The AFC Vietnam Fund decreased by −1.9% in September with a NAV of USD 1,831.46, bringing the return since inception to +83.1%. This represents an annualized return of +11.1% p.a. The Ho Chi Minh City VN Index in USD gained +1.3%, while the Hanoi VH Index added +2.7% (in USD terms) in September 2019. The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.50%, a high Sharpe ratio of 1.19, and a low correlation of the fund versus the MSCI World Index USD of 0.27, all based on monthly observations.

Lower rates as a sign of loosening money policy should support the economic growth in Vietnam. The State Bank of Vietnam recently reported credit growth numbers at 8.4%, lower than in prior years. The rise in bank shares as a consequence is understandable since interest rates are still high relative to other countries in the region and in the world. What may look like nostalgia for most people in the Western world, saving money in Vietnam still makes sense, given that inflation is well under control.

Unlike in Europe where negative nominal and real interests are having a negative impact on bank’s profit, Vietnam still enjoys an “old fashioned” credit cycle. As always, the limited availability of foreign room for local bank shares makes it difficult for foreign investors to find suitable investments in this sector. Besides Vietcombank and BIDV, most of the bigger bank stocks have reached their foreign ownership limit for a long time and hence are not accessible for international investors without paying a premium.

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