Monthly Update

RNS Number : 7557D

Vietnam Enterprise Investments Ltd

21 October 2022

 

21 October 2022

Vietnam Enterprise Investments Limited

("VEIL" or "the Company")

Monthly Update

-14.2% NAV Return in September 2022

VEIL is a closed-end fund investing primarily in listed equity in Vietnam, and a FTSE 250 constituent. The Company's NAV performance for September 2022 is set out in this notice.

Fund Performance

· As of 30 September, VEIL's NAV decreased 14.2% over the previous month against a fall of 13.1% for its reference index, the Vietnam Index ("VNI"), both in US dollar terms.

· The Company's NAV per share was US$8.79 as of 30 September (-14.2% for the month and -28.0% YTD) and its total NAV was US$1.8bn.

· In GBP terms, the Company's NAV per share was £7.87 as of 30 September (-10.6% for the month and -12.7% YTD) and its total NAV was £1.6bn.

· VEIL's NAV per share performance in US dollar terms is -9.9% over three months, -23.3% over one year and +23.8% over three years. Over the same time periods, the performance of the Vietnam Index was -7.3%, -18.4% and +15.7%, respectively.

· The Company's share price decreased by 12.6% in September, a fall of 31.5% YTD, and its discount to NAV as of 30 September was 19.2%, compared with 20.7% at the end of August.

· The Company repurchased 884,521 shares in September, to be held in treasury, compared with 349,727 shares repurchased in August. As of 30 September 2022, 3.1% of issued shares have been repurchased since 1 January 2022.

Dien Vu, the Portfolio Manager of VEIL commented:

"VEIL underperformed the VNI by 1.1% as investor sentiment turned back to weakness following an eleven-week high in August, the market fall of 13.1% in September is its biggest monthly drop since March 2020, and average daily turnover declined 15% compared to August. Despite strong macroeconomic numbers being posted, including third quarter GDP growth of 13.7% year-on-year (+8.8% YTD), the Investment Manager is reassessing its earnings outlook for 2022 and 2023 amid rising interest rates and concerns over access to credit, the latter spurred by a limited bank lending quota and a lack of clarity on new regulations relating to corporate bond issuance.

"So far, October has also seen increased volatility in the market following the arrests of the chairwoman and three executives of a large property developer with extensive holdings in central Ho Chi Minh City. In a move that may be related, the State Bank of Vietnam took a local bank into care. Both the developer and the bank are unlisted, and VEIL has never held a position in either company. The arrests grew out of the bond-market intervention which the Government launched in March, whereby it has focused a lens on insider trading, private placements, regulator capacity, and now investor protection. The Investment Manager believes investors will ultimately benefit from the campaign for transparency, institutionalisation and professionalism, by ushering in the next phase of the market's development.

"As the US Dollar Index (DXY) continued to strengthen in September amid the divergence of monetary policies between central banks, in a rare move, the State Bank of Vietnam raised policy rates by 100 basis points to defend the Vietnamese dong and ensure inflation remains low. This caused investors to become more cautious towards banks and property developers - the two biggest sectors on the Ho Chi Minh Stock Exchange ("HOSE") and in VEIL's portfolio - due to concerns about the twin risks of access to credit caused by limited lending quota and profitability being under pressure from higher borrowing costs.

"Thus, banking stocks were hit hardest during September's sell-off, with almost every listed bank on the HOSE suffering double-digit declines. VEIL is overweight in this sector due to its exposure to select banks which the Investment Manager identifies as displaying superior market positioning and fundamentals in a rapidly evolving industry, however in the short-term further challenges may arise as the Investment Manager expects that interest rates will increase again by up to 200 basis points by the end of Q1 2023.

"Overweight allocations to banks, materials and the retail sector have all contributed toward the Company's short-term underperformance of the Vietnam Index and erased VEIL's small YTD benchmark outperformance going into September. The general sell-off saw retail stocks underperforming despite strong sales numbers being posted for both the economy and VEIL's core retail holdings. The Investment Manager sees their share prices as a sign of general investor sentiment rather than a fair valuation of their fundamentals.

"With concerns of a global recession weighing down investor confidence, positive domestic economic indicators and market fundamentals in Vietnam may continue to be overlooked in place of risk-aversion from both local and international investors. When Moody's upgraded Vietnam to Ba2 (two notches below investment grade) in September, changing the outlook from stable to positive, they cited Vietnam's growing economic strengths and greater resilience to external macroeconomic shocks. While volatility can be expected in Vietnam's capital markets, the Investment Manager fully expects Vietnam's overall macro outlook to remain sound."

Economic Overview

· September's CPI rose 3.9% year-on-year from 2.9% in August. Of the 11 major categories in the CPI basket, education rose the most at 5.8% month-on-month but declining domestic petrol prices at -6.0% month-on-month helped keep inflation low.

· The Vietnamese dong depreciated 1.7% against the USD in September and has reached -4.3% YTD as of 30 September. The Vietnamese dong appreciated 2.8% against the pound sterling in September and its total appreciation was 13.8% YTD as of 30 September.

· GDP growth in Q3 2022 reached a record high of 13.7% year-on-year, largely due to a low base following lockdowns in Q3 2021.

· GDP growth is 8.8% YTD, the highest in over a decade. The service sector led the way, expanding 18.9% year-on-year in Q3 2022 and 10.6% year-to-date and contributing 54.2% to overall so far in 2022.

· The industry and construction sector grew 12.9% in Q3 2022 and 9.4% year-to-date, contributing 41.8% overall to GDP growth for the first nine months of 2022.

· Vietnam recorded a YTD trade surplus of US$6.8bn at end of September following a surplus of US$1.4bn for the month. Exports and imports YTD have amounted to US$282.3bn and US$375.6bn, respectively.

· While monthly exports and imports grew 9.9% and 4.9% year-on-year, both experienced monthly declines of 14.6% and 8.6%, respectively.

· Disbursed FDI was US$2.6bn in September, with the total year-to-date figure reaching US$15.4bn (+16.2% year-on-year) to the end of September.

· The Vietnam Purchasing Manager's Index registered at 52.5 in September, a twelfth consecutive monthly expansion. The report by S&P Global noted that new orders keep rising, driving higher output and employment, although growth in new orders slowed slightly due to weakened export demand.

· State revenue totalled US$56bn (+22.0%) and expenditure US$45.8bn (+5.4%) YTD, respectively. The State budget has a YTD fiscal surplus of US$10.2bn, five times higher than the US$2bn at the same stage of 2021

Top Ten Holdings (64.1% of NAV)

	Company	Sector	VNI %	NAV %	Monthly Return %	One-year Return %
1	Mobile World Group	Retail	2.1	11.7	-15.0	-3.8
2	Vietnam Prosperity Bank	Banks	1.8	11.4	-16.6	-29.7
3	Asia Commercial Bank	Banks	1.7	10.8	-11.5	-16.1
4	Hoa Phat Group	Materials/Resources	2.8	5.7	-9.4	-49.5
5	FPT Corporation	Software/Services	2.0	4.9	-8.7	1.2
6	PetroVietnam Gas	Energy	4.7	4.2	-7.7	11.2
7	Vinhomes	Real Estate	5.0	4.2	-18.3	-36.5
8	Vietcombank	Banks	7.8	3.9	-14.4	-7.2
9	Dat Xanh Group	Real Estate	0.3	3.8	-24.7	1.4
10	Becamex IDC	Real Estate	2.1	3.5	-3.2	95.2

Source: Bloomberg, Dragon Capital

For further information, please contact:

Vietnam Enterprise Investments Limited

Rachel Hill

Phone: [phone]

Mobile: [phone]

[e-mail]  

Jefferies International Limited

Stuart Klein 

Phone: [phone]

[e-mail]  

Buchanan

Charles Ryland / Henry Wilson / George Beale

Phone: [phone]

[e-mail]

LEI: 213800SYT3T4AGEVW864

 

END

 

 

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