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Vietnam’s stocks have captured the interest of global investors in pursuit of unexplored opportunities in the Southeast Asian nation. Experts attribute this optimism to various factors, including the impact of lower interest rates and government support to boost the economy.
Earlier this year, the country’s Vietnam Ho Chi Minh Stock Index (VNIndex) reached its highest level in less than eight months. Additionally, over the past year, the country’s benchmark index performed better than its regional peers, including Indonesia, Malaysia and Thailand. Also, the market cap of Vietnam stocks has risen considerably, and the market has seen substantial diversification over the last decade.
According to FiinPro, a financial data platform, Vietnam stocks have steadily grown, showcasing a CAGR of 16.2% from 2013 to 2022. However, 2023 has not been all smooth sailing.
“In October, the Vietnamese stock market extended its correction, marking the third consecutive month of declines in 2023 after an impressive first half of the year. The VNIndex underwent a notable decrease of 12% in USD terms this month, bringing the year-to-date performance to -1.8%,” says Asia Frontier Capital.
“…heightened geopolitical tensions and concerns among domestic retail investors led to nervous profit-taking and margin calls, contributing to the overall selling pressure,” adds the asset manager.
However, the outlook remains positive. “We believe that Vietnam’s supportive monetary setting will remain in place,” says Le Yen Quynh of Dragon Capital. “Our tracking systems of interbank rates, deposit rates, and corporate bond rates have yet to show signs of any red flags. Therefore, we believe that once Q3 earnings results are released and the global landscape calms, the VNIndex will return to its normalised alpha-driven direction.”
Also, the Vietnamese economy is keeping its recovery momentum with 5.3% year-on-year growth in the third quarter of 2023, mainly driven by the recovery in the manufacturing and service sector. The IMF expects the economy to grow 4.7% this year.
How to invest in Vietnam’s stocks?
With Vietnam’s stocks set to benefit from favourable economic development, we explore three equity funds that present investors with avenues to leverage opportunities within the country.
AFC Vietnam Fund
The AFC Vietnam Fund by Asia Frontier Capital aims to secure capital appreciation for investors by identifying value in undervalued Vietnamese equities, particularly emphasising small to medium-sized enterprises. The fund’s management is entrusted to Thomas Hugger and Andreas Vogelsanger, boasting over 50 years of collective investment expertise.
The fund has total assets under management (AUM) of $64.2 mn as of October 2023. It is benchmarked against the VNIndex. The AFC fund levies a management fee of 1.8% per annum and has a performance fee of 12.5% per annum.
Year-to-date*, the fund has achieved returns of 1.8%. Since its inception in 2013, the AFC fund has grown by 193.74%, outperforming the VNIndex by 120%. The fund has also boasted an annualised return of 11.6% since its establishment.*
The fund’s top five major holdings include the construction materials supplier Lam Dong Minerals and Building Materials (8.4%), garment manufacturing company TNG Investment and Trading (7.9%), stationery product manufacturing company Thien Long Group Corp (7.7%), Military Insurance Corp (7.7%), and the Agriculture Bank Insurance JSC (6.8%).*
In terms of sectors, the fund has the biggest investments in consumer discretionary (34.5%), financials (18.5%), consumer staples (13.1%), materials (11.9%), and utilities (8.9%).*
Dragon Capital – Vietnam Equity Fund
Dragon Capital is a Vietnamese asset manager that has been active in the market for over 25 years. In 2013, the group launched the Vietnam Equity UCITS Fund A share (VEF). VEF aims for medium to long-term capital appreciation by investing in key sectors that drive the country’s economic growth. The performance of the fund is compared against the VNIndex.
The fund has total assets under management (AUM) of $271.35 mn. As of September 30, 2023, the fund had a maximum subscription fee of 5% and a maximum management charge of 2%. All in all, the total expense ratio of the fund is capped at 2.50%.
The Dragon Capital fund recorded an overall year-to-date** growth of 13.77%. Looking at the past five years, the fund has given returns of 17.05%, in contrast to the benchmark’s 18.09% growth. Since its inception, this fund has achieved returns of 183.19%, higher than the benchmark index’s growth of 159.27%.**
VEF’s top five major holdings include IT company FPT Corporation (9.50%), MB Bank (7.14%), Sacombank (6.11%), Phu Nhuan Jewelry (6.01%), and the retail company Mobile World (5.64%).**
Sector-wise, more than 50% of the fund’s allocations are made up of banks (29.6%), retail (14.9%) and real estate (13.4%). Other major holdings are in software/svc’s (9.5%) and energy (7.1%).**
Le Yen Quynh has been the portfolio manager of this fund since 2013.
VinaCapital Vietnam Fund
VinaCapital Vietnam Fund A share, or VVF, invests in public equities of companies that are based in Vietnam to provide long-term sustainable capital appreciation by bottom-up stock picking. Like the rest of the funds mentioned here, the performance of VVF is benchmarked against the VNIndex.
The fund by Vietnamese asset manager VinaCapital has total assets under management of $77.45 mn as of November 13, 2023. VVF has the lowest management fee of all the funds on this list at 1.25%.
In the last five years, the fund has given annualised returns of 7.5%, as compared to 1.7% by the benchmark. Along with that, the fund has risen 15.3% year-to-date, as compared to the 11.3% rise in the VNIndex. Additionally, since its inception in 2015, VVF has generated 10.3% returns, outperforming its benchmark, which grew by 6%.***
The fund’s largest holding is the deep sea freight transportation company Gemadept Corporation (9.8%). This is followed by FPT Corporation (9.6%), Sacombank (9.4%), Vietcombank (6%) and the consumer staples company Quang Ngai Sugar (5%).***
Sector-wise, like VEF, VVF has the highest allocation of funds in banks (34%), followed by industrials (19.5%), consumer staples (13.1%), IT (9.6%) and non-bank financials (6.8%).***
Thu Nguyen is VinaCapital’s Head of Investment.
*As of October 2023
**As of October 31, 2023.
***As of September 30, 2023
