If you are selling out of China but want to keep some money in Asia, there are a lot worse places to look at than Vietnam. Vietnam Holding (LSE:VNH) has been showing investors what it is capable of with some excellent share price momentum over the last 12 months.
We have felt for some time that the economic fundamentals underpinning Vietnam were strong and just going to get better. The country has been one of the Southeast Asian nations with a good grip on the pandemic and also stands to benefit from business being flushed out of China by each successive regulatory rampage from Beijing.This view is echoed by Vietnam Holding, the London-listed investment company which invests in high growth companies based in the country. Vietnam has been one of the best emerging markets in the world as we have emerged from the pandemic, and many of the strategic fundamentals remain in place in our view.
Vietnam Holding has a diversified portfolio of companies that have helped to fuel its NAV growth, including the likes of electricals group MWG, Digiworld, and steel maker HPG.
Vietnam Holding has beaten one of the best markets in Asia
While Vietnam’s stock market has been one of the best performing in Asia, up over 23% this year, the Vietnam Holding trust has beaten the benchmark Vietnamese index by around 24%, making it well worth a look. The fund managers have been able to identify stocks which were going to do well regardless of the effect of the pandemic, hence backing the likes of Digiworld, which is Vietnam’s leading ICT distributor.
The fund’s manager is Dynam Capital, which has said that despite many bigger foreign investors getting out of Vietnamese stocks in 2020-21, retail investor participation has support prices considerably. Vietnam now has over 4m trading accounts, which equates to around 3% of the population of the country.
Historically the team at Dynam Capital has been able to put in some great numbers – up by 611% over 10 years, up by 58% over three years, and a very punch 103% in the 12 month picture as Vietnam has come roaring back from the pandemic. Compare that with the 14% you would have received from the Morningstar Emerging Markets Asia index in the last 12 months.
Dynam Capital is bullish on financial services in Vietnam
The trust is still keeping quite a bit of cash on the books, at just over 30%. The top holdings according to its 31 August report are FPT Corp (7%), Saigon Thuong Tin Commercial Joint Stock Bank (4.9%), Mobile World Investment Corp (4.8%), Vinhomes JSC (4.8%) and Vietnam Prosperity JSC Bank (4.4%). Financial services remains its biggest sector allocation, which is not surprising given the fast evolution of the sector in Vietnam in the last decade – it is where a lot of the real stock price action lies.
Will Vietnam keep up this kind of momentum? We think so. It remains a fast-evolving Asian economy and has not been saddled with the same pandemic issues as, say, Indonesia. GDP growth looks solid and the population is big, giving it the sort of people power that will allow it to compete effectively in manufacturing and heavy industry against China, especially as China encounters all sorts of structural issues in the next five years.
The investment company is still trading at a discount of 11%. It has been awarded a three star rating from Morningstar.
