PYN Elite fund looks back on multiple months of consecutive loss during COVID-19

April 14, 2020 | 10:52
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Finland-headquartered fund PYN Elite, which is a shareholder of 70 Vietnamese listed firms – including high-profile names such as VietinBank, TPBank, and PAN Group – has reported its sixth consecutive month of loss. Last month saw VND2.451 trillion ($106.57 million) of the fund's value evaporating. Its deep losses followed a rough patch for the VN-Index.

PYn Elite fund’s net asset value (NAV) per share tumbled by 29 per cent compared to the beginning of the year.

In March, local bourse VN-Index fell 25 per cent, which also led to PYN Elite plunging nearly 27 per cent.

PYN Elite’s representative said, “The crash in oil price, coupled with indiscriminate selloff, have been a brutal comeuppance for the equity market. Central banks across the globe have taken bold steps to ward off signs of an economic fallout.”

March was also the S&P 500’s most volatile month ever, as frenetic swings whipsawed the market from steep gains to even steeper losses, according to CNBC. Elsewhere, efforts to contain the virus have pushed European and Asian markets into further loss. Japan’s Nikkei ended the first quarter down 20.04 per cent – its worst quarter since the fourth quarter of 2008, while South Korea’s KOSPI lost 20.16 per cent. The VN-Index followed suit, tumbling 31 per cent year to date to reach 662.53 points as of March 31.

PYN Elite, though losing 29 per cent year-to-date, might have slightly better prospects, the representative explained.

In fact, the foreign fund has been rather bullish about the performance of the local stock market.

Petri Deryung, director of the fund, signalled that the fund would purchase more shares down the road in case of favourable conditions and attractive valuation.

pyn elite fund looks back on multiple months of consecutive loss during covid 19

PYN Elite dropped along with the VN-Index in the past several months (Photo: PYN Elite)

“VN-Index has good prospects to reach 1,800 points,” the fund said previously.

Particularly, the fund approached the stock pullback with a positive outlook, saying it would go all in and pour all its money into the stock market – which is easier said than done.

PYN Elite Fund is no longer a major shareholder of DIC Investment and Trading JSC since its ownership was reduced to 2.04 per cent. Earlier in March, the fund also slashed its holdings in Tasco JSC and DIC Investment and Trading JSC, among others. Most recently, on April 9, PYN Elite also sold 1.36 million shares in large-cap firm Mobile World Group (MWG).

All in all, the fund has offloaded a total of 27 million shares in the Vietnamese stock market in recent months.

Banking sector – Striking while the iron is hot?

While Vietnamese banks are particularly vulnerable to the global health challenge, PYN Elite appears to have taken a more optimistic view of bank stocks.

Last year, the State Bank of Vietnam asked financial institutions to gradually reduce the proportion of short-term capital for medium- and long-term loans from the current 40 to 30 per cent over the next three years. The SBV also demonstrated the central banks’ determination to tighten credit for risky sectors, such as real estate. High-risk borrowers such as BOT project investors would find it harder to access loans.

Since then, firms find less leverage, while holding much more cash.

Vietnam’s top 50 companies have a net debt-to-equity ratio of 32 per cent, which is lower than that of US and European counterparts. Smaller firms cannot get loans without collateral. In short, Vietnamese firms might be less risky for investors in case markets see a return of volatility.

On the other hand, just a few Vietnamese firms issue USD bonds since the domestic capital market has not completely opened up to foreign investors. Hence, external uncertainties have been limited in the past few months.

pyn elite fund looks back on multiple months of consecutive loss during covid 19
PYN Elite also talked highly of Mobile World Group (MWG) before selling half of its shares

Taking a look at PYN Elite’s portfolios, the bank group still holds the majority of funds, such as TPBank (10.94 per cent), VietinBank (7.99 per cent), or HD Bank (7.49 per cent).

“Our invested firms can make it through the escalating tension whereas higher borrowing costs and weaker export demand. The average net debt-to-equity ratio for our core firms is 27 per cent. Furthermore, more than half of our invested firms have net cash position, and most of them focus on the domestic market, except FPT exporting its IT services,” said the fund.

However, at the end of last year, PYN Elite also talked highly of MWG's growth prospect – before selling half of its shares in the firm.

By Lam Phong

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