, VNH’s manager says the Vietnamese government is determined, sincere and proactive in its response to tariffs, adding that it was not retaliatory and immediately offered to reduce tariffs on some US goods, dropping many to zero, to help boost trade. The Vietnamese government is also sticking to its 8% GDP growth target for 2025, despite the advent of the tariffs.

VNH’s manager thinks that the Vietnamese government will use the 90-day pause wisely to increase imports from the US – for example LNG; reduce tariffs and non-tariff barriers to trade on US goods entering Vietnam; and ensuring that goods that pass-through Vietnam benefit from legitimate value-add rather than just being repackaged. It adds that Vietnam has a relatively open economy – it now has 17 FTAs in place and is looking to secure more – and, while it will need to monitor these closely, Vietnam wants to increase bilateral trade with the US and get the proposed 46% tariff level down. In the meantime, with a 10% tariff across the board with the exception of China, the playing field remains level and there is no advantage in shifting manufacturing away from Vietnam.

Importantly, government debt remains low, providing ample room for fiscal stimulus, particularly in infrastructure and energy, both of which are central to Vietnam’s growth strategy.

Powering the future: LNG and PDP8

Energy policy is central to any government’s growth ambitions and Vietnam’s Power Development Plan 8 (PDP8 – which we have discussed in previous notes) is evolving to reflect shifting priorities. Specifically, the manager expects the next iteration will allow a greater role for LNG. As noted above, this shift is partly in response to political signals from the US, but also reflects the practical need to diversify away from coal, which still accounts for around 50% of Vietnam’s energy mix.

Vin Group’s gas plant is seen as a template for future projects and with private capital expected to play a greater part. A recent decree has opened the door for more private sector participation, and whilst legal and regulatory complexities remain, the direction of travel is clear: Vietnam wants a more diverse, cleaner, and more liberalised energy sector.

Vietnam – potential winner from US-China trade tensions

China’s slowdown cast a shadow across Asia, but Vietnam remained relatively resilient. China’s recently introduced stimulus measures appear to be bearing fruit, which could benefit Vietnam, but tariffs could derail this. Vietnam has become increasingly integrated into global supply chains, and while some exposure to China remains – particularly as a trading partner – Vietnam also has strong export links to Japan, Korea, and the US, helping to spread the risk.

Vietnam can still deliver GDP growth in the 5–7% range even in a worst-case scenario

If US-China trade tensions intensify VNH’s manager believes that Vietnam could emerge as a relative winner, especially if tariffs apply uniformly across Asia – as a low-cost manufacturing base, Vietnam remains attractive for global companies seeking to diversify away from China. Even in a worst-case scenario, VNH’s manager believes that Vietnam can still deliver GDP growth in the 5–7% range, thanks to domestic demand, investment, and trade diversification.

Investment process

Dynam Capital is searching for high-growth, compounding businesses that it can hold for the long-term.

In managing VNH’s portfolio, Dynam Capital (dynamcapital.com) is looking for high-growth, compounding businesses that it can hold for the long term. This can be summarised as growth at an attractive valuation. Dynam manages its portfolios using a mixture of top-down and bottom-up investment strategies. The top-down element of the investment process guides the manager towards the key sectors and sub-sectors on which to focus its attention, with the aim of achieving superior long-term returns. The bottom-up element of the process uses extensive fundamental research to select the best companies in those sectors and sub-sectors.

ESG incorporated into all investment and monitoring procedures

ESG research is fully integrated into its investment process.

ESG criteria are central to Dynam’s approach and have been part of its DNA since the beginning. Vu Quang Thinh, Dynam’s CIO, is very well-regarded in this area. He is a founding member and former chairman of the Vietnam Institute of Directors (VIOD). Established in April 2018, VIOD was the first private and independent organisation in Vietnam, aimed at promoting the highest standards and best practices in corporate governance among domestic firms.

Four-stage investment process: internal screening, due diligence, investment decision and investment monitoring

Dynam’s investment universe comprises around 1,500 companies split across three exchanges in Vietnam (the two major exchanges are Ho Chi Minh City and Hanoi), with a combined market capitalisation in the region of US$200bn. The overwhelming majority of these are deemed to be not suitable for investment. Many are too small, and others will not fit Dynam’s ESG criteria.

The initial screening process reduces the investable universe to around 150 companies. Further analysis reduces this to around 70. Dynam then speaks to company management and conducts extensive due diligence. Ultimately, this is narrowed to a portfolio of between 20 and 25 securities that fully reflects Dynam’s philosophy.

Internal screening and due diligence

Dynam regularly screens the Vietnamese market against its investment screening criteria to identify new potential investments. This includes an assessment against the manager’s critical risk table and its initial ESG checklist. Companies that pass this phase undergo a concept discussion at the weekly team meeting. If they pass, they enter the investment pipeline.

Of the 70 or so companies that make it through the initial screening phase and enter Dynam’s investment pipeline, the manager conducts extensive due diligence to assess a company’s suitability for inclusion in Dynam’s portfolios.

In this phase, a company is assessed in detail against Dynam’s investment criteria (see below). The manager conducts site visits, interviews company management, scores the company against its ESG matrix in greater depth, and builds a detailed valuation model. Broker reports and sector reviews feed into this process. Dynam’s investment criteria can be summarised as follows:

• Compounding long-term EPS growth (approximately 20% per annum);

• Attractive valuation with built in safety margin;

• Strong balance sheet and cashflow management;

• Rigorous adherence to ESG principles;

• Industry leader with strong competitive position; and

• Best management teams amongst peers.

The due diligence process is fully documented and conclusions of all of this analysis are pulled together into a draft investment proposal, which is presented to the investment team. The investment team critically appraises the proposal, and it is revised based on their feedback. Assuming that an investment clears this stage, the investment proposal is then finalised.

Investment decision and monitoring

Once an investment proposal has been finalised, it is reviewed by the investment committee at its weekly meeting and, where appropriate, the client. Assuming that an investment receives approval, it is passed to the trading team for execution.

Investment monitoring may lead to company engagement to propose improvements or suggest remedial action.

Dynam operates a process of ongoing investment monitoring. This includes attending analyst meetings, regular company visits, reviewing results and periodically rescoring a company against Dynam’s ESG matrix. Following such an event, an internal update on the company is produced and this is reviewed by the investment committee. Where appropriate, this may lead to company engagement, to propose improvements or suggest remedial action. It may also lead to a divestment proposal, which is also reviewed by the investment committee, before being acted thereon.

Investment restrictions

VNH’s articles of association impose the following investment restrictions, VNH:

• will not invest more than 10% of its NAV (at the time of investment) in the shares of a single investee company;

• will not invest more than 30% of its NAV (at the time of investment) in any one sector;

• will not invest directly in real estate or real estate development projects. However, it may invest in companies that have a large real estate component, if their shares are listed or are traded on the OTC Market;

• will not invest in any closed-ended investment fund unless the price of such investment fund is at a discount of at least 10% to its NAV (at the time of investment);

• may invest up to 25% of its NAV (at the time of investment) in companies with shares traded outside of Vietnam, if a majority of their assets and/or operations are based in Vietnam;

• may invest up to a maximum of 20% of its NAV (at the time of investment) in direct private equity investments;

• may invest up to 20% of its NAV (at the time of investment) in other listed investment funds and holding companies which have the majority of their assets in Vietnam;

• may borrow money, and grant security over its assets, provided that such borrowings do not exceed 25% of the latest available NAV (at the time of the borrowing);

• may also invest in securities that have equity features, such as bonds that are convertible into equity;

• may also invest its available cash in domestic bonds or international bonds issued by Vietnamese entities; and

• may utilise derivatives contracts for both hedging purposes and efficient portfolio management, but it will not utilise derivatives for investment purposes.

Investment restrictions – based on the United Nations Principles for Responsible Investment

VNH is a signatory of the UNPRI.

• VNH is a signatory of the United Nations Principles for Responsible Investment (UNPRI). This imposes a number of ESG-related restrictions. As a signatory, it will not invest in companies:

• known to be significantly involved in the manufacturing or trading of distilled alcoholic beverages, tobacco, armaments or in casino operations or other gambling business;

• known to be subject to material violations of Vietnamese laws on labour and employment, including child labour regulations or racial or gender discriminations; or

• that do not commit to reducing, in a measurable way, pollution and environmental problems caused by their business activities.

Asset allocation

Concentrated and low turnover portfolio of Vietnamese stocks

As at 31 March 2025, VNH’s portfolio had exposure to 23 securities, a net decrease of one from the 24 securities that it held at the end May 2024 (the most recently available information when we last published on VNH). As we have previously discussed, VNH’s portfolio is highly concentrated: it typically has exposure to between 20 and 25 securities (an average position size of between 4% and 5%), but actual position sizes can vary quite markedly (depending on valuation and the manager’s level of conviction).

As illustrated in Figure 10, the top 10 holdings accounted for 65.6% of VNH’s portfolio as at 31 March 2025, which is 1.9 percentage points higher than as at the end of October 2024.

The manager advises that recent portfolio turnover has been higher than the long-term average (typically around 35% per annum) with trading activity centred adjusting the portfolio to reflect the manager’s optimistic outlook for Vietnam’s medium-term economic growth prospects.

The manager increased exposure to banks (this has moved up eight percentage points) and retail (up four percentage points), which has been funded by reductions to energy, industrial goods and services, and construction and materials. The manager has been typically trimming back positions that have performed strongly and look more fully valued versus their near-term growth prospects.

Distinctly different from the index

VNH’s portfolio has a high active share.

As we have highlighted in our previous notes, VNH’s portfolio is distinctly different from the VN All-Share (or any Vietnamese-focused ETF for that matter). VNH’s portfolio has a high active share – typically 75–80% – and it should be noted that the index does not benefit from the manager’s strong focus on ESG considerations.

Banking on the recovery

Vietnam’s banks have been among the standout performers year-to-date, with the sector rallying over 20% and now trading at around 1–1.2x book value – a significant re-rating from levels below book just months ago. The manager has added to Sacombank (see top 10 holdings) now that its multi-year restructuring has completed and has also increased exposure to Techcombank and potentially ACB. VNH’s holding in Vietcombank was reduced on valuation grounds but VNH’s manager still likes the business. VNH’s banking exposure now sits around 35%, which the manager considers close to the upper limit for the portfolio.

Deploying cash to take advantage of opportunities

While VNH is permitted to borrow (up to 25% of its net assets), in practice, it does not have any debt facilities in place and generally maintains a small cash balance that is sufficient to meet its operating requirements. Reflecting valuations and the scale of the opportunities the manager is seeing, VNH continues to maintain a below average cash balance, as illustrated in Figure 9, which shows VNH’s month-end cash balance as a proportion of net assets over the last five years. As we have previously discussed, the cash level is not static and moves as the manager adjusts the portfolio to take advantage of prevailing opportunities. It was recently brought as high as 9% intra-month as part of the manager’s strategy to manage the volatility brought by Trump’s tariffs.

Figure 9: VNH month end net cash levels over five years to 31 March 2025

Source: Vietnam Holding Limited, The AIC, Marten & Co

Top 10 holdings

Figure 10 shows VNH’s top 10 holdings as at 31 March 2025, and how these have changed since 31 May 2024 (the most recently available information when we last published). Six of the top 10 holdings as at 31 March 2025 were constituents of VNH’s top 10 at the end of May 2024, although some of the relative positions have changed. Holdings that have moved up into the top 10 are Sacombank, Phu Nhuan Jewelry, FPT Digital Retail and Sai Gon VRG Investment, while, Gemadept, IDICO, PV Technical Service and Vietcombank have moved out.

VNH’s holding in Vietcombank was reduced on valuation grounds.

As noted above, Vietcombank was reduced on valuation grounds. Gemadept, the port operator, has also reduced. While the business remains well-regarded, it is currently operating at full capacity, with growth contingent on new facilities being brought online and so VNH’s manager has taken profits and redeployed the capital into opportunities that it believes has better medium-term upside.

VNH’s holding in Vietcombank was reduced on valuation grounds.

PV Technical Services (PVS), which previously made up around 6% of the portfolio, has been cut back to around 1%. While the company is expected to deliver decent earnings growth this year, the shift in Vietnam’s energy policy from offshore wind to LNG has clouded the medium-term outlook and so VNH’s manager has taken profits on the position. The position in IDICO was sold down as the manager rotated into Sai Gon VRG Investment (see below), which VNH’s manager believes are very similar companies from an operational perspective but Sai Gon VRG Investment is better position to benefit from significant infrastructure investment in Vietnam.

We discuss some of the more interesting developments in the next few pages. However, readers interested in more detail on these top 10 holdings, or other names in VNH’s portfolio, should see our previous notes (see page 28 of this note).

Figure 10: Top 10 holdings as at 31 March 2025

Sacombank (5.6%) – ready to expand again

Figure 11: Sacombank share price (VND)

Source: Bloomberg

Saigon Thuong Tin Commercial Bank (sacombank.com.vn/en), more commonly known as Sacombank, is one of the top 10 commercial banks in Vietnam and the private bank that VNH’s manager considers to be the most dynamic in the country. Reflecting this, it is a long time VNH holding and one that we have discussed in our previous notes – most recently in our June 2023 note (see page 28). To recap, Sacombank has grown significantly through acquisition, acting as a consolidator in Vietnam’s fragmented banking sector. It has also been key in and addressing NPLs, which previously weighed on the sector, having cleaned up its loan book during the decade.

However, Sacombank experienced problems absorbing its myriad acquisitions which ultimately led to its profitability suffering (earnings where heavily depressed by extensive provisioning) and Sacombank itself ultimately had to undergo a restructuring that took around six years to complete, finishing last year. VNH’s manager considers that, with the restructuring out of the way, the bank is ready to develop and expand again.

The manager notes that the Vietnamese government is also planning to auction off its stake in Sacombank, and believes that, with new owners, Sacombank will be well positioned to grow. It thinks that Sacombank’s earnings could grow by 20% per annum over the next two years. Sacombank is also focused on the retail sector, which continues to boom but, despite this, it was trading below book value when VNH’s manager added to the position. Sacombank is now trading at close to all-time highs and the position has been very profitable YTD for VNH.

Phu Nhuan Jewelry (5.6%) – rebuilt position at attractive valuations

Figure 12: Phu Nhuan Jewelry share price (VND)

Source: Bloomberg

Phu Nhuan Jewelry (www.pnj.com.vn), also referred to as PNJ, is the leading jewellery manufacturer in Vietnam and its operations cover the full value chain. It benefits from a growing middle class in Vietnam – as their income grows, consumers tend to move up the value chain in search of better quality – and, with a product range that covers the mid-end to luxury jewellery segments, PNJ is in a strong position to benefit from this long-term trend. VNH’s manager says that PNJ has been focused on developing its strategy and has been broadening its already-extensive product range by offering products for men and younger generations.

PNJ has long been a significant position within VNH’s portfolio, regularly featuring in its top 10 holdings. We have regularly discussed it in our notes on VNH, most recently in our December 2023 note – see page 16 of that note – where we explained that it had been a significant detractor from performance (its share price had derated heavily in H1 2023, reflecting a deteriorating outlook for consumers. However, the manager added to the position in H2 2023 and VNH benefitted as the share price recovered, with the manager taking profits again as the stock became more fully valued).

PNJ had a difficult 2024 (retail was one of the key performance detractors in 2024) and so VNH’s manager has added to the position again, although the share price retrenched further on the back of PNJ’s Q4 2024 results announced in March. VNH’s manager comments that, while demand for jewellery has been recovering, recent fluctuations in the FX and gold markets have raised concerns among investors that possible tighter control by the government and higher demand for gold bars in the domestic market could lead to higher input prices and a shortage of material inputs for PNJ, which has weighed on its share price further. However, VNH’s manager notes that the long-term fundamentals for the business remain intact and comments that, with PNJ trading on a F12m P/E ratio of 12–14x, it sees the potential for its share price to bounce back strongly.

Figure 13: Sai Gon VRG Inv. share price (VND)

Source: Bloomberg

Sai Gon VRG Investment (4.6%) – replaces holding in IDICO

Vietnam’s real estate market has been buoyant during the last year, with physical property prices rising around 20% but VNH’s managers comment that it can be challenging to find good developers that meet their criteria (for example, some high-profile names such as Novaland remain dogged by legal uncertainties, while governance concerns continue to weigh on giants such as Vinhomes). VNH’s manager has therefore remained cautious on these more exposed areas but is happy to continue to lean into industrial parks.

After a profitable exit from IDICO (idico.com.vn – which we highlighted as a new holding in our June 2024 note), VNH’s manager rotated the proceeds into Sai Gon VRG Investment (SIP) – commonly referred to as SIP – which it says has the same strong infrastructure-led growth potential but in an overall more attractive package.

VNH’s manager says that SIP shares several operational strengths with IDICO – including power and water provision that accounts for roughly 40% of net profit – but trades at a more attractive valuation – and, importantly, it also comes with a compelling long-term asset: a landbank of more than 1,000 hectares, viewed by the manager as one of the best in the sector.

Figure 14: IDICO share price (VND)

Source: Bloomberg

The development of Ring Road 3 (a major infrastructure project encircling Ho Chi Minh City) and the Moc Bai Expressway (a huge strategic link in Vietnam’s trade ambitions that will connect Vietnam’s commercial capital with the Cambodian border at Moc Bai, streamlining logistics between Ho Chi Minh City and Phnom Penh) continue and Sai Gon VRG has strong exposure to industrial park sites along the route. It is expected that these locations should see significant demand from tenants as these major infrastructure developments proceed and cross-border access improves, unlocking considerable latent value in Sai Gon VRG’s portfolio.

FPT Digital Retail (4.3%) – the dominant player in Vietnamese pharmacy retail

FPT Digital Retail (frt.vn/en), commonly referred to as FRT is the retail arm of the FPT Group (also a VNH holding). We spoke about FRT in detail in our June 2024 note (see pages 12 and 13 of that note) where we explained that, in addition to being the second-largest retailer of information and communication technology products in Vietnam (after Mobile World – also a VNH holding) FRT owns a pharmacy retail chain – Long Châu Pharmacy – in which it has invested and grown very quickly so that, by the end of 2023, it was Vietnam’s largest pharmaceutical retail chain.

Figure 15: FPT Digital Retail share price (VND)

Source: Bloomberg

Since that time, Long Châu has continued to grow and now has over 2,000 stores, offering a variety of prescription and non-prescription drugs, supplements, medical equipment, functional foods, and cosmetics (it has over 20,000 SKUs – significantly more than its competitors). VNH’s manager maintains that Long Châu has a very disciplined approach to opening new stores, which it can do faster than its competitors. This is important, as pharmacy retail is still a very fragmented market in Vietnam.

The Vietnamese pharmacy retail market that is now estimated to be worth some US$8-10bn annually. Long Châu continues to consolidate this space and take market share and, with revenues of c.US$1bn, it has around 10% of the market and growing. It now has a commanding lead over the next largest player, Pharmacity, which VNH’s manager comments is loss-making and struggling with a suboptimal store footprint. Long Châu, in comparison, has a very long runway for growth, and benefits from the support of its parent, FPT Group, which can provide logistics and infrastructure. In addition to the existing opportunity in pharmacy retail, FRT plans to expand into providing vaccinations and has aspirations to operate clinics and even hospitals.

Performance

The chart in Figure 16 illustrates VNH’s NAV total return performance relative to both the VN-All Share and VN-30 during the last five years and, as we have highlighted in our previous notes, a striking feature of this chart is the strong outperformance of the local indices by VNH’s NAV during this period, particularly in the years following the COVID-related market collapse of March 2020, which is echoed in the performance table in Figure 17. However, over the last nine months this previous trend of strong outperformance has given way to a period of mild underperformance of VNH’s NAV versus the major Vietnamese equity indices (since the beginning of July 2024).

As we have discussed on our previous notes, higher-than-expected inflation in the US that has drawn out the process of cutting interest rates is likely a contributory factor. This has been exacerbated by the trade policies of the new administration in the US, which are widely expected to be inflationary in addition to creating a lot of uncertainty and associated market volatility.

Figure 16: VNH’s NAV performance relative to the VN All-Share and VN 30 Indices – rebased to 100 over five years to 31 March 2025

Source: Morningstar, Marten & Co

Figure 17: Cumulative total return performance over periods ending 31 March 2025

With financials, VNH’s select banking holdings delivered strong returns as investor confidence returned to the sector. Credit growth resumed and banks achieved 15–20% EPS growth in 2024, with similar growth forecasts for 2025. Valuations remain reasonable, trading at around 1x price-to-book, offering further upside potential should earnings momentum continue.

However, more recently, despite their being lots of private foreign investment in Vietnam (FDI is at record levels – see page 5), foreign investors in listed equities are pulling out of Vietnam and emerging markets more generally, which is weighing on Vietnamese equities as a whole. Where inflows are occurring from foreign investors and ETFs, investors are focusing on large liquid index stocks, which does not tend to be where VNH is invested, as this is not where it generally sees the best opportunities. This has meant that VNH’s performance has lagged in the short term, causing a problem with its relative performance, despite its portfolio companies performing very well at an operational level.

At the same time, VNH’s manager says that, where there are inflows, foreign investors have generally been attracted to cheaper lower quality stocks – the Vincom Group stocks being obvious examples, which VNH does not own, with the sort of higher-quality growth stocks that VNH holds being overlooked.

These effects combined have weighed on VNH’s relative performance during the last nine months, but VNH’s manager thinks this is a short-term phenomenon. One additional observation is that, with foreign investors retrenching, domestic investors have grown in importance – there are around 10m share trading accounts in Vietnam now and domestic retail investors make up around 90% of daily trading – but VNH’s manager observes that these types of investors tend to chase short-term ideas rather than the sort of long-term ideas that professional managers are focused on. This has not helped VNH’s near-term relative performance, but creates the potential for longer-term opportunities.

Interim results for the six months ended 31 December 2024

VNH’s portfolio’s technology exposure, aided by its by largest holding FPT Corporation, was a standout performer, delivering a 73% share price gain over the full year. VNH’s consumer holdings also had strong six months, buoyed by a rebound in consumer confidence and the rising purchasing power of Vietnam’s growing middle class.

FPT Digital Retail (FRT), which we discussed on page 15 (it holds a leading position in Vietnam’s fast-growing pharmaceutical retail market), saw its share price rise more than 70%. Meanwhile, Mobile World Investment Corp (MWG) – VNH’s second-largest position at 8% of NAV – reported a robust earnings recovery as store-level performance improved across its electronics and grocery segments.

Industrials, particularly businesses exposed to logistics and infrastructure, also contributed meaningfully to returns. Vietnam’s infrastructure push has supported construction materials, logistics services, and other infrastructure-linked companies VNH holds. VNH’s manager believes these businesses are positioned to benefit from the government’s efforts to reduce development delays and improve connectivity across the country.

Peer group

Please click here for an up-to-date peer group comparison of VNH versus its country specialist peers.

VNH is a member of the AIC’s country specialist sector which comprises three funds focused on Vietnam as well as Weiss Korea Opportunity, a fund focused on Korean preference shares, which has put forward proposals for a managed wind-down. Consistent with our previous notes, our peer group analysis takes a more comprehensive approach where we compare VNH against both a direct peer group that focuses on the three pure Vietnam funds, as well as a broader comparison that includes other single country funds from the wider Asia Pacific region. These were all previously peers of VNH when it was part of the country specialist: Asia Pacific-ex Japan sector that was discontinued at the end of March 2021. All members of both the extended and narrower peer groups were members of these groups when we last published.

Figure 18: Peer group cumulative NAV total return performance to 31 March 2025

As illustrated in Figure 18, VNH is the top performing fund over the longer-term three- and five-year periods in the direct peer group of pure Vietnamese funds, although it is clear that it has lagged for the periods up until one year. Interestingly, VNH has outperformed VEIL, which is also focused on listed equities, over the longer-term three- and five-year periods, and has also outperform VOF over five years. VNH also ranks as one of the top-performing funds in the wider peer group over the five- and 10-year periods.

A comparison of the narrower and wider peer group averages illustrates why investors may wish to consider having a direct exposure to Vietnam. The average returns from the narrower group of Vietnamese funds exceed that of the broader peer group for the longer-term five- and 10-year periods.

Looking at Figure 19, a similar pattern is seen in VNH’s share price total return performance against both its wider and direct peer group, although VNH’s absolute returns are higher in share price total returns terms, reflecting the benefits of the recent discount narrowing that has occurred largely in response to the introduction of the redemption opportunity (see page 21).

Figure 19: Peer group cumulative share price total return performance to 31 March 2025

Looking at Figure 20, the volatility of VNH’s NAV returns is middle of the range for its Vietnam-focused peers, although, of the wider peer group, it remains one of the widest. At 2.97%, VNH has the highest ongoing charges ratio, both for the wider peer group and for the three Vietnamese-focused funds, although it is down 10bp from the 3.07% figure when we last published. The higher-than-average ongoing charges ratio largely reflects its relatively small size. It is notable that while VNH’s ongoing charges ratio is 101bp higher than VEIL’s, VEIL is a significantly larger fund (VEIL’s market cap is 12.3x that of VNH) and VNH’s higher running costs seem to be more than compensated for by its superior performance (which is after fees and expenses). Like the majority of the funds in the wider peer group, VNH does not charge a performance fee. Of its direct peers, VOF charges a performance fee, while VEIL does not.

Figure 20: Peer group comparison – size, fees, discount, yield and gearing as at 28 April 2025

Like many funds in the sector, VNH does not pay a yield reflecting both its capital growth focus and the underlying market in which it invests. In terms of gearing, whilst VNH is permitted to borrow, the managers have chosen not to and, instead, maintain a modest cash balance that is sufficient to meet its ongoing cash needs. As we have previously observed, all of the Vietnam-focused funds tend to run with a net cash position to some degree. VNH’s level of net cash was modestly below its long-term average at the end of March 2025, although it was still higher than those of any of its direct peers and the second-highest within the wider peer group.

No dividend – capital growth-focused

VNH is not required to pay a dividend and has not paid one since launch.

VNH does not have a formal dividend policy and has not paid a dividend since its launch. As a Guernsey-domiciled investment company, there is no requirement to pay out a minimum of 85% of its net revenue income that would apply if it was a UK-domiciled investment trust. During the year ended 30 June 2024, VNH earned dividend income of US$2.95m (2023: US$1.68m), which is equivalent to USc10.77 per share (2023: USc5.87 per share). However, for the first half of the current financial year, VNH’s dividend income fell 29.7% year-on-year from US$1.26m for the six months ended 31 December 2023 to US$887k for the first half of the current financial year.

During the last financial year, VNH’s manager increased the portfolio’s exposure to a small number of positions that provide a relatively high level of dividend income (such as IDICO, Saigon Cargo Services, Gemadept and Sai Gon VRG Investment). However, it subsequently reduced exposure to some of these positions in the first half of the current financial year to take profits (IDICO, Saigon Cargo Services and Gemadept). VNH’s manager comments that it was not a deliberate move to increase and then decrease stocks that pay high levels of dividends, but, instead, the moves reflected its shifting views of where the best opportunities were to be found.

Premium/(discount)

Redemption facility – successfully narrowed VNH’s discount

VNH is trading on tighter discounts since the redemption opportunity was introduced

As illustrated in Figure 21, VNH has been trading at materially tighter discounts (and briefly at a premium) following the announcement of proposals for an annual redemption facility (these were discussed in detail on page 23 onwards in our December 2023 annual overview note – see page 28 of this note).

In the previous couple of years, VNH typically traded in a discount range of 10-18% with a five-year average discount of 16.6%. In the 16-month period that has followed the announcement of the redemption facility proposals, VNH’s discount has averaged 4.3% and it has typically traded between par and an 8% discount.

Figure 21 highlights a number of events that have influenced VNH’s discount in recent years and more discussion of these is provided in our previous notes on VNH (see page 28). However, VNH’s discount still exhibits some sentiment related volatility, with the most recent example being the significant widening that has occurred following the announcement of Trump’s “Liberation day” tariffs, which creates additional opportunities for patient investors, although the long-term driver of returns for shareholders should still be the strong growth opportunities available in Vietnam.

As at 28 April 2025, VNH was trading at a discount of 9.8%, which is 7.9 percentage points wider than its average since the redemption opportunity was announced. VNH’s one-, three- and five-year average are 4.0%, 9.8% and 13.0% respectively.

We continue to think that, given the extent of the Vietnamese growth story, VNH’s long-term performance record, the additional certainty offered by the redemption opportunity, and increased uncertainty about the outlook in the West, particularly in the US, VNH could see more demand for its offering and we believe there is good potential for the discount to tighten further and for it to trade at a premium and begin to regularly issue stock. However, we would still caution that we expect VNH’s discount to continue to be sensitive to factors such as inflation numbers in the West, the outlook for China, and the general performance of Vietnamese companies.

Figure 21: VNH premium/(discount) over five years

Source: Morningstar, Marten & Co

Fees and costs

Tiered management fee structure with no performance fee

Tiered base management fee starting at 1.75% of net assets per annum and reducing.

Dynam Capital is entitled to receive a basic management fee of:

• 1.75% per annum of net assets up to US$300m;

• 1.50% per annum for net asset in excess of US$300m up to US$600m; and

• 1% of net assets in excess US$600m.

Figure 22: Ongoing charges ratio (%)¹

Source: Vietnam Holding Limited. Note: 1) For financial years ended 30 June.

The management fee is paid monthly in arrears, and the management agreement can be terminated on six months’ notice by either side. There is no performance fee element. The ongoing charges ratio for the year ended 30 June 2023 was 2.97% (2023: 3.07%), which, while it still looks high relative to peers and the typical investment company, shows a reversal in the growth trend witnessed in recent years.

Part of the reason for the rise in the ongoing charges ratio has been the shrinkage in AUM that has resulted from the regular tender offers that VNH has provided its shareholders with, along with repurchases that the board has authorised to try and address supply and demand imbalances. The result was that VNH had to spread its fixed costs over a smaller asset base, which put upward pressure on the ongoing charges ratio.

However, as we said in our December 2023 note, if the redemption opportunity succeeds in narrowing the discount, and the company is able to expand, the ongoing charges ratio should fall to a more acceptable level. With VNH recently being in a position to issue stock, there are signs that this is now coming through.

Fund administration and company secretarial services

Sanne Group (Guernsey) Limited is VNH’s administrator and company secretary. The administrator receives a fee of 0.08% per annum for of net assets up to US$100m and 0.07% per annum for net assets in excess of this, subject to a minimum fee of US$140k per annum. The administration fees are accrued monthly and are payable quarterly in advance. VNH has also entered into a separate accounting services agreement with the administrator. The combined administration and accounting fees increased by 6.3% to US$214.2k for the year ended 30 June 2024 (2023: US$201.6k).

Custody and audit fees

Standard Chartered Bank (Singapore) Limited and Standard Chartered Bank (Vietnam) Limited are VNH’s custodian and the sub-custodian, respectively. Custodian fees are charged at 0.08% on the assets under administration (AUA) per annum, subject to a minimum of US$12,000 per annum. Safekeeping of unlisted securities is charged separately at US$12,000 per annum for up to 20 securities (2022: US$12,000).

KPMG Channel Islands Limited is VNH’s auditor and audit fees were up by 7.6% to £66,900 for the year ended 30 June 2024 (2023: £62,200).

Capital structure and life

VNH follows an ungeared strategy.

VNH has a simple capital structure with one class of ordinary share in issue. It is also permitted to borrow up to 25% of its net assets, although, in practice, VNH does not have any debt facilities in place and maintains a small cash balance that is sufficient to meet its operating requirements (3% of net assets as at 31 March 2025). VNH’s ordinary shares have a premium main market listing on the LSE and, as at 28 April 2025, there were 23,505,035 of these with voting rights in issue with 253,104 held in treasury.

Unlimited life; next continuation vote at 2028 AGM

VNH does not have a fixed winding-up date. Shareholders approved a resolution for VNH to continue for a further five years at the 2023 AGM, and the next continuation vote is scheduled for its 2028 AGM.

Financial calendar

VNH’s year end is 30 June. The annual results are usually released in September/October (interims in March) and its AGMs are usually held in October/November of each year. VNH offers an annual redemption facility at 30 September each year.

Major shareholders

The most notable shift since we last looked at VNH’s share register in detail is the reduction in City of London’s holding, which has likely been reduced now that the VNH’s discount is tighter.

Management team

More information on the manager can be found at its website:

www.dynamcapital.com

Since 2017, VNH has been managed by Vietnam specialist Dynam Capital, and prior to that was managed by Vietnam Holding Asset Management (VNHAM).

Dynam is a partner-owned business whose sole focus is asset management in Vietnam. Its investment strategy is based on fundamental research, with a strong focus on companies that have a strong commitment to ESG principles. Vu Quang Thinh and Craig Martin (see biographies below) are both executive directors and founding partners of Dynam. The lead portfolio manager is Nguyen Hoang Thanh (see biography below). He is supported by a portfolio analyst, a data analyst, and a trader.

Vu Quang Thinh (CIO and managing director of Dynam Capital)

Vu Quang Thinh has over 30 years’ business experience, including 15 years in asset management, 12 years in corporate restructuring and seven years in an information technology business. He joined VNHAM in 2011 as CEO and, he was appointed to the board of VNHAM in 2014.

Before joining VNHAM, Thinh served as chief executive officer of a local asset management company. Previously, he was managing partner of MCG Management Consulting, which he founded. Prior to this, he was head of the management consulting practice of KMPG Vietnam where he did extensive restructuring work with several state-owned enterprises.

Thinh holds an MBA from Washington State University and a BS degree in Mathematical Economics from Hanoi National Economic University. He is a Certified Asset Management Practitioner in Vietnam, and is a founding member and former chairman of the Vietnam Institute of Directors (VIOD).

Craig Martin (chairman of Dynam Capital)

Craig Martin has over 27 years’ investment and fund management experience in emerging markets. He has lived and worked in Southeast Asia since 1993. This includes seven years in Cambodia, five years in Vietnam and 13 years in Singapore.

Until early 2018, Craig was co-CEO of CapAsia, a Singapore headquartered private equity fund manager, focusing on investments in Asia’s emerging markets. He joined CapAsia in 2010, and served on the boards of companies in Thailand, Malaysia, Philippines, Vietnam, Singapore, Indonesia, and Pakistan. Prior to CapAsia, Craig was head of private equity for Prudential Vietnam (now Eastspring), and he was previously part of the founding management team at Standard Chartered Private Equity.

Craig has a Master’s degree in Engineering from the University of York and an MBA with Distinction from INSEAD. He is also a member of the Singapore Institute of Directors. Craig is also a non-executive director of several private companies.

Craig has a significant personal investment in VNH.

As at 28 April 2025, Craig has a personal investment in VNH of 73,386 shares, representing 0.31% of VNH’s issued share capital. He added 6,300 shares to his holding during the last financial year (ended 30 June 2024). As a Singaporean National, Craig is able to purchase and hold VNH shares, although the same is not true for other members of the management team, who are Vietnamese nationals, as they are not permitted to own foreign investments. This includes VNH, as it is domiciled in Guernsey.

Nguyen Hoang Thanh (portfolio manager)

Nguyen Hoang Thanh has over 10 years of experience in banking and finance in Vietnam, including eight years in asset management and more than two years in banking. He started his career at LienVietPostBank, as a corporate banking officer, before joining Vietnam Holding Asset Management in 2011 as an analyst (he was promoted to manager in 2014). Thanh then spent one year at Dragon Capital as a senior banking analyst, and in late 2017, he worked at Pavo Capital as a senior investment manager covering IPOs and pre-listing investment opportunities. He holds a Master’s degree from Clark University, Massachusetts, and a BA in Finance from Can Tho University, Vietnam. He is also a CFA charterholder.

Board

VNH’s board has an average length of service of 5.9 years.

VNH’s board comprises four directors, all of whom are non-executive and considered to be independent of the investment manager, down from five when we last published. In this time, the board has had a mild refresh, with Sean Hurst and Damien Pierron stepping down following VNH’s AGM in December 2023, and Connie Hoang Mi Vu joining in March 2024.

Other than VNH’s board, its directors do not have any other shared directorships. Board policy is that all of VNH’s board members retire and offer themselves for re-election annually. VNH has adopted a formal policy that neither the chairman nor any other director shall serve for more than nine years. Although Sean Hurst and Damien Pierron – who joined the board in 2017 when the board underwent a wholesale change to address a number of corporate governance issues in relation to the outgoing board and manager – have now departed, we expect that Hiroshi Funaki and Philip Scales, who joined the board at the same time, will look to step down from the board within the next three years (see pages 4 and 5 of our initiation note for more in-depth discussion of the changes undergone in 2017). VNH’s board will therefore need to give further thought to succession planning in the next couple of years, in our view. However, VNH’s average length of service at 5.6 years is still a very comfortable level in our opinion.

Figure 25: Board member – length of service and shareholdings

Directors’ fees

VNH’s articles of incorporation limit the aggregate directors’ fees to a maximum of US$350k per annum. The total directors’ fees for the year ended 30 June 2024 was US$231,079 (2023: 270,901), which is well within the US$350k limit.

Recent share purchase and disposal activity by directors

None of the directors has made any purchases or sales of shares during the last 12 months.

Hiroshi Funaki (chairman)

Hiroshi Funaki has been actively involved in raising, researching and trading Vietnam funds for 23 years. Previously, he worked at Edmond de Rothschild Securities (between 2000 and 2015) where he led the Investment Companies team, focusing on Emerging Markets and Alternative Assets. Prior to that, he was head of research at Robert Fleming Securities, also specialising in closed-end funds. He currently acts as a consultant to a number of emerging market investors.

Hiroshi has a BA in Mathematics and Philosophy from Oxford University, and is a UK resident. He became chairman at the conclusion of VNH’s AGM on 8 November 2019, taking over the position from Sean Hurst.

Philip Scales (chairman of the audit and risk committee)

Philip Scales has over 40 years’ experience working in offshore corporate, trust, and third-party administration. For 18 years, he was managing director of Barings Isle of Man (subsequently to become Northern Trust), where he specialised in establishing offshore fund structures, latterly in the closed-ended arena (both listed and unlisted entities). He subsequently co-founded IOMA Fund and Investment Management Limited (now renamed FIM Capital Limited), where he is deputy chairman. Philip is a Fellow of the Institute of Chartered Secretaries and Administrators, and holds a number of directorships of listed companies and collective investment schemes. He is an Isle of Man resident.

Saiko Tajima (director)

Saiko Tajima has over 20 years’ experience in finance, including eight years spent in Asian real estate asset management and structured finance. She has worked for Aozora Bank and group companies of both Lehman Brothers and Capmark, where she focused on financial analysis, monitoring, and reporting to lenders, borrowers, auditors, regulators and rating agencies. Over the last five years, she has invested in and helped develop tech start-ups in Tokyo, Seoul, and Sydney.

Connie Hoang Mi Vu (chair of the ESG committee)

Ms Vu is a partner at Raise Partners, a consultancy that advises clients on ESG strategy.

Connie Vu is a partner at Raise Partners, a consultancy that advises clients on ESG strategy and partnerships and organises the annual Vietnam ESG Investor Conference. She has over 20 years of experience in ESG and international development and is one of Vietnam’s leading experts on human trafficking, modern slavery, and labour migration. Connie is a board member of the Belgium Luxembourg Chamber of Commerce Vietnam and has a BA from University of Michigan and MPA in International Nonprofit Policy & Management from New York University. She has been based in Vietnam since 2006.

Previous publications

Readers interested in further information about VNH may wish to read our previous notes (details are provided in Figure 26 below). You can read the notes by clicking on them in Figure 26 or by visiting our website.

Figure 26: QuotedData’s previously published notes on VNH

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