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The Vietnam Fund returned +3.0% in May with an NAV of USD 1,787.13, a new all-time high, bringing the net return since inception to +78.7%. This represents an annualised return of +18.4% p.a. The May performance of the Ho Chi Minh City VN Index in USD was +2.8% while the Hanoi VH Index gained +4.9% (in USD terms). Since inception, the AFC Vietnam Fund has outperformed the VN and VH Indices by +43.9% and +50.9% respectively (in USD terms). The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.83%, a high Sharpe ratio of 2.06, and a low correlation of the fund versus the MSCI World Index USD of 0.30, all based on monthly observations since inception.

News about a higher Vietnam weighting in the MSCI frontier market index and rumors that Vietnam will be added to the MSCI watch list for a potential upgrade to emerging market led to strong buying interest in blue chip stocks on both exchanges. Some banks, with a fully used foreign ownership quota, advanced by 10-20% over the past month, but also brokers, some of which we own, had a similar run and pushed up the indices, in particular, the Hanoi-index.

Market developments

We decided to sell two more of our oldest investments at very attractive prices due to an increased appetite in the small and midcap segment. We believe that these two companies are no longer as inexpensive as the rest of our portfolio and we have therefore increased our position size in some of our existing stocks according to our investment model. Additionally, we found some new and attractively valued midcap stocks which we have added to the portfolio.

Vietnam – the most compelling investment case since China’s stock market evolution twenty years ago

At any given time, there are numerous investment opportunities across the globe. For example, US stocks could see further expansion in valuation given their leading position in innovation, Europe could come out of the doldrums they have been stuck in for the past 10 years and finally see some economic growth again, but Emerging Markets in particular are looking better than they have over the past six years. Vietnam specifically is still one of the very few places in the world where all prerequisites are given for continuous growth and financial gains over the long term and we expect them to follow and participate in the 20-year long China success story.

Vietnam is still in the very early stage of a long-term upward trend, both in terms of economic growth and evolution of financial markets. The comparison with China is sometimes seen as overdone by many people, but in our view, it is most appropriate and we would even make the argument that Vietnam is in many respects in a more advantageous situation than China was 20 years ago.

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