GCIVietnam Holding monitors Russia risk as it hails February recovery
The Vietnam-focused closed-end fund (VNH ) told investors that Vietnam saw its economy recover further last month in line with its expectations, despite the onset of the Russia-Ukraine war which has shook stock markets around the world in recent weeks.
‘Globally, the implications of this war include higher energy costs from a surging price of oil and other accelerated inflationary pressures,’ the firm outlined in its monthly investor report.
Vietnam said some markets will also see a significant dent in tourism ‘with a sheer lack of travellers coming from Russia, however, increased volatility will continue to be felt across all sectors as evolving geo-political risks impact the supply and costs of goods around the world.’
Despite this, Vietnam’s economy recovered further last month in line with expectations as ‘manufacturing bounced back to a PMI of 54.3, trade kept up its growth momentum with exports increasing +13.6 YoY and imports +22.4% YoY, as Foreign Direct Investment disbursement grew further, +7.2% YoY, and retail sales kept improving after the Tet holidays.’
As a result, Vietnam Holding finished the month up 3.8% resulting in a flat YTD NAV per share after January’s decline. Meanwhile, the fund’s high active weight has contributed to strong outperformance of the market as diverse performance among positions has continued, it said.
‘The mid-caps proportion of the portfolio recovered strongly, with VNH fully gaining back the loss incurred the month before and outperforming the market on the way up,’ it highlighted.
It said top positive contributors for February included bank holdings as valuations appeared more attractive after the underperformance in 2H2021, and logistics companies, which have seen better net-profit-after-tax growth in 2022 due to stronger demand for sea cargo transport.
Looking ahead, the company expects demand to continue, if not increase more, since these companies are likely to benefit from further value chain disruption caused by the crisis, it said.
The company highlighted that its business fundamentals have become the key focus again for its investors in Vietnam. It acknowledged that Vietnam’s trade with Russia is only around 1% of its total, and therefore, the company does not anticipate the war to hit businesses directly.
Instead, the company told investors that it expects to see more global inflationary pressures stemming from the conflict as the main risk in Vietnam going forward, as well as domestic money flow which is already becoming less easy-going as a result of the current environment.
Addressing investors, the company said: ’With International Women’s Day, World Water Day, and World Consumer Rights Day all taking place throughout the month of March, it seems pertinent to also emphasise our monitoring of how the conflict in Ukraine and consequential rising energy costs might affect environmental, social and governance (ESG) commitments.”
Indeed, the ‘S’ side of ESG can transpire in many ways, including better customer service, high staff retention and positive innovation through greater research and development, to name a few. PNJ, the leading jewellery producer and retailer in Vietnam, is an excellent example of how corporate social responsibility can enhance customer satisfaction and trust. It is a well-respected brand that was recently applauded by Facebook for having over 138x return on ad spend and a 10% conversion rate from Messenger to successful transactions.”
“FPT, another exemplary company in our portfolio in this regard, takes pride in its education business with nearly 74,000 people becoming qualified IT skill workers because of it as of 2021. As one of Vietnam’s biggest broadband Internet providers, its management also aims to grow its products and services for domestic SMEs, which is not only positive for its own long-term performance but also for further growing the country’s economy,” Vietnam added.
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