Vietnamese stocks offer great value

Dr. Marc Faber

Vietnamese stocks, which Faber had predicted last year would be among few best longs in 2014, suffered huge sell-offs as a result.  Given the new context following the escalating tensions in the East Sea, Marc Faber agreed to an exclusive telephone interview with VIR about his analysis of market trends following the incident.

What’s your views on investment opportunities in Vietnam?

Basically, as you know or as you’ve been told, I’m the chairman of Indochina Capital and chairman of Vietnam Growth Fund that is managed by Dragon Capital, and I’m a partner and shareholder in the Hyatt Hotel in Vietnam and I have a villa there. I have investments in Vietnam and in the long run I believe that Vietnam offers attractive opportunities.

How deeply have you been involved in investment decisions at Indochina Capital and Vietnam Growth Fund?

Basically, the board of directors does not make the investment decisions. That’s up to the management of the companies. The board of directors is responsible to represent all of the shareholders and ensure their interests are treated equally.

Do you have any new plans in Vietnam?

I own Vietnamese shares, but after the strong rally we had in the last two years until April of this year, we’ve now had a setback as the result of the East Sea tensions and I think the market won’t increase a lot. It will kind of vary around this level but still offer a relatively attractive entry point.

But do you think you will be involved further in investment in Vietnam?

Yes. I’ve been involved in Vietnam since the early 1990s when we built the first project at the Furama Resort in Danang and later on we sold it, and then we built Nam Hai via Indochina Land which is managed by Indochina Capital. The Hyatt Hotel in Danang is a project invested in by another fund also managed by Indochina Capital. So, we’re already involved and I intend to continue to be involved in Vietnam.

Is that because investment opportunities here are better than elsewhere?

The world is a very large place and there are plenty of investment opportunities everywhere. I’m an international investor, I’ve told my clients to allocate some money to Vietnam.

Late last year, you said Vietnamese stocks would be one of the three best long bets in 2014. Do you want to change the prediction given tensions in the East Sea triggered jitters among investors and a subsequent huge sell-off?

Basically, Vietnamese stocks are still up I think by about 8 per cent so far this year, so they have certainly performed better than the S&P 500 in the US or the Russell 2000. But as I said, I don’t think they’ll go up a lot because the tensions will represent a cloud over the Vietnamese asset market. I think I don’t see a significant downside risk, but I don’t see a huge upside potential for now.

I think that eventually the dispute between China and Vietnam will be settled through negotiations, but I don’t think it will happen right away.

Do you think the Vietnamese markets have over-reacted to the China-Vietnam relation tensions?

I don’t think it was an over-reaction. As I’ve just said, in terms of the economic point of view it’s negative certainly for the near term as Vietnam and China have bilateral trade of $50 billion annually and China is a large foreign investor in Vietnam. The correction in my view is not an over-reaction also because the market was strong in 2012 and 2013 and as of April 2014 it was one of the best performing markets in the world this year and so some profit-taking would happen anyway.

Have you ever seen such a situation before?

I’ve been involved in stock markets since 1970 so I’ve seen so many markets sell off abruptly, much more than the sell-off in Vietnam. Usually, after the initial sell-offs, there is no rush to buy shares. Now, as I’ve mentioned to you, I think the share market is reasonably inexpensive, if not incredibly inexpensive but that doesn’t mean stocks will go up strongly.

Investors and local business leaders are expected to ask you to share investment strategies in the current context at the upcoming VIF 2014 event. What are you going to say?

I’ll talk about that if I’m asked. At the forum, I’ll focus on global macro-economic trends and geopolitical shifts in the world and financial trends at the event.

VIF 2014 co-organised by Vietnam Investment Review, HVS Vietnam Securities Co. and Hong Kong-based Asia Frontier Capital (AFC) will take place at the White Palace Convention Centre. The event entitled The Rise of Frontier and Emerging Markets and Opportunities for Vietnam? will feature Dr. Marc Faber as keynote speaker on whether we have entered the terminal phase of a gigantic global credit and asset bubble.

AFC CEO Thomas Hugger will also deliver a presentation on investment strategy in Asian frontier markets and in Vietnam while VinaCapital CEO Don Lam will discuss whether Vietnam will be a destination for foreign capital flows.