Vietnam Holding has had an exemplary start to 2024. The trust’s share price is up 12%, and the discount has narrowed to 6.5%.
UK Investor Magazine included Vietnam Holding in its ‘Top 15 Stock Picks for 2024’. Year-to-date, it has been one of the best performers.
Despite the sterling start to the year and sector-beating discount, Vietnam Holding has every possibility of continuing its ascent. Here’s why.
Vietnam’s growth is accelerating
After recording 5.1% growth in 2023, economist estimates for Vietnam’s growth in 2024 generally lie in the 6%-6.5% range. HSBC is forecasting 6% growth for the Vietnamese economy in 2024.
Increased exports, stronger manufacturing, and a boost from tourism are expected to drive accelerating growth. Domestic demand is expected to remain robust, and the Vietnamese economy’s digitalisation will underscore economic efficiencies. Retail sales grew 9.3% year-on-year in December.
Vietnam’s trade surplus reached a record $28 billion in December last year, which was helped by increasing electronics exports. Foxxcon invested $259m into two new plants last year, one of which will produce components for electric vehicles. As Vietnam’s manufacturing sector expands, the trickle-down effect to the consumer and broader economy will feed into Vietnam Holding’s portfolio.
Discount
Vietnam Holding and its manager, Dynam Capital, are intent on reducing and maintaining a low discount. Although this trust’s share price is trading at a 6.1% discount to NAV – a far superior discount to its peers, such is the commitment to a low discount, the VNH team will feel there is still work to do. Vietnam Holding’s peers trade at around a 20% discount and have been stuck with a wide discount for an extended period.
The trust introduced an innovative annual redemption facility last year, allowing investors to redeem shares at fair market value annually. The first redemption is slated for September 2024.
Efforts to achieve a low discount underpin the fundamentals supporting VHN’s Vietnamese growth companies.
Vietnam is not yet an emerging market
Vietnam is often referred to as an emerging market—which it is in many respects but not in the eyes of the organisation that sets equity index categorisations and, therefore, the flows of capital in any given jurisdiction’s equities.
Vietnam is still classified as a frontier market. Indeed, it accounts for around 28% of the MSCI Frontier Markets index. However, this may change in the future as Vietnam satisfies the criteria as an emerging market.
When Vietnam achieves the official EM classification, large emerging market money managers who are prevented from allocating capital to Vietnam as a frontier market will likely rush to buy up the country’s equities and Vietnam Holding’s long-standing portfolio companies.
