Monthly Update

RNS Number : 9869P

Vietnam Enterprise Investments Ltd

15 February 2023

 

15 February 2023

Vietnam Enterprise Investments Limited

("VEIL" or "the Company")

Monthly Update

VEIL is a London listed investment company investing primarily in listed equities in Vietnam and a FTSE 250 constituent. The Company's NAV performance for January 2023 is set out in this notice.

Company Performance

· As of 31 January, VEIL's NAV increased 10.8% over the previous month against a rise of 11.2% for its reference index, the Vietnam Index ("VNI"), both in US dollar terms.

· The Company's NAV per share was US$8.70 as of 31 January and its total NAV was US$1.8bn.

· VEIL's NAV per share performance in US dollar terms is +15.8% over three months, -28.9% over one year and +33.6% over three years. Over the same time periods, the performance of the VNI was +14.9%,

-26.3% and +23.0%, respectively.

· The share price rose 10.8% in January and has declined 22.1% in the last 12 months, both in US dollar terms

· In GBP terms, the Company's NAV per share was £7.07 as of 31 January (8.3% for the month and -22.5% over 12 months) and its total NAV was £1.5bn. The share price was up 8.2% for the month and down 15.1% over 12 months.

· The share price discount to NAV as of 31 January 10.8%, compared with 10.7% at the end of December 2022.

Dien Vu, the Portfolio Manager of VEIL commented:

"VEIL started the year with a solid 10.8% increase, albeit 0.4% behind its reference index, the VNI. This double-digit gain was despite Vietnam's President resigning from his position midway through the month, just two days before the start of the Tet (Lunar New year) Holiday. This resignation took responsibility for the shortcomings of two deputy prime ministers, which demonstrates in the Investment Manager's view that accountability is being taken at all levels of Government. Furthermore, we observe that obstructions in public infrastructure investment appear to have been cleared, and the tightening of capital markets (including the corporate bond and property markets) has been easing.

"Overall sentiment showed signs of improvement on a more positive domestic and global macro-outlook. Domestically, the easing of monetary policy is a major driver for this renewed positivity as liquidity pours back into the economy. The State Bank of Vietnam ("SBV") set the 2023 credit growth target of 14-15%, and also released Circular 26, amending the Loan-to-Deposit ("LDR") ratio, including State Treasury bank deposits. With US$5-6bn being considered for deposits into SOE banks, the LDR will likely decline by 1-2%, which we believe may incentivise inter-bank lending. The Vietnamese dong was supported by a US$3.6bn trade surplus, inward remittances ahead of the Tet Holiday, and the SBV purchasing around US$3bn whilst injecting a similar amount into the market. As a result of better liquidity, rates cooled down from December by between 25-50bps. 

"The banking sector reported Q4 2022 earnings growth of 22.2% year-on-year, however, internal divergence emerged due to corporate bond exposure, with state banks outperforming both commercial banks and the VNI. Many oversold sectors started rebounding from the historic low valuations seen in late 2022. Notably, the brokerage and construction materials sectors led the way in terms of sector performance. VEIL's largest holding in the materials sector, Hoa Phat Group ("HPG"), gained an impressive 23.7%, with this solid growth coming off the back of the Government's strong and emphatic commitment to deploying a US$30bn infrastructure plan in 2023. Brokerage holdings were also big movers in the Company, rising on the news of loosening monetary policy and improving retail market sentiment, achieving twice the gains in the VNI for the month.

"The consumer and retail sectors lagged the index, specifically Vinamilk (VNM) and Phu Nhuan Jewelry (PNJ), rising 1.3% and 1.0%, respectively. This was due to weak consumption demand in Q4 2022 and lower-than-expected earnings. Both names, however, are market leaders in their sectors with strong fundamentals and high barriers to entry, with mid-long-term prospects remaining positive.

"The fixed income market remained quiet. Roughly US$339m of outstanding bonds were redeemed early, but no new corporate bond issuance was reported in January. The Ministry of Finance has requested new guidance for Decree 65 that will delay its enforcement by roughly one year, giving bond issuers the flexibility to postpone principal payments by up to two years and the option to convert bond equivalent value to assets.

"2023 will not be without its challenges. However, with the improvement of market liquidity and the relaxation of monetary policy, in sync with ramped-up public spending, we are already seeing more measured retail investor sentiment in the market. 2023 may well be a year of selective opportunities where we see greater divergence between quality stocks and those that are struggling in a tighter economic climate. While domestic and global risks still remain, loosening Government policies can minimise their impact. This, encouragingly, could create opportunities in a more navigable domestic macro environment."

Economic Overview

Economic data for January 2023 was distorted due to the week-long Tet (Lunar New Year) Holiday. This caused fewer working days than January 2022, as last year Tet was in February. This should provide a reversal in year-on-year comparisons for the February 2023 data due to a low base effect.

· Vietnam's exports and imports in January fell 21.3% and 28.9% year-on-year to US$25.1bn and US$21.5bn, respectively, leading to a trade surplus of US$3.6bn compared to a surplus of US$1.4bn in January 2022

· The Index for Industrial Production fell 8.0% year-on-year in January, with manufacturing falling 9.1%.

· Disbursed and registered FDI in January dropped 19.8% and 16.5% year-on-year to US$1.4bn and US$1.7bn, respectively.

· Retail sales for goods and services increased 20% year-on-year in January due to higher consumption demand ahead of the Tet Holiday and the relatively low base last year.

· January's CPI rose 0.5% month-on-month and 4.9% year-on-year and can be attributed to rising petrol prices and increased consumption ahead of the Tet Holiday.

· The Vietnamese dong appreciated 0.7% in January against the US dollar, which was partly due to the decline in the DXY (US dollar index) but also supported by the large trade surplus and inward remittances from overseas ahead of the Tet Holiday. The Vietnamese dong depreciated 3.5% in the 12 months to the end of January 2023.

· The Vietnamese dong depreciated 1.1% against the pound sterling in January, and its total appreciation over the 12 months to 31 January 2023 was 5.1%.

Top Ten Holdings (67.5% of NAV)

	Company	Sector	VNI %	NAV %	Monthly Return %	One-year Return %
1	Asia Commercial Bank	Banks	2.0	13.0	19.9	-8.9
2	Vietnam Prosperity Bank	Banks	3.0	12.8	9.5	-23.1
3	Mobile World Group	Retail	1.5	7.7	9.2	-31.7
4	Hoa Phat Group	Materials/Resources	2.9	7.6	23.7	-33.1
5	Vietcombank	Banks	9.8	6.1	15.8	-0.2
6	FPT Corporation	Software/Services	2.1	4.6	9.4	10.5
7	Becamex IDC	Property	2.0	4.3	6.0	4.3
8	PetroVietnam Gas	Energy	4.6	4.2	5.5	-3.1
9	Vinhomes	Property	5.0	4.0	6.9	-37.0
10	Phu Nhuan Jewelry	Retail	0.5	3.2	1.8	14.6
	Vietnam, Index	-	-	-	11.2	-26.3

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms

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

 

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