TIDMVEIL
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 GBP7.87 as of
30 September (-10.6% for the month and -12.7% YTD) and its total
NAV was GBP1.6bn.
-- 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
================== =================== ===== ===== ============== =========
Vietnam Prosperity
2 Bank Banks 1.8 11.4 -16.6 -29.7
================== =================== ===== ===== ============== =========
Asia Commercial
3 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: +44 122 561 8150
Mobile: +44 797 121 4852
rachelhill@dragoncapital.com
Jefferies International Limited
Stuart Klein
Phone: +44 207 029 8703
stuart.klein@jefferies.com
Buchanan
Charles Ryland / Henry Wilson / George Beale
Phone: +44 20 7466 5111
veil@buchanan.uk.com
LEI: 213800SYT3T4AGEVW864
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