Monthly comment – June

The market

The Vietnamese stock market rose in June and reached a new 9-year-high level, supported by the strong performance of some key sectors such as Financials and the consumer and manufacturing sectors. The currency effect, once again, took out all of the gain and left FTSE Vietnam Net (SEK) at -1.1%. Vietnam outperformed both MSCI Frontier Market xGCC Net (SEK) and MSCI Emerging Market Net (SEK) which fell 1,5% and 2.1% respectively. Trading wise, foreign investors continued to buy the Vietnamese market with USD 89.5m net value during the month, lifting their total net buy year-to-date to USD 405m. Local investors were also buyers, speculating on strong Q2 results which will be out shortly. Liquidity was maintained at a high level of USD 214.5m a day in average. Financials did rather well this month thanks to a new regulation of the State Bank of Vietnam that allows commercial banks to be more flexible in dealing with their NPLs. High credit growth and better earnings prospects also helped their share prices to excel. The recent downward trend of commodity prices had a positive effect on the manufacturing sector as input costs are coming down. In a few weeks time, Q2 earnings will be out and may provide an additional boost to the market.

Macro wise, most indicators continued the same trend. PMI in June rose to 52.5 vs 51.6 in May. 6M committed FDI jumped to USD19.2bn (+54.8%). The disbursed number is more modest though at USD 7.7bn (+6.5%). June CPI fell to 2.54% (vs 3.19% in May) due to the fall of food prices. The 6M trade deficit was more or less unchanged at USD 2.7bn. Q2 GDP growth started to gain momentum at 6.2% (vs 5.2% in Q1). Thus, 1H GDP growth improved to 5.7%, still far away from full year target of 6.7%. However, with a detailed action plans including producing additional 1.5-2m barrels of crude oil, the government is still on their way to reach the number.

The fund

The fund gained 2.6% Net (SEK) during the month compared to the benchmark index which lost 1.1%. A majority of the outperformance was derived from our underweight in Industrials (ROS) in addition to our off-benchmark bets in Consumer Discretionary (PAC, DRC), Financials (MBB) and Information Technology (FPT). Our underweight in Consumer Staples (VNM, GTN, BHS) however contributed negatively to the relative performance. Our cash position (kept in USD or VND) also added to the negative performance as SEK appreciated against the major currencies. No new positions were added in the fund.

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