Vietnam’s economy, Asean’s shining star amid COVID-19 pandemic

"Looking back at the year 2020, the challenge that the human kind had faced was covid-19 pandemic. The pandemic affects every life, communities and slowing down the world’s economy.  Yet, one of only few countries that delivered positive economic growth is South East Asia country called “Vietnam”. Vietnam has delivered 2.91% GDP growth in 2020 and on track for 7%-8% growth this year"

(Source: Source: CS, As of March 2021)

Why Vietnam?

One of the key factors that made Vietnam’s economy stronger that other countries amid pandemic stress is its strong domestic consumption. Vietnam has almost 100 million population and most of them are in working age which means Vietnamese are ready to spend and pay taxes. While other countries are severely affected by country lockdown and traveling restriction because they highly depend on exports and tourism sectors, Vietnam are able to grow during these circumstances.

Vietnam also remains a strong position for Foreign Direct Investment as many manufacturers globally are considering to relocate in Asean countries. Vietnam’s minimum wage is approximately 27-28 baht per hour which is considered to be low compared to its neighboring countries. Additionally, Vietnam has been actively signing bilateral trade agreements which make the country as a favorable investment climate destination for foreign investors. As we can see, there were production base relocation which has been moved from other countries to Vietnam such as Intel, Apple and LG, etc.

Vietnam also has a high birth rate, as well as urbanization is only concentrated in major cities, which makes Vietnam attractive for long-term growth.

Principal Vietnam Equity Fund (PRINCIPAL VNEQ)

For investor who is interested in investing in Vietnam, Principal Asset Management wishes to propose “Principal Vietnam Equity Fund (PRINCIPAL VNEQ)”. The first Thai fund that started investing in Vietnam. The fund has a policy to invest in equity instruments listed on the stock exchange or have a core business in Vietnam that is believed to have potential for future growth. Also, investing in other equity instruments that are involved in the business and/or benefiting from economic growth. The fund is able to invest in other mutual funds that have a policy of investing in equity instruments and/or foreign equity ETF focused on investment in equity instruments in Vietnam for the average in the fiscal year that is not less than 80% of the net asset value of the fund. PRINCIPAL VNEQ’s local analyst team is ready to conduct ground research in order to get the information that is most suitable for investment decisions.

Another highlight that distinguishes PRINCIPAL VNEQ from other Vietnamese funds is the selection of VN30TR Index (VN30) as a "Benchmark" instead of MSCI Vietnam since VN30 has always outperformed MSCI Vietnam. The reason VN30 is a more compelling benchmark is the concentration of stocks in the VN30 index, made up of 30 stocks. On the other hand, MSCI Vietnam is only made up of only 17 stocks which makes first 5 stocks of MSCI Vietnam weighted over 70% compared to only 41.2% from VN30. (Source: Bloomberg, MSCI Vietnam, as of 31 Dec 2020)

VN30 has more than 28.14% exposure to banking and financing sectors than MSCI Vietnam which can reflect overall picture of the economy. (CGS-CIMB, Dec 2020)

The reason why MSCI Vietnam has lesser banking and finance stocks is because MSCI Vietnam has eliminated stocks subject to Foreign Ownership Limit Issue (FOL) where most banking and financial stocks are FOL-listed, making them unable to invest by foreigners. Investment from foreign investors is prohibited unless the investor buy stock from Over-The-Counter (OTC), which are more expensive. For this reason, MSCI Vietnam is more popular than VN30. And if a foreign investor wants to invest in FOL-listed stocks, then it is necessary to have a relationship with a local broker to find investment opportunities.
 

Example of PRINCIPAL VNEQ’s holding

1. Techcombank

Techcombank, is a publicly listed Vietnamese largest bank with 20% ROE annually. (Source: techcombank.com. As of 29 Jan 2021) On credit growth prospects which considerably high growth due to low debt-to-GDP level compared to other countries.

2. FPT Corporation

The largest information technology service company in Vietnam with its core business focusing on the provision of Telecom and ICT-related services. The company is expected to grow more than 20% in 2021. (Source: fpt.com.vn/en, As of 29 Jan 20201)

Vietnam is considered as the country with high growth potential in long term. However, the stock market is still not very efficient due to FOL which caused liquidity issues. Big lot volume of stock transactions through the trading board can causing price fluctuations. Thus, the Vietnamese stock market is more suitable for long-term investment than short-term speculation.

For investor who is interested in Principal Vietnam Equity Class-A Fund (PRINCIPAL VNEQ-A)”, initial investment of minimum 1,000 baht is required. For more information and fund prospectus details, please contact CIMB Thai, Siam Commercial Bank, sales support agents or Principal Asset Management Client Service at (662) 686 9595 or https://www.principal.th/en or Principal TH Mobile App.

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Disclaimer:

Investors should understand product characteristics (mutual funds), conditions of return and risk before making an investment decision.

This fund has highly concentrated investment in Vietnam. So, investors have to diversify investment for their portfolios.

The fund has a policy to invest in foreign countries and may have foreign investment risk. Investors may lose or receive profit from foreign exchange or receive money lower than the initial investment. / To hedge the risk associated with currency exchange rates that may arise from investment in foreign countries as appropriate and in different circumstances at the discretion of the fund manager.

Past performance of the fund is not a guarantee for future performance

Investors should study the information in the prospectus to understand in https://www.principal.th/en/mutual-fundth before investing