VinaCapital Vietnam Opportunity Fund (VOF – the largest fund of VinaCapital) considers that Vietnam can be regarded as a Goldilocks economy in the third quarter as GDP grew 7.3% thanks to households increasing spending along with the decline of inflation (2%) as retail gasoline price decreased 12% over the same period last year.
Vietnam is a Goldilocks economy
According to VOF, Vietnam can be considered as a Goldilocks economy in the third quarter as GDP grew 7.3% thanks to households increasing spending along with the decline of inflation (2%) as retail gasoline price decreased 12% over the same period last year.
In addition, the manufacturing sector of Vietnam also continued to grow strongly, although the growth in production output decreased from 12% in the first 3 quarters of 2018 to 11.4% in the same period of 2019. Vietnam’s Purchasing Managers’ Index (PMI) was about 50.5 in September and it is still growing. This means that the outlook for continual growth in manufacturing remains positive, in part because FDI disbursements increased by 7% over the same period last year, reaching USD 14 billion. It is estimated by VOF that more than half of those will be poured into manufacturing.Moreover, VOF estimates that consumer spending increased by 9% during the third quarter, in part due to the effects of rising real estate price in Ho Chi Minh City and Hanoi. In short, individuals have purchased apartments and land for investment, and those investments have increased by 10% over the past 12 months.
The opposite of the aforementioned optimistic outlook is the slowing growth of the Chinese economy – which has influenced Vietnam to some extent. For example, tourists from China decreased from 49% in 2017 to 30% in the first 9 months of 2018 and remained only 4% in the first 9 months of 2019. This makes the growth of tourism industry decline to 11%. Vietnam’s exports to China decreased from 27% in the first nine months of 2018 to 4% in the same period of 2019, resulting in a general export of 8% (from 16% in the first nine months of 2018).
Finally, Vietnam recorded a trade surplus of USD 7.2 billion in the first nine months of this year, which is higher than that of the same period last year (USD 6.3 billion). With a trade surplus of 3% of GDP, combined with the State Bank’s foreign exchange reserves of more than USD 10 billion, the value of VND has increased by 0.3% since the beginning of the year. In the period from the end of August to the end of September 2019, the USD / VND exchange rate remained almost unchanged.
It is time to sell some of the investments in the portfolio
In the context that global stocks fluctuated less in September, the VN-Index increased by 1.3%, which is an achievement compared to other markets in the ASEAN region (Philippines decreased by 2.5%, Malaysia decreased by 1.8%, Indonesia decreased by 2.5%, Thailand decreased by 1.1%).
Vietnam stocks are said to be led by bank stocks as there were positive changes when the State Bank reduced the rediscount interest rate by 0.25%. In addition, Vietnam’s macroeconomic indicators continued to grow positively, a respectable achievement when the global economy faced many instability issues.
The Fund said that in recent months, taking advantage of the market’s momentum, it has sold a number of shares in its equity investment portfolio (including divestments from VJC last month). Previously, most of the investments in VOF portfolio were investments in private companies. And over time, through the IPO or listing periods, these investments turn into a portfolio of listed stocks. VOF Fund believes that it is time to sell a certain number of shares in the portfolio.
Within a year, Vinacapital has evaluated more than 100 private investments (non-public companies) and selected the six largest potential companies. By the end of September, Vinacapital said it would invest USD 21.4 million in Ngoc Nghia Industry-Service-Trading JSC. In particular, VinaCapital will “pour” USD 17 million through VOF and receive two seats in the Board of Directors Ngoc Nghia.
Unless some unforeseen problems arise during the negotiation process, the Fund expects to announce more deals in the near future. And when an agreement is reached, the proportion of investment in private companies will increase, thereby creating stability when the stock market continues to be a bit erratic.