Vietnam Holding sees significant uptick in country's manufacturing and FDI

Dynam Capital, the investment manager of VietNam Holding (VNH Follow | VNH), delivered in its July 2022 investor report an upbeat assessment of Vietnam's economy and business environment against a backdrop of global macroeconomic uncertainty.

Despite continued volatility in global equities and inflationary pressures around the world, Vietnam maintained resiliency and recorded a trade surplus of US$764m for the first 7 months of 2022.

The country's manufacturing sector continued to expand in July while China, Korea and the EU slowed. This is evidenced by Apple's recent decision to manufacture its Apple Watch and MacBook line of laptops in Vietnam instead of China for the first time. This follows Samsung's recently announced plan to  trial production of semiconductor parts in its facility in Thai Nguyen province from July 2023. Samsung also revealed plans to invest an additional US$3.3b in Vietnam later this year.

Furthermore, with help from Vietnam's central bank, the VND remained stronger and more stable than other currencies in the region, particularly against the rising USD. This has in turn enabled Vietnam to maintain controllable foreign debts and a diverse range of trading partners.

Retail sales are recovering and consumer confidence is high, prompting VNH to maintain significant exposure to Vietnam's retail sector. The fund explains that some profit-taking in Q2 has weakened its retail positions somewhat, resulting in a 0.6% decrease in NAV. VNH maintains confidence in the sector, however, pointing to temporary causes of some mixed earnings results, such as restructuring and expansion expenses, and good business results and increased market share not being rewarded due to market uncertainty.

VNH reported its top 10 holding companies were showing evidence of compelling growth, with market valuations in Vietnam at a more attractive level following diverse Q2 earnings reports.

With economic development and stability have come increased levels of foreign direct investment (FDI), which surged by 59.3% to US$7.24b in 2022 so far, according to a report by the Vietnam Ministry of Planning and Investment. Over 900 new foreign projects worth US$5.7b were licensed in the last 7 months. Foreign investors have been encouraged by aforementioned decisions by Apple, Samsung, and others to invest heavily in Vietnam.

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Today's report mirrors an equally positive H2 21 report from March, which showed asset value per share rising 14.1% in USD and 31.7% in GBP. Vietnam's open economy approach has seen its trade reaching more than US$668b in 2021, representing more than 200% of GDP, levels seen by only a few countries globally.

Vietnam continues to develop a strong middle class with increasing levels of consumption, as living standards, digitalisation, and domestic production advance. The country is to become the tenth largest global consumer market by 2030, larger than Germany's. VNH is focused on this transition as part of its investment approach and selection criteria. 

Vietnam's tourist sector is also rapidly growing with a 43% year-on-year jump in holiday travel last month, and domestic tourism now 40% above pre-pandemic levels.

Vietnam’s stock market was one of the best performing in the world in 2021, with domestic indices hitting record levels. VNH is up 170% since the pandemic downturn in April 2020 and has remained largely flat this year, indicating resilience against the global downturn in equities, and optimism about the country's growing market.

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