Bearish market does not deter investment funds

Foreign investment funds remain upbeat about the Vietnamese market’s potential, Photo: Le Toan

In this year’s past quarter, the Vietnamese stock market went through a corrective period, as the main gauge VN-Index tumbled by 20 per cent from its historic peak of 1,170 points in March. External volatilities on trade and foreign currencies threatened to drag the market down further. However, foreign investors, who have seen the value of their portfolio going south, now take refuge in the upbeat business results of leading Vietnamese firms.

Tundra Vietnam Fund, the first Scandinavian fund focused solely on Vietnam, noted that they saw earnings growth in key sectors, such as banking, real estate, materials, and construction. The financial sector posted year-on-year growth between 50 and 150 per cent, which excited Tundra Vietnam as Saigon Securities and HDBank are both among its top 10 holdings.

Specifically, Saigon Securities posted VND2.1 trillion ($92.92 million) in gross revenue in the first half of 2018, up 60 per cent year-on-year. Consolidated pre-tax profit stands at VND885 billion ($39.16 million), 20 per cent higher than last year. Similarly, the pre-tax earnings of HDBank were VND2 trillion ($88.5 million), which is twice as much as in June 2017.

“At present, the valuations look more reasonable than a few months ago. Furthermore, with any easing of geo-political and external risks, the market will be poised to post better returns,” said Tundra Vietnam Fund with unbroken optimism.

Vietnam Opportunity Fund (VOF), managed by VinaCapital, noted that the average earnings growth of companies in the first six months of 2018 was 19 per cent year-on-year. The fund mentioned that steelmaker Hoa Phat Group, its largest holding, posted revenue growth of 30.6 per cent and net profit growth of 27.4 per cent, reaching VND27.5 trillion ($1.21 billion) and VND4.4 trillion ($194.7 million), respectively.

VOF was also positive about the recent Moody’s upgrades of Vietnam’s government bond rating from B3 to B1, as well as a slew of upgrades in domestic banks.

“We think the market has already priced in a significant amount of risk and uncertainty with respect to where the trade war will lead, as well as its potential impact on companies’ earnings in Vietnam,” said the fund about the US-China trade war and its effect on Vietnamese firms.

Meanwhile, PYN Elite Fund jumped for joy when its biggest holding Mobile World Investment Corporation posted stellar growth of 43 per cent year-on-year in revenue and 44 per cent in net profit. The fund called this “an excellent result, which was in line with our expectations.” Mobile World accounts for 15.3 per cent of the fund’s $463-million portfolio.

Joining the party is FMG Fund from Malta. The fund holds 72 Vietnamese stocks, 70 per cent of which have posted revenue results for the first half of 2018. According to FMG Fund, thanks to positive earnings and lower stock prices, 29 of its stocks are trading at less than 8x expected earnings for 2018 and eight of them are below 5x.

This situation is good for FMG, as the fund said it can now enter new investments or increase its holdings in Vietnam at a more affordable price.

Vietnam Phoenix Fund, which manages $45.74 million of assets, also drew the attention to FPT Corporation, the stock that takes up 10.7 per cent of its portfolio. FPT increased its revenue year-on-year by 9 per cent to stand at VND10.2 trillion ($451.32 million), and profit before tax increased by 32 per cent to VND1.68 trillion ($74.33 million).

Most of the funds pin high hopes on Vietnam’s stable macro-economics, vibrant domestic consumption market, and smaller or new listings on the stock market. Vietnam Holding, for example, said that the country is worth the money, as the forecasted growth rate for earnings in the next 12 months stands at 20 per cent, higher than the price-per-earnings ratio of 14x.

Lien Le, head of Institutional Research at Maybank Kim Eng, told VIR that in her recent business trips to Europe and the US, she could see that investment funds remain excited and curious about Vietnam.

“I have not seen any capital flight out of Vietnam yet; the money is still here. Foreign investors are not running away from the fast-growing Vietnam – instead, in the bearish market, they are restructuring their portfolio and seeking new opportunities, still in the country,” said Lien.