Vietnam market performed in line with the Frontier markets in August with 1.4% gain for FTSE Vietnam Net (SEK), compared to 1.2% return of MSCI FM xGCC Net (SEK) and 0.5% for MSCI Emerging MARKETs Net (SEK). Liquidity was at decent levels with an average trade value of USD 194mn per day. Foreign investors were net buyers and poured in fresh equity of USD 109mn. Newly listed Vietnam Prosperity Bank (VPB VN), one of the most efficient mid-size commercial banks, marked a record high subscription of USD1.2bn from foreign funds for its pre-IPO book building. However, share price declined 7% from the listing reference as foreign ownership limit maxed out on the first day of trading. The government reiterated the GDP target of 6.7% for 2017.The Prime Minister pushed the banking system to increase the credit growth target to 21%-22% in order to boost the economy. This increase would translate into another USD 31bn to be available to the market in the form of margin lending during remaining 5 months of 2017. The Ministry of Finance proposed a new tax scheme, in which VAT tax will increase to 12% from the current rate of 10%, starting 2019. It is believed that this move will bridge budgetary gaps for infrastructure development. Other macro indicators also remain encouraging: PMI stayed almost unchanged at 51.8, CPI increased by 0.92% in August, mainly due to the hike in healthcare service prices and petrol prices; while committed FDI for the first 8 months surged to USD23.4bn (+45%) while disbursed FDI was USD 10.3bn (+5%).
The fund retreated 1.6% (SEK) during the month, compared to the benchmark index which gained 1.4%. Our natural underweight in index heavy stocks in Real Estate (VIC), Consumer Staples (MSN) and Industrials (ROS) contributed mostly to the relative underperformance. As a result of the buying spree by foreigners and ETFs, these heavy weights are likely to surge more than rest of the market. In addition, our overweight in Materials (BCC, HT1) and Consumer Discretionary (PAC, DRC) also added to the negative relative returns. On the positive side, our underweight in Consumer Staples (VNM, SBT) performed well for the fund. The fund has added exposure in Real Estate during the month.