The AFC Vietnam Fund gained 12.7% in April with a NAV of USD 1,558.09, bringing the return since inception to +55.8%. This represents an annualized return of +7.2% p.a. The Ho Chi Minh City VN Index in USD gained 17.0%, while the Hanoi VH Index rose by 16.2% (in USD terms) in April 2020. The broad diversification of the fund’s portfolio resulted in an annualized volatility of 12.78%, a Sharpe ratio of 0.49, and a low correlation of the fund versus the MSCI World Index USD of 0.55, all based on monthly observations since inception.

Unlike other rallies in Vietnam over the past few years, the recovery this time was very broad-based; even when accounting for the flaws in both stock indices in HCMC and Hanoi, with the HSX Index being very concentrated on Vingroup-stocks and banks, and two banking stocks in Hanoi being the main drivers for the index gains in April. We have seen price jumps in many small- and mid-cap stocks recently, some of which gained 30% to 80%. Those gains were driven by a new influx of capital from local first-time investors which more than compensated for continued foreign selling. We are also seeing a spike in new brokerage accounts being opened, with 32,000 in March alone, a development we have been waiting a long time for but certainly did not expect to happen during this bear market. In controlling risks, we used the massive jump in liquidity and sharp rally to reduce or exit positions in selected smaller stocks. We will reinvest this cash in bigger companies on renewed weakness given that many companies are currently trading back at similar valuations than before the crash.

At the end of April 2020, the fund’s largest positions were: Agriculture Bank Insurance JSC (5.8%) – an insurance company, Vietnam Container Shipping JSC (4.4%) – a container port management company, Idico Urban and House Development JSC (4.1%) – an energy, construction, and real estate business, TanCang Logistics and Stevedoring JSC (3.0%) – a logistics company, and Dinh Vu Port Investment & Development JSC (2.8%) – owner/operator of the Dinh Vu Port.

The portfolio was invested in 54 names and held 16.0% in cash. The sectors with the largest allocation of assets were industrials (31.2%) and consumer goods (24.7%). The fund’s estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 6.33x, the estimated weighted harmonic average P/B ratio was 0.82x and the estimated weighted average portfolio dividend yield was 7.87%.

The AFC Vietnam Fund gained 4.3% in May with a NAV of USD 1,624.75, bringing the return since inception to +62.5%. This represents an annualized return of +7.8% p.a. The Ho Chi Minh City VN Index in USD gained 13.1%, while the Hanoi VH Index rose by 3.5% (in USD terms) in May 2020. The broad diversification of the fund’s portfolio resulted in an annualized volatility of 12.78%, a Sharpe ratio of 0.54, and a low correlation of the fund versus the MSCI World Index USD of 0.56, all based on monthly observations since inception.

May saw another month of recovery, though it was less spectacular than April’s as momentum began topping out during the month. This is no surprise as the VN-Index has risen by 33% since the bottom on 31st March, and the rally was mostly broad-based with decent market breadth. It now needs some time to digest those gains before we get confirmation that a new bull market has started. It is good to see that foreign net selling mostly disappeared, while local retail investors, many of them new to the market, continued to purchase stocks across the board.

At the end of May 2020, the fund’s largest positions were: Agriculture Bank Insurance JSC (6.2%) – an insurance company, Vietnam Container Shipping JSC (4.7%) – a container port management company, TanCang Logistics and Stevedoring JSC (4.0%) – a logistics company, LienViet Post Joint Stock Commercial Bank (3.0%) – a bank, and Phu Tai JSC (2.8%) – a home and office furnishings company.

The portfolio was invested in 50 names and held 19.2% in cash. The sectors with the largest allocation of assets were industrials (31.1%) and consumer goods (22.6%). The fund’s estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.93x, the estimated weighted harmonic average P/B ratio was 1.02x and the estimated weighted average portfolio dividend yield was 7.58%.

The AFC Vietnam Fund lost 0.3% in June with a NAV of USD 1,620.26, bringing the return since inception to +62.0%. This represents an annualized return of +7.7% p.a. The Ho Chi Minh City VN Index in USD lost 4.2%, while the Hanoi VH Index rose by 0.3% (in USD terms) in June 2020. The broad diversification of the fund’s portfolio resulted in an annualized volatility of 12.70%, a Sharpe ratio of 0.53, and a low correlation of the fund versus the MSCI World Index USD of 0.55, all based on monthly observations since inception.

The volume on the Vietnamese stock market was relatively high during the month due to increased interest from local investors. Foreigners continued to be net sellers for most of the month, which was easily absorbed by the always more dominant local investor base. In 2020, foreigners sold more than USD 200 mln, but to keep that in context – this is less than the current average daily turnover on the two stock exchanges and just a little more than 0.1 per mille of total market cap. We should also not forget that during the market collapse between 2008 and 2012 foreigners were buyers most of the time, so any directions to be interpreted from foreign flows are questionable. This confirms our theory that while international money flows are important for Vietnam, as is the case for any other market, it is more important to see growing domestic investor participation in order to create a sustainable stock market.

At the end of June 2020, the fund’s largest positions were: Agriculture Bank Insurance JSC (6.7%) – an insurance company, Vietnam Container Shipping JSC (4.5%) – a container port management company, TanCang Logistics and Stevedoring JSC (3.8%) – a logistics company, LienViet Post Joint Stock Commercial Bank (3.2%) – a bank, and Phu Tai JSC (3.1%) – a home and office furnishings company.

The portfolio was invested in 48 names and held 23.0% in cash. The sectors with the largest allocation of assets were industrials (28.6%) and consumer goods (22.3%). The fund’s estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 6.54x, the estimated weighted harmonic average P/B ratio was 1.02x and the estimated weighted average portfolio dividend yield was 7.63%.

 

Domicile: Cayman Islands

Sources: Bloomberg LP, Asia Frontier Capital

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