The Vietnam Fund gained +3.0% in September with a NAV of USD 1,845.40, bringing the return since inception to +84.5%. This represents an annualised return of +13.7% p.a. The Ho Chi Minh City VN Index in USD gained +2.7%, while the Hanoi VH Index added +3.0% (in USD terms). The broad diversification of the fund’s portfolio resulted in a low annualized volatility of 8.66%, a high Sharpe ratio of 1.50, and a low correlation of the fund versus the MSCI World Index USD of 0.23, all based on monthly observations.

Market Developments

The Vietnamese equity market continues to remain resilient against the ongoing negative media coverage on emerging markets. It now seems that domestic and foreign investors are getting increasingly positive about Vietnam, especially with more analyst reports looking at potential losers and beneficiaries, such as ASEAN, specifically Vietnam, in relation to the escalating trade war between China and the US. FTSE announced that Vietnam, which is currently classified as a frontier market, will be added to the watch list for possible reclassification as a secondary emerging market. It will probably not have the same impact as an MSCI reclassification, but it is definitely something worth noting. We should mention that the composition and performance of the FTSE Vietnam Index is very different to other indices as it has a very high concentration of around 70% (!) in the top five weighted companies. But this news should further improve the market sentiment which is also reflected by the advance/decline ratio, as seen below, with more stocks finally advancing than declining, something we have not seen this year.

The fear of many investors in relation to emerging markets seems to be due to increased media coverage, specifically on those markets which will be impacted by Trump’s trade war. Though historically, there have always been some emerging market countries in crisis at almost any given time. In fact, 2018 has not been much of an exciting year for global investors thus far. Bond investors have been given very little yield around the world and US bonds tanked heavily with increasing interest rates. Even the strong Dollar (“strong” at least according to media coverage) is up only 2% this year, based on the USD index. When looking at different main market indices around the world, it is hard to find any particularly strong performance this year, with the exception of US markets. But it is exactly the US where we see some potential bubbles; for example, in overhyped cannabis stocks right now where companies with a few hundred employees and little business are valued at several billion dollars. This is just one of many such cases in the late stage of the US bull market.