Thursday, October 22, 2020

Hopes of quick economic recovery make Vietnam's shares attractive

Sep 21. 2020
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By The Nation

Vietnamese company shares have become attractive to investors, as the country's economy is seen as recovering rapidly.

Vietnam is one of the Southeast Asian countries that has been able to contain the spread of Covid-19, enabling a quick turnaround of its economy.

The General Statistics Office of Vietnam expected economic growth this year to be at 3.6 per cent, down from 7 per cent in the previous year.

Vietnam was able to draw investments from several countries, such as Singapore, South Korea and China, while the country's foreign trade performed well.

Vietnam's stock market is also a good choice for investment, as its price-to-earnings was 14 times, higher than that of neighbouring countries. As of August 31, the country's VN30 Index year-to-date returns contracted 2.16 per cent, performing better than other regional indices.

The VN30 Index is made up of 11 industries, enabling the index to diversify investment.

One Vietnamese equity fund that is able to generate high returns is the Principal Vietnam Equity Fund (Principal VNEQ). The fund's year-to-date returns as of September 17 contracted 1.36 per cent, 6.25 per cent in the past three months, 19.79 per cent in the past six months, contracted 8.08 in the previous year and 6.02 per cent yearly since inception.

The fund's year-to-date return was higher than other equity funds. Its year-to date-return was 4.93 per cent in the past three months, 18.61 per cent in the past six months and contracted 10.01 in the previous year.

Also, the fund's year-to-date returns as of July 31 was similar to the VN30 Total Return Index that contracted 12 per cent, while its year-to-date return compared to the total return index in the past three months was 2.62 per cent and 0.92 per cent, respectively.

Principal VNEQ's outstanding point is the bottom-up strategy and fund manager's risk management, picking up middle- and large-cap shares with good fundamentals, high growth, sufficient liquidity and appropriate prices.

As of July 31, Principal VNEQ invested 98.5 per cent in Vietnam Dairy Products JSC, 7.34 per cent in Vinhomes JSC, 7.02 per cent in Hoa Phat Group JSC, 6.42 per cent in Vincom Retail Joint Stock Co and 6.39 per cent in Housing Development Bank.

Principal VNEQ is suitable for investors who invest in foreign shares because it has risks from liquidity, concentration, currency exchange and volatility. Also, the fund collects fees higher than other foreign funds at 2.31 per cent yearly, while the front-end fee is 1.50 per cent per annum.

Principal VNEQ's net asset value per share was Bt7.9478 per share, while net asset value was Bt1.30 billion. The fund does not have a policy to pay dividends.

Considering the investment trends in the rest of this year, Principal VNEQ is another interesting choice for investment, but investors should gradually buy stocks when the market falls to diversify risks and increase the chance to get returns from Vietnam's economic recovery, which is likely to be rapid.

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