RCS - Vietnam Enterprise - Portfolio Manager Insights

Vietnam Enterprise InvestmentsAnnouncement

29/05/2025 07:00

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RNS Number : 5736K  Vietnam Enterprise Investments Ltd  29 May 2025

29 May 2025

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

VEIL is a London-listed investment company investing primarily in listed
equities in Vietnam and is a FTSE 250 constituent.

Emerging Market Upgrade:

Reform-Led Growth and Modernisation

Mr Tuan Le, Lead Portfolio Manager

Vietnam: The Quiet Contender

 

Global investor attention is increasingly dominated by the tariff tensions
driven by the US administration. Amid this volatility, Vietnam stands apart,
quietly laying the tracks for sustained growth beyond the noise of global
tariffs. At VEIL, we have pivoted the portfolio decisively toward domestic
demand drivers like banking, retail, and infrastructure, firmly aligned with
Vietnam's resilient growth fundamentals.

 

Ignore the Noise, Follow the Signal

 

While the 90-day tariff pause between the US and its trading partners creates
considerable uncertainty, how or when future tariffs may impact global trade
remains unclear. Nevertheless, Vietnam has responded pragmatically, offering
to reduce tariffs on US imports to zero, a clear signal of its commitment to
balanced trade and constructive negotiation. Yet amid the noise, Vietnam is
charting a clear, home-grown path, built on rising consumption, public
investment, and decisive policy reform.

Mispriced Growth

Despite consistently outperforming regional peers, Vietnam remains a glaring
omission in global portfolios, trading at valuations more akin to frontier
markets than its fundamentals suggest. Its equity market currently trades at
around 10.5x forward earnings, significantly below the ASEAN average of
approximately 13.0x, and well below major emerging markets like India at
around 18.5x. Vietnam's PB ratio further illustrates this undervaluation,
below its 5-year average of 2.0x at approximately 1.6x, driven more by a
temporary shift in sentiment than any deterioration in fundamentals. Despite
downward revisions due to potential tariff impacts, net profit growth for 2025
is still expected to reach 11%, underscoring the resilience of the corporate
earnings outlook and the disconnect between valuation and performance.

 

The Vietnam Upgrade is Not a Story, It's a Strategy

 

A formal FTSE EM Index announcement is expected by October 2025, followed by
likely inclusion in March 2026. Historical examples, such as Saudi Arabia and
Kuwait, demonstrate that substantial foreign inflows often precede official
market inclusion, implying increased potential inflows for Vietnam:

 

·    Estimated passive inflows from EM-focused ETFs range from US$500
million to US$1 billion.

·    Active inflows from global institutional investors could range
between US$2.5 billion and US$7.5 billion.

 

These flows have the potential to transform market depth, breathe life into
the IPO pipeline, and support a broad-based rerating.

 

An EM Economy in a Frontier Wrapper

 

Vietnam's economic fundamentals already mirror those of established emerging
markets, with wide-reaching government reform promising to lay the foundations
for accelerated growth:

 

·    GDP growth reached 7.1% in 2024, and the government targets 7.5-8.5%
over the next five years. The private sector, now central to economic strategy
under the new Resolution 68, is likely the most important factor in achieving
this, with the government aiming to double the number of private businesses by
2030.

·    A new legal environment is being established where civil and economic
disputes are decriminalised, and businesses are permitted to operate freely
unless explicitly restricted by law, a game-changing shift for investor
confidence and entrepreneurial activity.

·    Policy measures target a 30% cut in business costs, supported by
expanded access to credit, streamlined land use policy, and preferential
treatment for small and medium-sized enterprises.

 

Under the leadership of General Secretary Tô Lâm, a sweeping reform agenda
is accelerating. Public investment will reach an estimated US$36 billion in
2025, with the bulk directed toward infrastructure. In parallel, a bold
administrative overhaul is underway: 18 ministries are being consolidated into
14 to eliminate inefficiency, while the number of provinces will be reduced
from 63 to 34 to streamline governance and improve scale. The pace is nothing
short of extraordinary - phase one is set to conclude by 30 June, with full
rollout by 30 August. This rapid execution underscores the political resolve
and a reform tempo more often seen in corporate turnarounds than government
bureaucracy.

 

Portfolio Strategy: Leaning into the Transition

 

In anticipation of structural shifts, VEIL has rebalanced away from
volatility-prone sectors and leaned into Vietnam's domestic growth engines:

 

·    Reduced exposure to volatile, cyclical sectors such as steel and
heavy industries.

·    Increased allocations to banking (42.4% NAV) and retail consumption
(11.9%), sectors crucial to long-term domestic economic growth.

·    Enhanced positions in infrastructure and logistics, which directly
benefit from increased government and foreign investment.

·    Added to select real estate holdings set to benefit from
infrastructure investment, urbanisation, and a more supportive legal framework
designed to stimulate new developments and revive previously stalled projects.

 

Crucially, 72% of exports are generated by FDI firms which are not listed on
the Vietnam Index. As a result, the Vietnamese equity market remains largely
domestic, with limited direct exposure to global trade tensions.

 

Capital Market Reforms are Clearing the Path for Global Investors

 

Vietnam's capital market reforms, including the successful launch of the new
Korea Exchange Trading System (KRX) in April 2025, are enhancing
infrastructure and improving investor access. The platform is now technically
capable of introducing intra-day trading, faster settlement, and expanded
derivatives products, addressing long-standing structural barriers for foreign
investors. These upgrades are unlocking long-sealed doors to Vietnam's capital
markets, aligning them with global standards and welcoming greater EM-focused
participation.

 

In parallel, regulatory simplifications and the planned removal of foreign
ownership limits in key sectors further support Vietnam's move toward global
investor norms, significantly lowering the risk premium traditionally
associated with its equity market.

 

Vietnam is not simply responding to external pressure, it is pursuing a
deliberate and comprehensive reform agenda aimed at strengthening long-term
fundamentals. With a policy focus on fostering a strong private sector,
increasing domestic demand, enhancing administrative efficiency, and improving
capital market access, the country is quietly repositioning itself within the
global investment landscape. For institutional investors, Vietnam increasingly
reflects the hallmarks of a maturing emerging market, one whose trajectory is
being shaped more by internal momentum than external volatility.

 

Top Ten Holdings (55.9% of NAV)

      Company            Sector                 NAV Weight %  VNI Weight %  Weight vs Index %  YTD        1-Year Rolling Return %

                                                                                               Return %
 1    Mobile World      Consumer Discretionary  8.1           1.8           6.3                (2.3)      8.8
 2    Asia Com. Bank    Financials (Banks)      6.2           2.1           4.1                (8.6)      4.0
 3    Techcombank       Financials (Banks)      6.0           3.6           2.4                4.6        13.5
 4    Vietcombank       Financials (Banks)      5.7           9.4           (3.7)              (7.9)      (8.4)
 5    VP Bank           Financials (Banks)      5.4           2.6           2.8                (15.5)     (8.3)
 6    FPT Corporation   Information Technology  5.2           3.1           2.1                (29.7)     0.9
 7    BIDV              Financials (Banks)      5.1           4.7           0.4                (9.8)      (17.2)
 8    Hoa Phat Group    Materials               5.0           3.2           1.8                (6.2)      (3.7)
 9    Vietinbank        Financials (Banks)      4.9           3.9           1.0                (3.5)      10.6
 10   Vinhomes          Real Estate             4.4           4.7           (0.3)              43.1       39.5

      VEIL NAV          -                       -             -             -                  (10.5)     (1.1)
      Vietnam Index     -                       -             -             -                  (5.0)      0.6

 

Source: Bloomberg, Dragon Capital

NB: All returns are given in total return USD terms as of 30 April 2025

 

 

For further information, please contact:

Vietnam Enterprise Investments Limited

Rachel Hill

+44 122 561 8150

+44 797 121 4852

rachelhill@dragoncapital.com (mailto:rachelhill@dragoncapital.com)
 

 

Jefferies International Limited

Stuart
Klein

+44 207 029 8703

stuart.klein@jefferies.com (mailto:stuart.klein@jefferies.com)

 

Montfort

Gay Collins

+44 (0)7798 626282

+44 (0)20 3770 7905

gaycollins@montfort.london (mailto:gaycollins@montfort.london)

 

h2Radnor

Iain Daly

+44 20 3897 1830

idaly@h2radnor.com (mailto:idaly@h2radnor.com)

 

LEI: 213800SYT3T4AGEVW864

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