Slightly unusual trading in Vietnam today. VNI barely moved but small caps up 0.8% and midcaps up 1.7%, with a small amount of net foreign buying. I'm curious how that affects NAV.
Currency weakness has been a BIG headwind in the last few months. Can it last much longer?
free stock charts from uk.advfn.com |
I see HFEL sold down their remaining 1.3% stake in VOF in their last reporting period, having been at 3.0% of their total investments a couple of years previous. In total, that's something pushing £15m worth that they've sold down. But they have none left now. I don't know if will help shrink the discount now but it's certainly not been helping it recently.
So HFEL selling its investment in VOF as VOF sell its Vietnamese investments to try counter the discount with buy-backs to let HFEL exit at a better price. The investment world has gone insane if it expects share prices to rise from everyone selling ... |
Ah thanks for that, I heard reference on a podcast to China selling western IP at production cost + and didn't know what they were talking about. |
China flooding social media with women advertising Chinese factories producing goods for companies like Lululemon and Prada. Saying you can order goods for $6 which are sold in the US for $100. Interesting tactic, but does highlight how big tariffs on low value items don't make much sense. It's really VAT in disguise that Trump is proposing. I doubt it will make any difference to Vietnam |
I am not sure that trying to appease someone as capricious as Trump is a sensible policy for any nation. |
Xi Jingpin visits Vietnam, 45 deals signed.
Trump describes it as China trying to figure out how to screw the US.
I think it's in Vietnam's interest to not appear to be collaborating with China right now. |
So it's good news for China at the expense of Vietnam? |
Vietnam exports a lot of this stuff: |
They didn't know yesterday whether for china is was 125 or 145. I would guess 10% is on top, but as amt says, who knows. |
I wouldn't bother trying to calculate anything. Trump can change his mind from one day to the next. Providing he doesn't do anything else the tariffs themselves are irrelevant compared to the damage to US consumer confidence. So best to see what happened the last time the US had a recession. |
From what I can gather the old US tariff on trainers was 9% and leaather/rubber sports boots and Cotton T-shirts was 20%. So what is the new rate? Add 10%? Minimum 10%? Everything now 10%? Something else? |
VNI closed up 4.6% but HNX up about 2%. |
Big increase in the market index today 3.5% |
There'll be a lot of US businesses running scared about getting on the wrong side of Trump now. They'll be seeking alternative producers to China. Other countries will also be looking at their Chinese sourcing again. China exports over $300bn of textiles and apparel. Vietnam currently exports over $40bn but could see a big boost from this.
And that's just textiles ... |
Why VOF over Veil, other than the dividend consideration.
VNH has thrashed both over the last 5 years.
Andy, who posts here, first alerted me to VNH back in the day. He lives, or lived in Vietnam, from memory. |
I would argue quite strongly a 10% tariff across the board doesn't damage Vietnam much. Even 20 or 30%. It doesn't export items that might be made in the US even at a 30% tariff, so just has to deal with lower volumes. What matters is the tariff differential with other similar countries, and whether that might cause development to be diverted elsewhere.
The Vietnam stock market is a step away from the economy, and VOFs holdings a second derivative. |
This is the rub, any idea that everything's now honky dory looks highly optimistic.
Business confidence, in particular, has taken a big hit stateside.
Expect a wave of Q2 and FY warnings and guidance cuts to come.
Andy, nice day for VNH |
Agreed. After today's near 7% rise in VNI and 8%+ rise in HNX, discount is probably approaching 28%.
But with Vietnam on 10% tariffs and China on whatever the latest huge tariff is, will importers be placing massive orders for Vietnamese fashion goods and other high-labour goods that are made in both countries to take advantage of the short-term discepancy?
I said this could benefit Vietnam, and the accounting says it does in the short term, though the emotion might leave everybody sat on their hands and not ordering. Take a guess as to what happens next .... |
Discount about 27 or 28% at 376p |
Now the EU retaliates.. |
China retaliates with 84% tariffs on America. Who's going to back down first, Trump or Chi? |
 I've only been pointing out that the emotional reponses to all these tariffs are disproportionate to the monetary impact that media seem to not be bothering to analyse. At the end of the day, I can't predict emotional reponses of importers, consumers and politicians when media are wailing at them that it is the end of the world when on fact it is only a modest pricing adjustment for many goods at RETAIL prices.
The prices of many imported Vietnamese goods are high in labour. If tariffs push landed prices up 1/3rd, do they manufacture in the US on 1/3rd more than Vietnamese wages? No. Which Americans will do repetitive handwork for $6 or 7k per year (v current $4k+)? They are still mostly going to be made in the same places while Americans pay slightly more. There will likely be a modest increase in automation in US producers to increase output as prices rise slightly but it won't double from 1 to 2% of the market overnight.
Such output in Vietnam was growing quickly. It might now stop growing or grow slower but why would it shrink on monetary grounds only? It's much cheaper and all the infrastructure is in place. It can't be replicated overnight and the costs still can't be matched. However, I can't predict if an importer can't get finance to carry on or if consumers stop buying suddenly because they're scared Trump will crash stock and bond markets. |
You make some good points but vast amounts of Vietnamese are employed in these factories. Some have climbed the ladder to enjoy a higher standard of living with their own properties, holidays, restaurants etc. Should these factories close or move elsewhere, the hit to Vietnam in terms of unemployment, the domestic economy and potential instability cannot be underestimated. |
The alternative and most likely impact is that sales of these products to the US falls off a cliff. I think the mistake is to assume demand will remain and it's just a question of where stuff is made. I also think it unlikely that manufacturing will return quickly to the US. It might over time as robotics and AI replace Labour. |
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