THE MARKET

The Vietnamese market performed well during the first half of May, but concern over high margin borrowing balance by local investors put pressure on the market toward the end of the month and erased most of the gain. Due to the currency effect, FTSE Vietnam Net fell 1.0% in SEK, compared to a 4.1% gain in MSCI Frontier Market xGCC Net and a 1.5% increase in MSCI Emerging Market Net. Margin borrowing positions are at an all-time high level. However, brokers have not mentioned a reduction in loans to investors as liquidity has improved substantially recently. Average daily trading value rose to USD 250.1m (+24% m.o.m.). Foreign investors continued to buy with an encouraging net value of USD 52.3m.

The government officially put out an anti-dumping tax to galvanized steel sheets from China, and is considering doing the same for fertilizers. This provided a good trigger for stocks in those two sectors as competition will be more favorable.

Reports from Savills and CBRE showed early signals that the property market is cooling down. Number of new supply and successful transactions dropped significantly during the last quarter. Land price in Ho Chi Minh City as well as several other cities fell by 5%-10% from the peak.

The Prime Minister of Vietnam has visited the US bringing in top Vietnamese companies with the target to sign USD 15- 17bln worth of trade agreements. The US president also plans to visit Vietnam this November. Investors can thus be relieved that trade and investments between the two countries will continue to be good regardless of TPP withdrawal by the US.

Macro wise, most indicators are stable. PMI in May reduced to 51.6 but still means an expansion in manufacturing. 5M committed FDI surged to USD 12.1bn (+10.4%). May CPI dropped by 0.53% due to the fall of food and oil prices. 5M trade deficit stayed almost the same at USD 2.7bn.

THE FUND

The fund gained 2.9% (SEK) during the past month compared to the benchmark index which lost 1%. The fund’s overweights in off-benchmark bets in Financials (VND, MBB), Energy (PVT) and Information Technology (FPT) were the key drivers of positive relative performance. In addition, our underweight in the real estate sector also bode well for the fund. On the negative side, lower exposure in Consumer Staples were the negative contributors. No major changes were made in the fund during the month.