The Fund went down 4.9% (SEK) in June, compared to the benchmark index, which went down 5% (SEK). June was predominantly a profit-taking month, given decent gains in the previous month. The Fund’s underweight in index heavy sectors such as Real Estate (Vingroup), Consumer Staples (Masan & Vinamilk), and Aviation (Viet Jet) added positive relative performance to the Fund. In addition, our off-benchmark bets in Material (Hoa Sen Group) also had a positive contribution to the Fund.
On the negative side, our off-benchmark bets in Energy (Southern Gas), Information Technology (FPT Group), Healthcare (Traphaco), and Consumer Staples (Kido Foods) did not perform well for the Fund.
The Fund reduced its exposure in Information Technology, Real Estate, and Materials in June.
FTSE Vietnam TR (SEK) declined 5% (SEK) during the month, performing worse than MSCI Emerging Markets’ positive return of 6.1% and MSCI Frontier Markets xGCC Net TR (SEK) declining 0.6%. After a strong run in May, investors chose to book profits, especially in the Energy sector. Foreigners remained seller to the tune of USD 30m, however, strategic investments by KKR and Temasek in Vin Homes of USD 650m converted the flow to a positive USD 630m. We saw improved investors’ participation and average daily traded value inching up to USD 334m.
The statistics department released the GDP numbers for the second quarter, where GDP grew meagerly by 0.36% Y/Y, bringing 1hCy20 GDP growth to 1.81%. These are the lowest readings during the last decade. Since the government imposed an effective lockdown and strong measures to control the virus spread, the economic numbers did not come as a surprise. Now when most of the businesses and consumer activities are back, we believe the worst is behind us unless there is a second wave of virus spread. The economic department has revised down the GDP growth forecast to 3.5-4.5% for Cy20, which is still optimistic compared to the IMF’s forecast of 2.7%.
Vietnam is now fully back to normalcy and COVID-19 seems to be under control. The manufacturing PMI re-entered an expansionary phase to reach 51 in June, up from 43 in May and 33 in April. The June PMI result was the first positive monthly reading since January (i.e., since the pre-COVID period). Index of Industrial Production (IIP) in June 2020 grew by 10.3% M/M and 7% Y/Y. During the first 6 months of the year, the index only increased by 2.71% Y/Y.
On the demand side, as measured by retail sales, has also shown an improvement in June. In June, retail sales went up 6.2% M/M and 5.3% Y/Y, from 4.8%Y/Y in May 2020 and -26% in April 2020. For the first 6 months of 2020, retail sales are still down by 0.8% Y/Y.
The trade surplus in June reached USD 500m despite traditional trade partners still under selective lockdowns. Exports were estimated at USD 21bn, up 9.5% M/M while import turnover was estimated at USD 20.5bn, up 12.8% M/M. This brings the total trade surplus during 6m2020 to USD 4bn. Noticeably, electronics, computers, and components reached USD 19.3bn, up 24.2% Y/Y. On the other hand, phones and parts export value grew 8.4% Y/Y to USD 21.5bn, accounting for 17.7% export turnover. Textiles and garments decreased by 15.5% Y/Y to USD 12.8bn. In our opinion, a strong trade surplus should create room for expansionary monetary policy to trigger economic growth.
Disbursed foreign direct investment (FDI) in 6m2020 was estimated at USD 8.65bn, sliding 4.9% Y/Y. The majority of the FDI is represented by manufacturing (71%) and real estate (15%).
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