The Vietnam Fund gained +0.8% in April with a NAV of USD 1,841.87, bringing the return since inception to +84.2%. This represents an annualized return of +12.1% p.a. The Ho Chi Minh City VN Index in USD lost −0.2%, while the Hanoi VH Index lost −0.1% (in USD terms). The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.52%, a high Sharpe ratio of 1.3, and a low correlation of the fund versus the MSCI World Index USD of 0.25, all based on monthly observations.

Market Developments

April is not only the month where earnings for the first quarter of the new fiscal year are published, but it is also the month where most annual shareholder meetings are held. As previously reported, we have attended quite a lot of them and so far, we are quite satisfied with what we have heard from management and their medium-term outlook. But we do intend to exit some of our positions which reached their target levels, and in due course we want to increase some of our existing holdings further as the earnings growth of many of our companies are far away from being priced in.

Most investors are simply satisfied with investing in an index tracking product or fund no matter how expensive the valuation or how high the risk of these investments might be. While a lot of people perceive bigger, blue chip, companies as safer investments than smaller ones, we have shown many times how volatile they can be as they are often the target of short-term traders. Furthermore, we currently observe the phenomenon in Vietnam that the stocks within the top 10% market cap are trading at valuations of around 200% higher than the rest of the market which is not commonly seen in other stock markets around the world and which is not sustainable over the long term in our view. A higher valuation – but not by a factor of 3 – would only be justifiable if the growth rate would be higher, but this is also not the case in Vietnam. The results of the blue chips, which have reported so far, can be seen as mixed at best.

For that reason, it is not surprising that the consolidation phase has not ended yet and the resistance for the most observed HCMC index could not be broken.