Vietnam Enterprise Investments (LSE:VEIL) Ltd reported a decrease in its net asset value (NAV) over the past month, but less than the national index as Vietnam was unable to escape the global stock market volatility.
The FTSE 250-listed company's NAV per share was US$11.54 as of 30 April 2022, down 5.9% over the month but up 12.7% on a year ago.
In comparison the national Vietnam Index, having been near all-time highs early in the month, fell 8.9% over the course of the month, but is up 12% over 12 months.
With VEIL’s share price decreasing 5.5% in April, its discount to NAV at the end of April was 18.7%, compared with 19.5% at the end of March.
"In April, despite some impressive Q1 2022 results announcements (which exceeded the investment manager's forecasts) Vietnam's markets responded to both global pressures and domestic events,” said Dien Huu Vu, VEIL’s portfolio manager at Dragon Capital, in a statement.
He said global concerns such as the anticipated policy tightening from the US Federal Reserve, China's lockdowns and potential supply-chain disruption from Beijing’s zero-COVID policy, and the risk of stagflation all weighed on the market.
“On the domestic front, sentiment was impacted by the arrest of the chairman of a small securities brokerage (following two arrests of the chairmen of two property firms as reported the previous month), with margin calls also affecting the market,” Dien said.
The two biggest laggards for VEIL’s portfolio in April were unsurprisingly therefore both property companies, Vinhomes and Dat Xanh Group.
Given the pair’s strategically located landbanks and quality of their projects, combined with the key sector drivers of urbanisation and the rising middle class, the investment manager believes that these two companies “remain primed for solid growth when investors start to look past these incidents and sentiment normalises”.
Despite strong first-quarter earnings reported in the banking sector, there was still a general decline in line with the market. Asia Commercial Bank and Vietcombank had relatively better performances than the sector and the national index, which the investment manager said was because these banks are considered to be more conservative with strong risk management and so are usually favoured in times of volatility and uncertainty.
Elsewhere in the portfolio, Mobile World Group saw improved investor sentiment after its annual shareholder meeting, reaffirming the retailer's ambitious growth path in the coming years.
Dien noted that pressures from the US Fed's rate hikes and the devaluation of the renminbi, had led to the Vietnamese dong depreciating 0.9% in the year-to-date.
“However, we still believe that the outlook for the Vietnamese dong remains solid, based on considerable US dollar inflows, a robust external account position, and importantly, the return of tourism after Vietnam's borders reopened mid-March.”
He noted that the State Bank of Vietnam can also use its foreign exchange reserves, which have increased tenfold over the past decade to US$110bn.
“Meanwhile, inflation has shown evidence of spillover effects from petroleum to other categories, resulting in a modest CPI increase of 2.6% year-on-year in April, prompting the State Bank of Vietnam to sustain the exchange rate to prevent imported inflation."
As part of its share buyback, 875,517 shares were repurchased in April, meaning 1.7% of issued shares have been bought since the start of 2022.