The Hanoi index will double in the next fourteen months from its lowest level in January, said Heather Manners, chief investment officer and fund manager at Prusik, asset managers of Asian equity.
‘Vietnam is a classic example of an emerging market with falling interest rates and falling inflation. I started buying Vietnamese equity at the beginning of the year and I’ve just put in an order to buy more,’ said Manners who has just returned from a visit to South-East Asia.
Vietnam’s small caps equity index, the Hanoi index, fell 87% between its high in 2007 to its low this January. Vietnam’s central bank announced Tuesday it would cut rates further after the government revealed last week that growth had fallen to its lowest in three years.
Manners who will increase an 11% exposure in the Prusik Asia fund to as much as 15% ‘any minute’, said there is still ‘time to buy into the correction’ of the stock market which has seen a rally this year.
‘Vietnam is a proper emerging market. The brokers are local, company presentations are patchy, the English language isn’t brilliant and on the streets there are soaring motorbikes everywhere. You won't find a Merrill Lynch or any of the big houses. It’s like going back 20 years.’
The country’s economy is mainly in agriculture and manufacturing. Its main export are garments to the US for which it imports textiles from China.
Vietnam equity hedge fund manager and chief executive of PXP Vietnam Asset Management, Kevin Snowball told Citywire Global earlier this week that a weaker dollar and a stronger Chinese currency stands to benefit the Vietnamese economy.
‘If the yuan keeps appreciating and the cost is four or three times higher in China, then outsourcing is continually going to flow towards Vietnam,’ said Snowball who says that demand for a Ucits version of the fund has grown.
Yet Manners says that Vietnam is neither attractive due to a domestic structural turnaround or its links to China’s economy.
‘Don’t get too distracted by China. What really is attractive about Vietnam is its trade links and the developments we’ve been hearing from the ASEAN trade bloc. We could be seeing Cambodian stocks traded in Malaysia and Thailand trading Vietnamese stocks.’
‘Vietnam is more important to China as one of the bridges to the ASEAN trade block.’
The now 10-member Association of Southeast Asian Nations discussed further trade and monetary integration last week at a summit in Cambodia that included talks of a single currency.
Over the past five years, the absolute return focused fund has returned 4.7% compared with the average fund manager in the sector who returned 21% over the same period.