Vietnam Enterprise Investments Ltd outperforms benchmark as local market shrugs off Ukraine effects

The investment company’s discount to net asset value widened to 19.5% from 18.5% a month ago

Vietnam Enterprise Investments (LSE:VEIL) Ltd outperformed its benchmark last month as the Vietnamese index reacted little to events in Ukraine.

As of February 28, VEIL’s net asset value (NAV) was up 1.0% to $12.35 per share from end-January in dollars, compared to a 0.1% rise for the Vietnam index, which rose after the Lunar New Year holiday before losing ground amid global market turbulence before quickly recovering around record highs.

With the £1.5bn investment trust’s share price falling 0.3% during the month, its discount to net asset value at the end of the month was 19.5 % against 18.5% four weeks earlier.

VEIL repurchased just over one million shares in treasury during the month, with 0.8% of outstanding shares having been repurchased since the start of the year.

Dien Huu Vu, portfolio manager of VEIL, noted that unlike many markets around the world, Vietnam’s index has been robust since Russia’s invasion of Ukraine, while price inflation consumption was also minimal at 1.4%.

“From an economic point of view, although the investment manager’s initial assessment suggests that the conflict has not had a significant direct impact on the Vietnamese economy, we believe there will be knock-on effects on global markets and continued inflationary pressure.”

Money flows in the stock market were favourable, the manager said, with new retail investor account openings hitting their third-highest monthly number on record at 211,000, bringing new openings for both first months of 2022 to 401,000, more than all of 2020.

Net overseas sales stabilized at $16.4 million after about $130 million in releases in January and December, with average daily revenue down 16% on local exchanges, but for the first two months of the year, the average daily turnover increased by 60% year-on-year.

Regarding inflation, the manager raised the inflation forecast for 2022 from 3.5% to 4.2% to reflect higher oil prices.

“While oil itself is only 3.6% of the CPI basket, rising fuel costs could quickly spill over to other components of the basket, and commodity prices other than fuels are also vulnerable,” Dien Huu Vu said.

“Meanwhile, the investment manager has cut its trade surplus projection from $13 billion to $10 billion to make room for higher (oil-led) import prices and possibly a lower export volumes created by both demand and supply chain factors Currency risk appears limited given external account surpluses, rising US dollar reserves, low external debt and ongoing FDI disbursements.

By the end of the month, almost 77% of the country’s 97 million people had received at least two Covid vaccines and around 40% also had a booster economy.

Vietnam also increased its exports by 15.5% year-on-year to $23.4 billion, while imports jumped by 21.9% to $25.4 billion, the deficit of $2 billion of the month being awarded to manufacturers who increased purchasing activity at the fastest rate in ten months to secure materials for production, according to the IHS Markit PMI survey.

Separately, Samsung has committed $920 million to expand its smartphone factory.