Monthly comment – July

The market

The Vietnamese equity market retreated in July. The market initially panicked about high gearing among retail investors. Bargain hunting from both foreign and local investors pushed the index back to bullish spree by the end of the month. FTSE Vietnam Net (SEK) closed July 3.6% down (flat without the currency effect), compared to a 2.8% drop of MSCI Frontier Markets xGCC Net (SEK) and a 2.1% gain of MSCI Emerging Markets Net (SEK). Liquidity remained decent at USD 202m average daily traded value. Foreign players remained net buyers to the tune of USD 112m (year-to-date net foreign inflow already surpassed half a billion USD). As the result season started, 1H earnings are being released. We are witnessing significant differences between individual companies/sectors. In general, business conditions in the first half were healthy for banking, consumer, brokerage, etc. while oil and gas, cement, steel, and commodities faced difficulties. The government has fast tracked IPOs of a few major SOEs and has expressed an interest in reducing its stakes in some strategic holdings including Saigon Beverage (SAB), Hanoi Beverage (BHN), and Vinamilk (VNM) toward 2H2017. This helped those shares rally in July.

In terms of macro, PMI in July cooled down to 51.7. This however still indicates an expansion in the manufacturing sector. 7MCY17 committed FDI jumped to USD 21.9bn (+52% y-o-y). Total disbursement is more modest though at USD 9.1bn (+5.8% y-o-y). 7MCY17 retails sales reached USD 74bn (+10% y-o-y). July CPI was soft at +0.1%, taking YTD CPI to 3.9%. This allowed the State Bank of Vietnam to cut policy interest rates by 0.25%-points.

The fund

The fund lost 6.5% during the month compared to the benchmark index which dropped 3.6%. Our overweight in Materials (BCC, HT1, HSG) and Consumer Discretionary (DRC, CSM) contributed mostly to the relative underperformance. On the positive side, our underweight in Consumer staples (VNM), Real Estate (NVL), and the off benchmark bet in Financials (VND) performed positively. No new positions were added in July.

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