Monthly Investor Report

RNS Number : 6956W

VietNam Holding Limited

11 November 2014

 



VietNam Holding Limited ("VNH" or the "Company")

Monthly Investor Report

A report detailing the activities of the Company for the month of October 2014 has been issued by VietNam Holding Asset Management Limited, the investment manager of the Company. Electronic copies of the report have been made available to shareholders on the Company's website at http://www.vietnamholding.com/latest-publications.aspx and a summary of the report is included below.

Investor Report Summary

Vietnam News

The HSBC Purchasing Managers' Index was 51.0 in October, down from 51.7 in September, but still above the critical 50-mark that indicates increasing rates of growth for the 14th month in a row. Job creation was reported to be at a nine-month high, with new orders and output both increasing.  Production volumes have risen for the last 13 consecutive months.

The Ministry of Finance has let it be known that it would like to do a US$1bn sovereign bond issue, primarily to restructure earlier debts.  It would be the first such issuance by Hanoi since 2010.  In July Moody's raised Vietnam's credit rating    by one notch, to B1, with a stable outlook. Fitch has followed suit with a re-rating of BB- (the same as S&P), also with a stable outlook.

Vietnam Airlines is in the final stages of preparing for its IPO for November, and the government plans to try to accelerate the sluggish equitization process by establishing a new working group.  Meanwhile the Ministry of Transport has advised the National Assembly (currently in session) that the controversial new airport for Ho Chi Minh City would cost US$18.7bn.

Since the Vietnam All Share Index (VNAS) hit another resistance point at 608.5 on October 6, it ended the month at 587.6, down 0.4%. By comparison, the VNI finished the month at 600.8, up 0.3%.

VNH Insights

The report refers to Barrons positive analysis of Vietnam's equity market, which was published last week. Barrons commented on a commendable performance of the two Vietnam Exchange Traded Funds (ETFs).

ETFs have become the low-hanging fruits for global investors. In many markets ETFs are viable investment options for many investors.

However, they do not work in every market. A notable case-study is Vietnam. Over 3 years, the two Vietnam ETFs underperformed the Vietnam All Share Index (VNAS) by 22.2% and 25.7% respectively. The VNI in turn underperformed the VNAS by 5.8%

The Deutsche Bank x-tracker Vietnam has an asset base of US$410mn. Its expense ratio is 0.85%. The Van Eck Market Vectors Vietnam ETF has a NAV of US$554mn. Its expense ratio is 0.7%. Most actively-managed Vietnam country funds have a total expense ratio (TER) between 2% and 3%.

The weighted average of the VNH peer group did substantially better and out-performed the VNAS by 17.2%, despite their higher annual expenses. That is 39.4% higher than the "less bad" of the two ETFs, and of course fully accounts for the higher TER.  Active management indeed justifies the higher costs!

VNH's three year outperformance of the VNAS was 58.8%. VNH has outperformed the better of the two ETFs by a full 81% over the same period. 

There are several reasons why ETFs do not work in Vietnam:

-    They are limited to a selection of high-liquidity shares. Deutsche Bank's diversification reflects this: 83% of their assets are invested in only 10 positions.

-    The ETFs are unable to invest in the best shares, namely those where the foreign ownership limit of 49% has been reached.

-    They are a victim of their size. Their combined size is more than 15% of the free float. When they buy shares, they inflate the share prices. When they sell, they drive the prices down.

For more information please contact:

VietNam Holding Asset Management Limited	Tel: [phone]
Gyentsen Zatul - Investor Relations
Altium Capital Limited (Nominated Adviser)	Tel: [phone]
Tim Richardson
Winterflood Investment Trusts (Broker)	Tel: [phone]
Joe Winkley / Neil Langford
Buchanan Communications	Tel: [phone]
Charles Ryland / Sophie McNulty

 

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