Vinacapital Vietnam Oppo... Share Discussion Threads

[aleman] 18/9/2024 09:49

Economic forecasts seem to be improving after Vietnamese inflation came in lower than target last month. Inflation was expected to hold steady at 4.4% but dipped to 3.5%, versus a target of 4.0-4.5%. In the last 6 months, CPI has risen at an annualised rate of only 2.1%. The prospects of a dovish central bank in months ahead are tending to see a stronger outlook in the latest economic forecasts. This should help the property market recover from a couple of years of doldrums, besides the general economic uplift of GDP growth, expected to be pushing 7% in 2025. Gold has been on a very strong run and savings rates are likely to fall so a switch to lowly-priced shares and and property in the early stages of recovery could see VOF in a sweet spot in the next year. Falling western interest rates might reduce foreign selling of Vietnamese equities that have plagued the stockmarket market since the 2022 bond crisis.



Domestic capital outflows are becoming less acute and should ease further, given better stability in the local gold market, lower U.S. rates, and manageable domestic inflation pressure, according to MUFG.

Improving inflation and interest rate expectations and improving economic confidence is seeing a flood of corporate bond issuance which looks like being the final recovery stage of the property bond crisis that started in 2022.

[amt] 16/9/2024 20:17

Well if the market goes up and it comes good in the next year or two I shall celebrate but I am much less bullish than most of the posters here.
I think there are better options elsewhere but I will keep my small holding, best to spread the risk.

[kenmitch] 16/9/2024 16:11

My final post on this as it’s not worth wasting time with ill informed posters.

There was an 11 month bear market in Vietnam which started at the all time Vietnam Index peak around 1500 in January 2022 and ended in November 2022 when their market bottomed around 960. I stayed invested during that 40% fall but posted on Mike Walters site on the Investment Trust threads that it looked too early to buy while those falls were occurring. It was fluke timing admittedly, but I topped up both VOF and VNH right athe bottom in Nov 2022 and posted that buy opportunity at the time.

Since then their market has been in a slowish uptrend and is now at 1240 and about 25% above that Nov 2022 buy opportunity. There is of course a plus and minus case for investing in Vietnam now as there is with every market and every share we invest in. So sensible posts putting the current bear case for Vietnam are very welcome.

My preferred tactic for years has been to buy the big dips e.g like at the start of the recovery from the banking crisis heavy falls, and then again with the big overdone Brexit falls that were quickly reveersed, and as the markets recovered after the covid falls and again during the temporary Liz Truss chaos crash. That tactic often works.

[shaker45] 16/9/2024 16:03

Amt you should be trying to understand the future and not living in the past.

[amt] 16/9/2024 15:21

Exactly there is political risk and its a lot of risk. That for me explains why when all the economic indicators look so good the market has disappointed and is where it was 3 years ago.
That's not ill informed rubbish, it's factual
What is not factual is to give the impression that thr Vietnam stock market has done well in the last 3 years
You can give a distorted view by describing when you happened to buy Kenmitch when the market was low and so you might have done OK but that's hardly a good analysis of the situation.
Interesting how when the facts don't suit somebodies analysis they resort to commenting about the poster in a negative way rather than discussing the facts.

[aleman] 16/9/2024 13:35

VNI is on a forward P/E of 11.3 @1239, with earnings predicted at the upper end of 15-20% growth in 2024 and then 15-20% growth in 2025. That puts the 2025 P/E under 10. The historic trailing average figure is generally quoted around 14.5-15. A reversion to the mean could see the VNI rise 50% in less than 2 years. If it did, I'd expect NAV here to slightly outperform, as it reversed previously underperforming property and unlisted investment exposures. Then we might also see the discount to NAV of 24% shrink to a more normal 10% or so. It's quite possible a reversion to the mean of all parameters, on strongly rising earnings and improving sentiment, would lead to a 75-80% rise in VOF shares in under two years.

I'm not saying this will happen. It's not a forecast. I'm just asking someone to suggest another foreign investment trust where there could be such large gains based on current strong earnings forecasts and reversions to historic means that might come if the forecasts were hit?

I grant there is political risk. If there wasn't, VNI would probably be on a higher rating with the historic and future growth profile it has had and seems likely to have.

[shaker45] 16/9/2024 12:34

Ignore amt.very negative on vietnam. Read the recent Questor column on vietnam to see a better informed view

[kenmitch] 16/9/2024 11:56

amt

Your reply makes my point even clearer. It’s GOOD to read quality posts giving the negative case. There’s no point tsking notice of people who post ill informed rubbish, and unfortunately that applies to your posts here.

VOF has proved a disappointment this year with flat performance but that’s partly because the discount is so wide.

VOF has tripled since 2016 and doubled from the covid lows. It is up 15% from when I posted and added on the November 2022 buy opportunity.

VNH has done much better snd is on a small discount thanks to that. VNH is up 22% this year, and up 70% since I bought and posted at the Nov 2022 low, and has tripled since covid low and multibagged 25 times since 2009.

[amt] 16/9/2024 11:16

Kenmitch you can put the blinkers on if you like but since I sold down a substantial part of my holding after I became aware just how risky a market Vietnam is the market and VOF have fallen. If you are only interested in observing anything positive and ignoring the risks then that's your decision. However to tell other readers to ignore a different point of view from Aleman is rather short sighted and goes against the idea of discussion which is the idea of these boards.
If Vietnam only had all the good points going for it the market would have gone up, not down. Perhaps you can explain why that is the case.
I still have a holding here but reduced by 90% so I do still have an interest but I am not going to look at everything through Rose tinted glasses.

[kenmitch] 16/9/2024 11:02

silverlandfinance

VOF is on a much bigger discount than VNH and that’s partly because they hold some non quoted investments. But imo both these Trusts are well worth holding as the frequent updates from Aleman here AND the monthly updates and Results comment from the Trusts themselves make clear. Ignore posts from amt; it’s always good to read the well argued case against a share or Investment Trust, but not ill informed nonsense.

btw….there are a lot of Trusts across a range of sectors that are on unusually wide discounts. It’s often a buying opportunity

[aleman] 16/9/2024 10:16

New Global Markets Research forecasts for Vietnamese GDP are 5.8% for 2024 and 6.8% for 2025. These are tweaked from 6.1% and 6.5% after the recent Typhoon.

[amt] 16/9/2024 08:26

It's not unusual especially for high risk investments when the markers are doing badly.

[shaker45] 16/9/2024 07:32

Check other funds - 30% not unusual

[silverlandfinance] 16/9/2024 07:14

Why is there such a discrepancy between the net asset value(over£6) and the share price of £4.60-about 30%?

[aleman] 13/9/2024 11:48

Discount to NAV over 24% now. Historically, this is extreme.

[amt] 10/9/2024 07:25

Well the increased discount hasn't come as much of a shock to me given the state of the markets in general plus being such a high risk market.
Vietnam Market in a rut.

[aleman] 09/9/2024 15:13

As per post 2209, the recent weaker £ versus the Dong, on growing speculation of UK rates cuts (falling Gilt yields), seems to be adding a bit of that shine back to NAV in recent days. There is a little speculation that the strengthening Vietnamese economy and slight rise in CPI might see some modest Dong rate rises in coming months. Typically this might lift the Dong further?


free stock charts from uk.advfn.com

[aleman] 09/9/2024 11:21

NAV is back above £6 and the discount is up to a historically very high 23.6% at 460p.

[hpcg] 09/9/2024 09:25

To be clear Kenmitch I am not at all saying that buybacks in trusts can do much to close discounts. What they are good for is pound cost averaging over the long term where the very mechanism ensures that shares are bought back when they are relatively cheap than relatively expensive. The second element that should be recognised is that they provide daily liquidity. I can safely hold my relatively tiny allocation because I know I can exit in a day if for some reason I had to. For any issue, stock, trust, bond, lack of liquidity can be a killer. It doesn't protect against big market falls, but then nothing does.

As I am here for the long term story the buybacks in the bad times provide juice when the good times arrive. We are in one of the consolidation periods now, but there are likely to be significant gains after it breaks ATH.

[kenmitch] 09/9/2024 08:31

Interesting reply hpcg.

What stands out is that comment that they were disappointed that their buybacks didn’t work in reducing the discount as long ago as 2015! So why are other Trusts still claiming surprise that their recent buybacks haven’t worked and in some cases have resulted in an even bigger discount! Also VOF spent $214million on buybacks and that large sum only saw a 37cents cumulative accretion to NAV.

Haven’t checked but presumably that disappointment is a key reason they are now going for tender offers instead. That’s better for shareholders who get a cash benefit which they don’t with buybacks, but if done regularly it creates the problem outlined by Aleman.

I think too many Trusts worry too much about discounts and instead of trying ways like tender offers and buybacks to try and fail to reduce the discount, they would do better to focus on using spare cash investing in their portfolios.

Regardless of all this, I ‘ve held both VOF and VNH for most of this Century except for selling temporarily (too late!) in the covid crash. They’ve both proved to be superb investments, albeit with VNH way outperforming VOF.

And with promotion to full Emerging Market status from current frontier market coming in time that could well give the share prices a good boost along with, in the case of VOF, of a big narrowing of the discount. Both VOF and VNH could even go to premiums then with imo VOF having the edge because there’s a wider discount to correct.

[hpcg] 08/9/2024 15:31

kenmitch - in which case the discount to NAV for a trust and by summation many trusts is that investors are not interested in buying them. In which case why should it continue on for years? Why should trusts continue as an investment vehicle at all if people don't want to use them? The NAV per share in VOF has performed much better than VEIL. It has been growing its NAV in absolute terms this year, though the big moves are highly correlated with the market it operates in. It continues to outperform the index. One thing it isn't really doing is getting smaller. It can grow its absolute shareholder equity and reduce its share count at the same time. The company has been able to vastly decrease the share count whilst still growing its absolute size.

RNS Monthly NAV
"The Company announces that, for the month ended 31 October 2018, its unaudited, estimated NAV was USD 989.28 million or USD 5.26 per share. The Sterling equivalent as at that same date was GBP 774.27 million or GBP 4.11 per share."

Market update and NAV RNS
"VinaCapital Vietnam Opportunity Fund Ltd ('VOF', the 'Company') announces that on 23 May 2014, pursuant to the share buyback authority granted to the Company's Board of Directors on 25 October 2011, Visaka Holdings Limited, a wholly-owned subsidiary of the Company, purchased 410,875 Ordinary Shares of USD0.01 each at an average price of USD2.3136 per share.

Following this transaction, VOF has spent USD163.4 million overall repurchasing 85,150,086 shares which are held as treasury shares and have reduced the total voting rights in the Company to 239,460,173. The total number of shares acquired since November 2011 represents 26.23 percent of the Company's 324,610,259 ordinary shares in issue. As a result of the Company's share buyback programme, VOF has recorded USD0.33 in cumulative accretion, equating to an 11.1 percent benefit to VOF's net asset value per share."

Passage from the 2015 annual report:
"Every statement I have written has contained an expression of disappointment that the discount to NAV remains too high. This year’s is no exception. While we have continued to buy shares back and the Investment Manager has taken an active approach to spreading the ‘VOF message’, the impact has been less than your Board would like. This year, we bought back USD47.3 million of stock, adding 5 cents to NAV per share and, since the inception of the buyback programme in November 2011, the total value of shares bought back amounts to USD214 million with a cumulative accretion to NAV per share of 37 cents."

[riskvsreward] 08/9/2024 10:39

Sorry, don’t know why the post is duplicated. But deleted the duplication.

[riskvsreward] 08/9/2024 10:36

The fact doesn’t support the argument of painting the merits of buyback with one brush. My view is that a good investment is a good investment, no matter who buys it so buyback is a good thing. And the opposite is true as well so buyback is bad only when the business is a bad one. For trust buyback is normally really bad for the fund manager so it should be applauded if they do it for the benefit of the shareholder.

[kenmitch] 08/9/2024 10:25

Strongly agree Aleman. It’s so obvious that it’s buybacks and redemptions (and not dividends) that are shrinking Trusts until they become too small. And it’s not as if the buybacks are working as too many Trusts are finding out the hard way as their discounts widen even further despite their buybacks to reduce them! Dividends reward investors with real cash, and are welcomed by sensible investors who understand the downside of buybacks, and not just the theory of them!

The key point though in Aleman’s post is the unintended and concerning negative results of buybacks and redemptions; I.e shrinking Trusts to the point where it threatens their continuing existence.

[hpcg] 08/9/2024 09:55

I would argue it is the payment of dividends that is bad for trusts. They should be compunding their money. That is what a buyback at much less than NAV does whereas a dividend is just leakage. Berkshire Hathaway is the prime example. VEIL, which I sold out of recently is an accumulation fund but its NAV per share progress is very disappointing.