A new way to tap into Vietnam

Vietnam has huge potential. But until now there’s been no effective way for investors to buy in. A new fund aims to change that, says Merryn Somerset Webb.

160526-vietnam
Investors will soon be able to buy into Vietnamese stocks

You might remember me writing about a particularly good group of Vietnam based fund managers SSI Asset Management coming to see me in Edinburgh last year. They've just been through again, so this is just a quick update.

The firm has two Vietnam funds on the go. Both have fabulous records the SSI Sustainable Competitive Advantage Fund is, for example, up 14% since its inception in September 2104 against a market return of -12%, and 7% from the next best fund in the market (VN Holding Ltd). But we can't invest in either of them (one is for local investors and one is for institutional investors).

That's particularly frustrating, given the potential of the Vietnamese market. It's got a young and well educated population (average age 29, literacy rate 94.5% and educational attainment levels just below Germany and just above Australia).

It's becoming the production hub of choice for firms priced out of China and Taiwan, and domestic consumption is rising nicely too: from $46bn in 2012 to a forecast $940bn in 2030. Inflation and interest rates are at the right sort of levels (3% and 5%) and GDP growth is not far off 7%.

At the same time, its stockmarket is super-cheap but with fast improving corporate governance: nearly 400 stocks have p/e ratios under ten, and some 50% of companies trade below their book value. And you get dividends too the average yield is just under 4%.

There is good news. In June, the firm is launching a new UCITS fund that you will be able to buy on most UK platforms. It's to be called the Vietnam Value and Income Fund and will follow a similar strategy to the fund mentioned above seeking out undervalued and under-researched stocks (SSI has 20 people in Vietnam) in what is already a cheap market.

The managers expect the final portfolio to have an average yield of around 5.5%, an average p/e of nine and an average price to book ratio of around 1.6.

The new fund won't be particularly cheap (there's to be a 1% management fee and a performance fee too). But if it performs as well as the other funds in SSI's portfolio, you probably won't mind this as much as you usually do.

I'll let you know when it launches it's worth noting that if it does well it won't be open to us for long: the managers intend to cap its size at £200m (something I thoroughly approve of!).

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Beware the hidden risks when investing in emerging markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Emerging markets: buy when the news is bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

How the stamp duty holiday is pushing up house prices
Stamp duty

How the stamp duty holiday is pushing up house prices

Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb…
25 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020
Can Rishi Sunak’s winter plan save the UK economy?
UK Economy

Can Rishi Sunak’s winter plan save the UK economy?

With his Winter Economic Plan, chancellor Rishi Sunak is hoping to support the economy through the dark months ahead as restrictions tighten again. Jo…
25 Sep 2020