VietNam Holding Ltd's (LSE:VNH) investment manager said it still sees "much upside" for the Vietnam economy as it "roared into 2022" but the investment trust was caught up in a sell-off of mid-cap companies.
The country's retail sales made a strong recovery of 1.3% and manufacturing PMI data also bounced back to 53.7 for January in what was the fourth consecutive improvement in factory activity following the lessening of the Delta wave of coronavirus.
Foreign direct investment disbursement rose sharply as lockdowns were lifted, increasing 6.8% year-on-year to US$1.6bn, the strongest January in five years, while capital commitment to existing projects rose 169%.
Dynam Capital Ltd (LSE:CAPD), the trust's manager, said local retail investors are continuing to drive the Vietnam stock market and are steadily becoming more sophisticated, though this led to equity markets entering the year on a more volatile note, with a twist in divergence between blue-chips and mid-caps and an increased disparity of returns among sectors.
"These movements were largely due to profit taking by domestic retail investors, who continue to drive the country's stock market and in January made a sudden reversal from the month before by selling mid-caps in brokerage and real estate and shifting to blue chips in banking and retail," Dynam said.
The manager's ongoing research and market surveys conducted over the past year indicate how fast this growing group have evolved in such a short space of time, with the more experienced 'F1' investors now tending to refer to company financial statements when selecting stocks rather than looking at technical indicators as they did before.
"This could be because of the ever-increasing interest in online financial education through YouTube and other social media channels," Dynam suggsted.
Novice investors, or 'F0s', are now trying to detect signals from the market, whereas in earlier waves were listening to what brokers were recommending and prior to that taking tips from family, friends, and insiders.
The VNH saw its net asset value decline 3.6% in January amid the heightened divergence and volatility.
"The indiscriminate sell-off brought the whole pool of mid-caps down regardless of fundamentals and we considered many of the movements to be irrational," said Dynam.
"We believe the overreaction is likely to be attributable in part to the high level of margin trading among retail investors. In any case, we kept steady hands and chose to stay largely still as the market moved at furious speed, and then began to recover in early February."
Top positive contributors to the fund for January were mostly from the banking sector, while real estate endured a correction after a strong performance in previous months with VNH having reduced its holdings in the sector before the correction.
"Vietnam's equity market overall is at its long-term valuation levels, and despite the twists and turns in January, we still see much upside for 2022. Stock picking is always key in emerging markets such as Vietnam and, as always, our eyes will be on companies well-positioned for growth and making a positive impact," the manager said.