Funds cater to foreign investors’ growing appetite for Vietnamese stocks

Asia Frontier Capital (AFC), whose AFC Vietnam Fund invests exclusively in listed Vietnamese equities, yesterday announced that it is opening an office in Ho Chi Minh City by the second half of this year.

“After a period of rapid growth at the AFC Vietnam Fund, we have decided to expand in order to capture future growth opportunities through having local presence in Vietnam,” said the company in its May 2016 newsletter.

According to AFC, in the past two months it has seen significant inflows to its AFC Vietnam Fund. Including May 2016 subscriptions, the fund is now managing more than $26 million in assets.

Meanwhile, late last month Dragon Capital announced that it is looking to float its flagship fund Vietnam Enterprise Investments Limited (VEIL), which has holdings in listed and pre-IPO companies, on the Main Market of the London Stock Exchange next month.

Closed-end VEIL is currently listed on the Irish Stock Exchange. The London listing is expected to create a more transparent and liquid market in VEIL’s shares, thereby widening potential ownership, attracting greater analysis coverage, and narrowing the discount to net asset value (NAV) at which the shares currently trade.

Dominic Scriven, chairman of Dragon Capital, said the listing will address demand from a wide range of investors looking to benefit from Vietnam’s economic growth. “Increased access and transparency will overcome barriers for a number of institutional and retail investors,” he said.

According to the company’s release, approximately half of VEIL’s NAV, currently $850 million, is represented by stocks which are at their foreign ownership limit and cannot otherwise be accessed by foreign investors.

In March, VinaCapital’s Vietnam Opportunity Fund (VOF) also moved to the premium segment of the Main Market of the London Stock Exchange from the AIM. As of the end of April, VOF invested about 60 per cent of its assets in OTC and listed Vietnamese stocks.

According to Andy Ho, managing director of the company and chief investment officer of VinaCapital Group, the listing elevates the fund’s profile, putting it “in a better position to improve liquidity and reach a broader investor base."

A GDP growth of above 6 per cent, strong FDI inflows, and a young, well-educated workforce have been cited as the selling points of the Vietnamese economy. Moreover, the country is expected to greatly benefit from the trade pacts Vietnam recently joined, including the EU-Vietnam Free Trade Agreement and the Trans-Pacific Partnership.