Monthly Update
Updated : 14:16
14 November 2022
Vietnam Enterprise Investments Limited
("VEIL" or "the Company")
Monthly Update
-14.6% NAV Return in October 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 October 2022 is set out in this notice.
Fund Performance
· As of 31 October, VEIL's NAV decreased 14.6% over the previous month against a fall of 12.7% for its reference index, the Vietnam Index ("VNI"), both in US dollar terms.
· The Company's NAV per share was US$7.51 as of 31 October (-38.5% YTD) and its total NAV was US$1.6bn.
· VEIL's NAV per share performance in US dollar terms is -21.7% over three months, -38.5% over one year and +6.4% over three years. Over the same time periods, the performance of the Vietnam Index was -19.7%, -33.9% and +0.8%, respectively.
· The share price declined 11.0% in October and 39.0% YTD in US dollar terms
· In GBP terms, the Company's NAV per share was £6.52 as of 31 October (-17.2% for the month and -27.6% YTD) and its total NAV was £1.3bn. The share price was -13.7% for the month and -28.2% YTD
· The share price discount to NAV as of 31 October was 15.8%, compared with 19.2% at the end of September.
· The Company repurchased 20,000 shares in October, to be held in treasury, compared with 884,521 shares repurchased in September. As of 31 October 2022, 3.2% of issued shares have been repurchased since 1 January 2022.
Dien Vu, the Portfolio Manager of VEIL commented:
"While it is tempting to attribute most of this month's decline to recent regulatory action against a large private company, it is worth acknowledging other factors, the most significant of which being the erosion of liquidity due to growing risk aversion due to global news flow. This has prompted retail investors - who account for c.90% of daily trade - to pull money out of the market, causing an inevitable and indiscriminate impact on equity price performance.
"Thus, with the market's daily trading liquidity halving from US$1.2bn in Q4 2021 to US$580m from April to October of this year, the VNI has declined 36.2% YTD to the end of October. This is despite EPS growth for the first nine months of the year averaging 21.4% across the top 80 companies under the Investment manager's coverage. While this may represent a value investor's sweet spot of mispriced fundamentals (the market's trailing price-to-earnings ratio is at a 10 year low), the mark-to-market impact belies the core strength of the Vietnam investment case.
"As noted in previous releases, restrictions on new bond issuance, rising interest rates (100 basis points each time on September 23 and October 26) and limited credit quota available to banks have also caused concerns regarding liquidity for local corporates. Against that backdrop, VEIL's NAV fell 14.6% for the month (in USD terms), in which all the Company's top ten holdings were in the red. Five of the top ten holdings posted double digit drops although only three underperformed the market's 12.7% fall.
"Mobile World Group ("MWG") declined 22.5% despite their recent investor updates not containing anything ominous. There was, however, an unfounded rumour regarding MWG's bond exposure to which the company later issued a statement reassuring the market that none of their bonds related to any of the issuers being currently investigated or that have attracted negative media headlines. Furthermore, MWG confirmed its bond holdings were only around 10% of its cash and short-term investments, 80% were not property companies, and all bonds had tenors of three months or less.
"Vinhomes ("VHM") was heavily sold-off in October along with the rest of the property sector despite posting record quarterly profit number in 3Q 2022. VHM's US$583m net profit was the highest quarterly result ever recorded for a Vietnamese company. VHM also displays a sound financial position, including a net debt-to-equity ratio of only 17% at the end of the quarter.
"Similarly, MB Bank ("MBB"), the other underperformer in the top ten this month, also posted the highest quarterly profit level in its history. Nevertheless, in a volatile market, quarterly earnings sometimes can be seen as a lagging indicator, and short-term share prices are more susceptible to rumours and sentiment-driven sell-offs.
"The Investment Manager maintains the view that tightening liquidity combined with weak retail investor sentiment, which are reflected in the above, are currently driving the market. On the other hand, we have observed investors favouring companies which have historically been perceived as more conservative. Among banking stocks, Asia Commercial Bank and Vietcombank - often regarded as having the most prudent risk management in the sector - both held up well in October with only modest declines."
Economic Overview
· October's CPI rose 4.3% year-on-year from 3.9% in September, rises in education prices were again offset by falling petrol prices.
· The Vietnamese dong depreciated 4.0% against the USD in October, putting the total depreciation at 8.1% YTD as of 31 October. The Vietnamese dong depreciated 8.2% against the pound sterling in October and its total appreciation was 6.8% YTD as of month-end.
· Vietnam recorded a YTD trade surplus of US$9.6bn at end of October compared to a trade deficit of US$634m at the same stage of 2021.
· Export rose 2.2% month-on-month to US$30.5bn while imports fell 1.7% to US$27.9bn for the period.
· Disbursed FDI was US$2.0bn in October, with the total year-to-date figure reaching US$17.5bn (+15.2% year-on-year).
· The Vietnam Purchasing Manager's Index registered at 50.3 in October, a thirteenth consecutive monthly expansion.
· State revenue totalled US$59bn and (+16.7% year-on-year) YTD as of October 31 and expenditure was US$49.2bn (+6.3% year-on-year). The State budget has a YTD fiscal surplus of US$9.9bn, more than triple the US$3.22bn surplus at the same stage of 2021.
Top Ten Holdings (62.7% of NAV)
| Company | Sector | VNI % | NAV % | Monthly Return % | One-year Return % |
1 | Asia Commercial Bank | Banks | 1.9 | 12.2 | -3.1 | -22.3 |
2 | Vietnam Prosperity Bank | Banks | 2.7 | 11.6 | -12.7 | -41.0 |
3 | Mobile World Group | Retail | 1.8 | 10.6 | -22.5 | -27.6 |
4 | FPT Corporation | Software/Services | 2.0 | 5.2 | -9.8 | -12.4 |
5 | PetroVietnam Gas | Energy | 5.2 | 4.6 | -3.0 | -16.0 |
6 | Vietcombank | Banks | 8.5 | 4.5 | -3.5 | -11.3 |
7 | Becamex IDC | Real Estate | 2.1 | 4.0 | -12.5 | 43.6 |
8 | Vinhomes | Real Estate | 4.8 | 3.8 | -14.7 | -50.4 |
9 | Phu Nhuan Jewelry | Retail | 0.6 | 3.1 | -6.5 | -6.8 |
10 | Military Bank | Banks | 2.0 | 3.1 | -15.0 | -31.7 |
| ||||||
| Vietnam, Index | - | - | - | -12.7 | -33.9 |
Source: Bloomberg, Dragon Capital
NB: All returns are given in USD terms
For further information, please contact:
Vietnam Enterprise Investments Limited
Rachel Hill
Phone: +44 122 561 8150
Mobile: +44 797 121 4852
Jefferies International Limited
Stuart Klein
Phone: +44 207 029 8703
Buchanan
Charles Ryland / Henry Wilson / George Beale
Phone: +44 20 7466 5111
LEI: 213800SYT3T4AGEVW864
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