The Vietnam Fund returned +0.4% in November with a NAV of USD 1,813.88, bringing the return since inception to +81.4%. This represents an annualised return of +12.8% p.a. The Ho Chi Minh City VN Index in USD gained +1.3%, while the Hanoi VH Index lost −0.5% (in USD terms). The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.64%, a high Sharpe ratio of 1.40, and a low correlation of the fund versus the MSCI World Index USD of 0.27, all based on monthly observations. November’s market activity was characterized by less volatility and sharply lower volume. Investors’ nerves calmed, but they stayed mostly on the sidelines. Major indices ended mixed with HCMC up and Hanoi down while mid- and small-caps were mixed with only a few companies in our portfolio showing stronger movements.

Market Developments

With only one month left in 2018, it is time to sum up the events of this year and provide some initial thoughts about investments in 2019. As we all know, 2018 was a year most investors would like to forget, especially if Santa Claus doesn’t bring surprisingly strong gains in December. It will be remembered in the history books of finance for many things (including the meltdown in cryptocurrencies), but certainly not for a disastrous year in equities. What many investors have forgotten over the past few years of more or less continuous gains is simply that stock markets are not a one-way street, and a year of losing 10% on average in world stock markets is not really anything special in the world of investing. As a general rule, people investing with a time horizon of 1-2 years should refrain from investing in stock markets. Many current investors around the world are first time buyers who were attracted by non-stop gains in recent years, especially in the tech sector. Like in all previous bull markets, they are now getting caught by adjustments in stock prices due to unsustainable valuations. The same can be said for markets like Vietnam, where a long-term investment horizon is even more important as we are investing there for an economic and stock market outperformance not only in the next 1-2 years, but rather for the next 1-2 generations. This does not mean, however, that we are not looking for short term gains as well, but there are many factors in politics and financial markets which influence the price of stocks which have little to do with the business activities of the invested companies. Like a dog owner walking his dog on a leash, the dog will sometimes be ahead and sometimes behind his owner, but overall, he will walk along with him – very similar to the economy and its stock market – the only problem is that we don’t know how long the leash is. With our investment approach we try to reduce volatility in our portfolio as much as possible (so far very successfully), so investors do not have to worry too much about these short-term swings.