The report notes that Vietnam is poised to become the biggest constituent in the MSCI Frontier Markets 100 Index following Kuwait's recent reclassification as an Emerging Market. This means that Vietnam could make up as much as 30% of this benchmark index by the end of 2021 and potentially attract several hundred million dollars more from foreign equity investors.
It points out that Vietnam's emerging economy is unique not only given its remarkable growth over the past three decades and since launching its stock market only 20 years ago but also because it is one of the few countries in the world that will end 2020 with GDP growth.
Containing the coronavirus (COVID-19) pandemic well has certainly helped Vietnam's economy bounce back in the second half of this year with ever-increasing improvement in domestic demand and manufacturing activities, the report continues, with the government's aim for increased public investment in infrastructure also playing an important role in building a sustainable recovery since lockdown.
Foreign direct investment remained strong in October and the country saw further export growth, up 10.2% for the month, as well as a record year-to-date trade surplus of US$18.7bn, it adds.
Corporate Q3 results released throughout the month proved promising across most sectors apart from harder-hit areas, such as aviation and tourism; though both are in better shape than some other tourist destinations around the world thanks to buoyant demand in domestic travel. Retail sales also made notable 2.4% month-on-month and 6.1% year-on-year increases in October.
The fund outperformed the VNAS index with a 3% net asset value (NAV) increase largely due to overweight holdings in selective companies across the Industrial, Retail, Banking and Telecommunications sectors.
The most significant contributor was steel producer Hoa Phat Group (HPG) up 15.8% on its exceptional Q3 earnings and NPAT year-on-year increase of 111% stemming from stellar sales growth. In Retail, it benefited from our overweight holdings in Mobile World Group (MWG) and Phu Nhuan Jewellery (PNJ), up 1.8% and 14.2% respectively for the month.
The fund's increased holdings in Vietin Bank (CTG) also paid off. The bank recorded a robust year-on-year rise in earnings of 22.6% for the first nine months of 2020, placing it amongst a few banks with two-digit NPAT growth.
Not only is its stock price relatively cheap compared with its peers but the bank is also well-positioned for further growth given the government's amended law on the investment and management of State capital for joint-stock enterprises. This amendment allows the three largest banks in Vietnam to increase their charter capital and improve Capital Adequacy Ratios, which gives room to further expand business activities.
The investment said it has been increasing holdings in the Banking sector throughout the pandemic given their attractive valuations and strong growth potential in an under-banked country. Vietnam's resiliency throughout the pandemic has helped raised its profile as a major trading partner in the world and an attractive manufacturing alternative to China.
Vietnam is the Chair of ASEAN this year and has recently attracted stately visits from the new Prime Minister of Japan, the Foreign Secretary from the UK Dominic Raab, as well as US Secretary of State Mike Pompeo, two weeks before the American Presidential Election. Trade relations are expected to gain further momentum and the fund anticipates Vietnam's economy will return to an expansion rate above 6% next year given the country's multiple engines of growth, Dynam Capital said.
In October the fund held its AGM where all resolutions were passed, including authority for a tender offer for 15% of the company's shares. The tender price announced on November 9, 2020, was $2.5857 per share.
Electronic copies of the report are available to shareholders on the company's website: www.vietnamholding.com/investors/