Vietnam Enterprise Investments (LSE:VEIL) Limited believes its strong weighting towards the banking sector will be rewarded in 2022 as the economy continues to recover from the pandemic.
In the past month, all of the FTSE 250-listed investment trust’s top ten holdings rose, though six of the ten underperformed the national index due to a relative underperformance in the banking sector.
The trust’s net asset value increased 6.5%, compared with 7.7% for the Vietnam Index, though for the year to date the fund’s NAV is up 47.1% versus 34.1% for the index.
Dien Huu Vu, portfolio manager at VEIL’s investment manager, Dragon Capital, said: “October started and finished strongly off the back of the reopening up of the economy and news of a potential economic stimulus package, respectively. The market closed the month on record-highs in the Vietnam Index, which had daily liquidity of $1.2bn across its three exchanges, also boosted by solid Q3 earnings growth and remains one of the best performing markets in Asia.
“VEIL is heavily weighted in banks and we believe valuation and share price performance in the sector will likely diverge further in the near future as 3Q and 4Q results separate the better banks from the weaker.”
The banking sector has been a weak spot for the market in general since the start of the fourth wave of the COVID-19 pandemic, primarily due to concerns about the possible creation of non-performing loans, the fund pointed out in the statement.
“Looking ahead to 2022, we believe stock selection within the banking sector will become more critical when assessing value/growth metrics, accelerating credit expansion and provisions being unwound,” Vu said.
“This presupposes that our forecast of a broad-based macro recovery pans out, helped by the expected fiscal stimulus to help Vietnam's economy return to its high growth rate, which we believe will be positive for equities.”