Performance summary
NAV per share:
Change (Month-on-month)
Total NAV (million):
31 December 2017
USD GBP The VN Index rose 3.7% in USD terms in December, to end 2017 at 984 points, capping off an extraordinarily good year for Vietnam's stock markets. During the year, the Index increased 48.4%, the
5.52 4.08 6.15% 6.25% 1,095.1 809.5
Share price: 4.49 3.32
Market cap (million):
Premium/(discount)
GBP/USD exchange rate as 30 November 2017: 1.35 GBP/USD exchange rate as 31 December 2017: 1.35 Source: Reuters
889.6 658.5 Corporaon of Vietnam (ACV: 29.2%), Hoa Phat Group (HPG: 13.7%), and Vinamilk (VNM: 11.7%). As a result, our capital market porolio saw a return of 51.1% for the 2017 calendar year. Our return this
-18.8%
-18.8%
Cumulave change (% change)
NAV per share (USD)
Share price (USD)
VN Index (USD terms)
MSCI Emerging market
MSCI Vietnam
3 mth 1 yr
13.4
3 yr
5 yr
32.1 68.7 111.2
December: Capping off an exceponally strong year
second-highest yearly advance in its history (in 2006, the Index rose 42.4% in USD terms), and placing Vietnam among the world's top performing stock markets in 2017.
VOF's net asset value (NAV) per share was USD5.52, an increase of 6.2% over NAV per share price at USD5.20 from its closed business on 30 November 2017. The discount between share price and NAV per share widened slightly to 18.8%. Our capital market porolio, was up 8.7% in December, outperforming the Index, thanks to strong performances during the month in our top holdings such as Airports
calendar year is largely due to stock selecon and having convicon or overweight posions in a number of core holdings (such as those menoned above) as opposed to simply owning the top 10-12 largest companies in the Index (the top 10 companies by market cap were up 63.5% on average in 2017).
Aviaon is one sector we have favoured, and stocks such as ACV and VietJet (VJC: 8.7%) benefied from both a record number of internaonal arrivals over the year (13 million, up 29% over 2016) and growing numbers of domesc travellers. Robust retail sales (up 8.36% in real terms) played a role in the performance of companies such as VNM and Phu Nhuan Jewelry (PNJ: 10.0%), and movated us to take a pre-IPO stake in FPT Retail in the last quarter of the year. Meanwhile, banks have benefied from ample liquidity, low interest rates, and high credit growth, and over the past few months, we have parcipated in private placements in two up-and-coming banks: Orient Commercial Bank and, in December, HD Bank,
12.7
32.6 79.5 144.6 one of Vietnam's most innovave and fastest growing banks. HD Bank listed on the Ho Chi Minh City
22.5
48.4 69.8 117.8
7.1
34.3 21.1 9.8
35.8
60.7 46.5 60.4
Stock Exchange on 5 January 2018. More informaon about our investment in HD Bank may be found
here.
The fund's December cash posion of 7% of NAV is a natural reflecon of the robust market, one in which we took some profit and our ability to reinvest in the capital market was somewhat restrained due tohigh valuaons. However, we connued to buy back shares and instuted a dividend as another way to generate returns for our shareholders.
Annual performance history (% change)
CY 2017 2016 2015 2014 2013 2012
NAV per share (USD)
VN Index (USD terms)
32.1 25.5 1.2 8.4 15.3 19.1
48.4 13.4 0.9 6.6 20.5 18.9
Top ten holdings*
Investee company
Hoa Phat Group (HPG)
Vinamilk (VNM)
Airports Corporaon of Vietnam (ACV)
Khang Dien House (KDH)
Phu Nhuan Jewelry (PNJ)
Vietjet Air (VJC)
Quang Ngai Sugar (QNS)
Eximbank (EIB)
Coteccons (CTD)
Petrovietnam Technical Services Corporaon (PVS)
Total
*Capital market equies
% of NAVSector
13.4 Construcon materials
10.9 Food & beverage
9.0 Infrastructure
6.3 Real estate & construcon
6.1 Consumer discreonary
4.7 Industrials
3.2 Food & beverage
3.1 Financial services
3.0 Real estate & construcon
2.6 Mining, oil & gas
62.4
With Vietnam now prominently on the radar screen of many internaonal investors, we expect fund flows will be an important driver of returns in 2018, and several blue chips considered by some analysts to be at "full" or "fair" valuaons may get even "fuller" or "fairer" valuaons; as some investors learned in 2017, "expensive" is a relave word.
Historical share price, NAV and buyback acvity
10.0
VOFsharespurchased(millions)
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2011
2013
2012
Shares bought back
VOF porolio by asset class
2014
2015
VOF share price
2016
Monthly NAV
6.00 5.00 4.00 3.00 2.00 1.00 -
SharepriceandNAV(USD)
2017
VOF porolio allocaon by sector
2.9% 1.1%
Listed equity (64.7%)
Private equity (7.6%)
Real estate projects (2.9%)Unlisted equity (16.6%)
Cash and others (7.0%)
Operating assets (1.1%)
Construction materials
Food & beverage
Real estate equities
Infrastructure
Industrials
Consumer discretionary
Financial services
Cash and others
Mining, oil & gas
Real estate projects
Agriculture
Pharma & healthcare
Operating assets
Quarterly GDP growth (%)
The Index traded at a trailing PE of 19.2 mes by the end of the year, versus 16.4 mes at the start, and in hindsight seems relavely "cheap" then. Having said that, with the market now more "top-heavy" (i.e., dominated by the large caps), we think that looking outside of this area could be a fruiul endeavour. During 2017, we deployed cash in some of the smaller listed companies, and we would not hesitate to invest more if the risk-reward is aracve.
2018 is looking to be another strong year. With a combinaon of growth and ample global liquidity, Vietnam is poised to see connued good equity growth. We look forward to capitalising on the opportunies in both listed and private equies, and connuing to deliver solid returns to shareholders.
Macroeconomic Commentary
Vietnam's surprisingly high, 7.7% yoy GDP growth rate in Q4 liſted the country's 2017 growth to 6.8%, which beat both the consensus forecast for 6.6% growth, and the government's 6.7% GDP growth target. Vietnam's GDP growth increased from 6.2% in 2016 to 6.8% in 2017, but inflaon actually fell from 4.7% in 2016 to 2.6% in 2017. These ideal "Goldilocks" economic condions (ie. the economy is "not too hot, and not too cold"), helped drive a near 50% increase in Vietnamese stock prices last year, as measured by the VN-Index.
The improvement of Vietnam's GDP growth in 2017 was primarily driven by an improvement in the expansion of the country's manufacturing output, which contributes 15% of overall GDP, from 11.9% growth in 2016 to a 14.4% rate of growth in 2017, and driven by a faster pace in personal consumpon growth from 8.3% in 2016 to an esmated 9.5% growth in 2017. The only notable factor holding back GDP growth last year was an 11% decline in oil producon volume, which lopped off about one-half a point from GDP growth.
The improvement in manufacturing output growth was fueled by an 10.8% increase in FDI disbursements in 2017, the majority of which was invested in factories and other producon facilies, and by a rebound in the producon of Samsung smartphones starng from Q2, following the disrupons Vietnam's largest FDI invested company faced when retooling its factories to ramp up producon of its new Galaxy 8 smartphone.
Dec-17
The strength in Vietnam's manufacturing sector was reflected by the fact that the mean monthly PMI survey readings for 2017 reached an all-me high. The country's PMI has now exceeded the '50' expansion-contracon threshold for over two years - although businesses are increasingly reporng difficulty in sourcing the raw materials needed to expand their output, which could pose challenges going forward.
Surveys of Vietnam's consumer confidence also hit all-me highs in 2017, which helped fuel the above menoned increase of personal consumpon, which was the other major factor that boosted GDP growth last year, as consumpon accounts for nearly two-thirds of Vietnam's economy. Consumpon was also buoyed by an esmated 65% surge in consumer lending last year, which raised the proporon of the banking system's overall credit extended to individuals from 12% in 2016 to 18% in 2017.
Despite a plethora of factors that drove growth in Vietnam higher last year, the country's headline inflaon rate actually fell from 4.6% in 2016 to 2.6% in 2017. That drop was aributable to a deceleraon of medical price inflaon from 56% in 2016 to 28% in 2017, owing to slower government mandated medical price hikes last year, but a 1.8% decline in food prices - which account for 36% of the CPI basket - also lopped 0.7%pts from the headline CPI rate in 2017.
Note that medical prices only account for 6% of Vietnam's CPI basket, but the steep deceleraon in medical price inflaon last year reduced the 2017 headline CPI rate by 1.7% points - although medical price hikes sll contributed 1.7% points to inflaon rate last year. Finally, Vietnam raised electricity prices by about 6% in December, which we esmate will eventually add 0.5% points to the country's inflaon rate, and we also expect global oil prices to increase by about 15% this year, which would boost Vietnam's inflaon by more than 1.5% points.
Macroeconomic indicators
GDP growth1
Inflaon (%)
FDI commitments (USDbn)
FDI disbursements (USDbn)
Imports (USDbn)
Exports (USDbn)
Trade surplus/(deficit) (USDbn)
Exchange rate (USD/VND)
2016
Dec-17
2017
6.2% 4.7% 24.4
6.8% 6.8%
0.2% 2.8
2.6% 2.6%
35.9 44.4%
15.8
1.5
17.5 10.8%
174.1 176.6
19.9 19.7
211.1 20.8%
214.0 21.2%
2.5
(0.2)
2.9
22,720
22,665
0.2%
Sources: GSO, Vietnam Customs, SBV, VCB |1. Annualized rate, updated quarterly
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Mar Jun Sep | Dec | Mar Jun Sep | Jun Sep | Jun Sep | Jun Sep | Dec Mar | Jun Sep |
2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
Mar
Dec
Dec
DecMar
DecMar
Purchasing Managers' Index
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Cumulave registered and disbursed FDI (USDbn)
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Disbursed (YTD)Registered (YTD)
Monthly trade balance (USDm)
Y-O-Y
(1,000)
(1,500)
(2,000)
(2,500)
1,500
1,000
(500)
500
-
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Year-on-year and month-on-month inflaon (%)
YoY CPI
8 7 6 5 4 3 2 1 -
2016
MoM CPI
2013
2014
2015
YoY CPIMoM CPI
Source: GSO, Vietnam Customs, Bloomberg
1.2
1.0
0.8
0.6
0.4
0.2
0.0
(0.2)
(0.4)
(0.6)
(0.8)
2017
Board of Directors | VinaCapital Investment Management Ltd |
VOF's Board of Directors is composed enrely of independent non-execuve directors. | |
Member Role | Member Role |
Steven Bates Non-execuve Chairman Marn Adams Non-execuve Director Thuy Dam Non-execuve Director Huw Evans Non-execuve Director | Don Lam Chief Execuve Officer Brook Taylor Chief Operang Officer Andy Ho Chief Investment Officer Duong Vuong Deputy Managing Director, Capital Markets |
Fund informaon | |
LEI | 2138007UD8FBBVAX9469 |
Bloomberg | VOF LN |
Reuters | VOF.L |
Fund summary | |
Fund launch | 30 September 2003 |
Term of fund | Five years subject to shareholder vote for liquidaon (next vote to be held by December 2018) |
Fund domicile | Guernsey |
Legal form | Exempted company limited by shares |
Investment manager | VinaCapital Investment Management Ltd, with sub-delegaon to VinaCapital Fund Management JSC |
Structure | Single class of ordinary shares trading on the Main Market of the London Stock Exchange plc |
Auditor | PricewaterhouseCoopers (Guernsey) |
Custodian | Standard Chartered Bank Vietnam |
Custodian and Administrator | Northern Trust Internaonal Fund Administraon Services (Guernsey) Limited |
Registrar and Transfer Agency | Computershare Investor Services |
Brokers | Numis Securies (Bloomberg: NUMIS) |
Base and incenve fee | Base fee of 1.5% of NAV. Incenve fees are based on two separate pools of investments: direct real estate and all other investments. The incenve fee paid equates to 15% of the increase in the NAV of each pool during the year over a hurdle of 8%. The total amount of incenve fees paid in any one year is capped at 1.5% of the pool's NAV |
Investment objecve | Medium to long-term returns through investments either in Vietnam or in companies with a substanal majority of their assets, operaons, revenues or income in, or derived from, Vietnam |
Investment objecve by geography | Investments will be in Vietnam or in companies with at least 75 per cent of their assets, operaons, revenues or income in, or derived from, Vietnam at the me of investment |
Dividend policy | It is the intenon of the Board to declare semi-annual dividends, normally declared in April and October, for the foreseeable future of an amount of at least 4.8 US cents per share, or the equivalent in UK pence. This amount is approximately equal to 1 per cent of VOF's net asset value at 30 June 2017. As and when circumstances permit, it is the Board's intenon to increase the dividend. Dividend payments will not necessarily be fully covered by income and, as such, may represent a return of capital to shareholders. Sharehold- ers should note that the change in dividend policy is in addion to the Company's share buyback programme, which has been the primary mechanism for aempng to control the share price discount to net asset value. |
" 2018 VinaCapital Group. All rights reservied.
Important Informaon
This document, and the material contained therein, is not intended as an offer or solicitaon for the subscripon, purchase or sale of securies in VinaCapital Vietnam Opportunity Fund Limited (the "Company"). Any investment in any of the Companies must be based solely on the Admission Document of that Company or other offering document issued from me to me by that Company, in accordance with applicable laws.
The material in this document is not intended to provide, and should not be relied on for accounng, legal or tax advice or investment recommendaons. Potenal investors are advised to independently review and/or obtain independent professional advice and draw their own conclusions regarding the economic benefit and risks of investment in either of the Companies and legal, regulatory, credit, tax and accounng aspects in relaon to their parcular circumstances.
The securies of the Companies have not been and will not be registered under any securies laws of the United States of America nor any of its territories or possessions or areas subject to its jurisdicon and, absent an exempon, may not be offered for sale or sold to naonals or residents thereof.
No undertaking, representaon, warranty or other assurance, express or implied, is given by or on behalf of either of the Companies or VinaCapital Investment Management Ltd or any of their respecve directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the informaon or opinions contained in this document and no responsibility or liability is accepted by any of them for any such informaon or opinions or for any errors, omissions, misstatements, negligence or otherwise.
No warranty is given, in whole or in part, regarding the performance of either of the Companies. There is no guarantee that investment objecves of any of the three Companies will be achieved. Potenal investors should be aware that past performance may not necessarily be repeated in the future. The price of shares and the income from them may fluctuate upwards or downwards and cannot be guaranteed.
This document is intended for the use of the addressee and recipient only and should not be relied upon by any persons and may not be reproduced, redistributed, passed on or published, in whole or in part, for any purposes, without the prior wrien consent of VinaCapital Investment Management Ltd.
Investor Relaons/Communicaonsir@vinacapital.com +84 28 3821 9930www.vinacapital.com
Broker
Numis Securies +44 (0)20 7260 1000funds@numis.com
VinaCapital Vietnam Opportunity Fund Ltd. published this content on 16 January 2018 and is solely responsible for the information contained herein.
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