The Vietnam Fund returned +0.6% in March with a NAV of USD 1,880.29, bringing the return since inception to +88.0%. This represents an annualised return of +15.9% p.a. The March performance of the Ho Chi Minh City VN Index in USD was +4.4%, while the Hanoi VH Index gained +3.2% (in USD terms). The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.65%, a high Sharpe ratio of 1.79 and a low correlation of the fund versus the MSCI World Index USD of 0.26, all based on monthly observations.

With most markets around the globe in negative territory this month, as well as for the first quarter, Vietnam was able to buck the trend again – at least some index heavyweights did. The indices of HCMC and Hanoi advanced by 4.7% and 3.4% respectively, while most stocks lost ground again. Our diversified investment strategy is still playing out, but at a slower pace in this environment. With a slightly lower Dong, our NAV was able to gain +0.58% to USD 1,880.

Vietnam continues to have not only two stock exchanges, but also two different types of stocks – a tiny group of index heavyweights and all the remaining 1,000+ stocks. We are still looking for the light at the end of this very long tunnel in terms of an improved market sentiment for small and mid-caps. Local retail investors, responsible for about 80% of market activity, are continuing to follow foreign institutions, which have been pouring money into the same stocks since the beginning of this decoupling. Some market observers would call these valuations by now “stretched”, but for others valuation is simply not an investment criterion at all, like ETF’s or short-term momentum players. For many institutional investors, this ongoing strange market behaviour is now becoming more and more of a problem as the disconnect between the majority of the stocks and the index heavyweights gets larger.

With an index up 19.3% in the first quarter of 2018, people would think that all investors should be happy with their stock investments, as it seems to be an outright bull market. In fact, despite the tremendous index gains over the past few months, only a minority of stocks have participated in this rally. The majority of stocks are actually down since the beginning of this year.