Frontier funds to pour money into Vietnam shares on growth

Bloomberg/TN News

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Traffic moves through the Hoan Kiem district of Hanoi. Photo: Bloomberg/Justin Mott Traffic moves through the Hoan Kiem district of Hanoi. Photo: Bloomberg/Justin Mott

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Frontier-market equity funds from Sweden to Hong Kong are ready to buy more Vietnamese stocks, attracted by cheap valuations and the fastest economic growth in almost a decade.
Coeli Asset Management and Asia Frontier Capital say they plan to add to their equity holdings this year as record-high foreign direct investments and the nation’s free-trade agreements help boost economic growth. Tundra Fonder says it wants to buy consumer, industrial and construction companies.
Vietnam’s VN-Index is priced at 1.68 times net assets, near a three-year low, after the gauge almost entered a bear market in January as rising U.S. interest rates and a selloff in emerging markets sparked outflows. The government’s growth target of 6.7 percent in 2016 will be among the world’s fastest, girded by rising domestic demand and foreign investment. HSBC Holdings Plc is bullish on Vietnam as attractive valuations and its economic resilience makes it a “rare bright spot,” according to a report on February 22.
 
“We will continue to allocate additional capital to the market; we like the consumption theme which benefits from the significant wage uplift as workers migrate from local factories to FDI-related businesses,” James Bannan, a portfolio manager at Coeli in Malmo, Sweden, wrote by e-mail. “We remain very positive on Vietnam’s prospect.”
Bannan, who boosted his holdings in 2015 when the VN-Index rallied 6.1 percent, has 14 percent of funds focused on Vietnam, one of his largest allocations. His investments there returned 27 percent in dollar terms last year, he said. The benchmark gauge fell 0.1 percent as of 9:18 a.m. local time on Monday.
Hong Kong-based Andreas Vogelsanger, chief executive officer of Asia Frontier Capital’s AFC Vietnam Fund, which has risen more than 40 percent since its inception two years ago, said Vietnam’s trade pacts and inflows of foreign investments are key reasons why the country will outperform Asian markets.
Shamoon Tariq, a Stockholm-based money manager at Tundra, said consumer spending and structural reforms will underpin Vietnam’s economic turnaround. Vietnam Dairy Products JSC, country’s biggest company, has rallied 13 percent in the past month. Petro Capital & Infrastructure Investment JSC , a builder, has jumped 36 percent.

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