Wednesday, December 13 2017

VietNamNews

Fund manager optimistic on VN stock market

Update: November, 16/2017 - 09:00
Offshore fund raising director of Vietfund Management (VFM)
Viet Nam News

After 10 long years, the VN-Index has again gone past the 800-point mark. Việt Nam News speaks with Steven Mantle, offshore fund raising director of Vietfund Management (VFM), about the market and VFM’s funds.

What is your reading of the Vietnamese economy now?

In terms of Việt Nam’s economy, GDP growth is very healthy now, reaching 7.5 per cent in the last quarter, the highest Q3 growth in seven years, which is positive in terms of Q4 growth. There are some concerns over the loosening of monetary policy, lower interest rates, increase in credit growth allowance. This can be scary for foreign investors given previous events in Việt Nam many years ago.

Now, it is fair to say where the economy is with low inflation so far this year of 1.8 per cent, with the balance of trade now at $442 million,  it seems that foreign investors are more confident about where the economy is and the government policy is, despite the shock over the monetary policy.

Việt Nam does not have pressure to devalue the currency to increase exports or boost manufacturing.

The economy at the moment is very strong.

The market has reached 800 points. What do you think of this remarkable milestone?

In the region, Việt Nam is the top performing market out of Thailand, the Philippines and Malaysia. Last year, it was the second best performer behind Thailand, but Thailand is struggling this year. Việt Nam has kept its momentum going. The Philippines is also having a good year, but this follows a bad 2016 when it was the only market in Southeast Asia to fall. Việt Nam however has continued to grow very well following a 14.8 per cent growth last year.

Việt Nam is an emerging market. As we know Morgan Stanley Capital International (MSCI) did not include Việt Nam in the emerging market watch list, but at the moment we have a lot of liquidity, far more than in the Philippines or Pakistan. In the Philippines, some of their biggest companies are family owned and they don’t really have much trade. In terms of the depth of Việt Nam’s stock market, it is actually healthier than the Philippines, it has much more choices available.

In terms of the impact of foreigners, net buying this year has been around US$630 million, the second highest in Southeast Asia after Malaysia. At its peak, the net buying this year was worth nearly $670 million. We had some selling last month, a bit more this month.

The last thing is that in June, Việt Nam has not been put on the MSCI emerging markets watch list. There is a lot more to be done in terms of foreign investors, general trading, but one thing that Việt Nam does excel is in the quality of stocks we now have: over 22 stocks with a market cap of more than a billion dollars, 15 of them in our VN30 ETF, and there are four that meet MSCI criteria for emerging markets while a further five only fall short due to MSCI’s subjective free-float criteria.

How is VFM’s ETF doing this year?

So as a company that has gone from managing around US$75 million at the beginning of this year to about $115 million today, we have seen growth in all four funds in terms of performance and subscription.

Often, the Korea and Việt Nam story is compared to Japan and Thailand in the 90s, but essentially there is a large level of foreign direct investment coming into Việt Nam from Korean companies. So we have a lot of interest from Korea this year.

Korea is the biggest, but we are seeing interest from different areas. Hong Kong, Thailand have been big investors in the capital market, and also Singapore and Taiwan. We are also seeing interest in Europe and US.

The ETF was up 28 per cent at the end of September.

How do you see the market and foreign capital flows from now through year-end?

We’ve already seen extremely high levels of foreign buying compared to previous years and currently we’re on for our biggest year of net buying since 2007. This is thanks to good quality IPOs and overseas corporates investing strategically. Also, more overseas investors are warming up to Việt Nam, perhaps helped by higher MSCI Frontier Index allocation but also importantly due to good earnings growth.

The Vinamilk stake being divested by the SCIC last week should help bring in more foreign capital. Despite the market being at its highest levels for a decade, there are still many compelling buying opportunities out there for overseas investors not looking to take profit.

In terms of predictions for the market itself, the Việt Nam Index has continued to rise this year with very little correction so far. Although November is traditionally a down month for the VN-Index, 2017 could perhaps become just the second time in 10 years this month has been positive. VNS

B2-thungan

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