RCS - Vietnam Enterprise - Quarterly Insights

Vietnam Enterprise InvestmentsAnnouncement

14/01/2025 07:00

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RNS Number : 2340T  Vietnam Enterprise Investments Ltd  14 January 2025

14 January 2024

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

Quarterly Insights

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

Considering Vietnam's New Economic Direction

Mr Tuan Le, Lead Portfolio Manager

A Fresh Start in Macro Policy

The ascension of General Secretary To Lam marks a potential turning point for
Vietnam's economy. His administration has outlined bold plans to drive growth
through accelerated public spending, streamlined government, and capital
markets modernisation. If successfully pursued, this legislative overhaul,
while nascent, may be the key to unlocking the bureaucratic inertia that has
plagued decision-making in recent years.  While these targets signal
formidable resolve, it remains to be seen how successfully they will be
implemented, hinging on effective leadership amid global uncertainties under
Trump's second term.

A Pro-Growth Government Takes the Helm

Since taking office in August 2024, To Lam has championed a vision for a "New
Era of Advancement". Under his guidance, the National Assembly has set a 2025
GDP growth target of 7.0%, with the government aiming for 8.0%, and To Lam
himself expressing ambitions to achieve average double-digit growth from 2026
to 2030.

While such ambitious targets naturally raise questions of execution, To Lam's
tenure as Minister for Public Security showcased his strong political and
managerial capabilities. As Party leader, To Lam's support of Prime Minister
Chinh's agenda provides him with the tools needed to achieve such an ambitious
growth target. Chinh's proactive, hands-on leadership is evident in his focus
on reviving public spending and spurring growth. He has personally visited
provinces and construction sites across Vietnam, directly engaging with local
leaders to ensure action is taken at both government and individual project
levels.

The key elements of the new administration's economic strategy are:

·    Slashing the Government: One of the most transformative initiatives
is to restructure or merge 18 government ministries into a streamlined 13,
aiming to lower costs and improve efficiency. This ambitious reform mirrors
the transformative impact of the Doi Moi era, with a similar focus on driving
national progress through bold systemic change. By softening the focus on
anti-corruption and emphasising operational streamlining, the new
administration seeks to enhance governance and reduce waste. However, the
scope and practical impact of these reforms remain critical areas to monitor
as they move from policy to implementation.

·    Intensified Public Spending: Vietnam plans to increase infrastructure
spending by 15-20% to around US$31bn in 2025, supported by a manageable
debt-to-GDP ratio of under 40%. Key projects include 3,000 km of national
highways set for completion by 2025 and ongoing airport expansions in Hanoi
and HCMC, with the investment in Phase 1 of Long Thanh Airport alone reaching
US$5bn. Additionally, the ambitious US$67bn North-South high-speed rail
project is set to begin in 2027 and is expected to contribute approximately 1%
to annual GDP until its slated completion in 2035. The pace of planning and
execution for these national projects has accelerated significantly,
reflecting the government's serious intent to advance its overarching
infrastructure agenda.

·    Capital Markets Modernisation: Efforts to upgrade Vietnam's stock
market to FTSE Emerging Market (EM) status have been ongoing since 2023,
gaining significant momentum over the past six months. A major milestone was
achieved in November 2024 with the official termination of the pre-funding
mechanism for foreign investors, a long-standing obstacle to the FTSE EM
upgrade. This progress is further bolstered by the anticipated implementation
of the KRX trading system, which aims to align Vietnam's financial markets
with international standards. The system will introduce a central clearing
party, shorter settlement times, and new financial products, marking a major
step forward for the equity markets. These developments are expected to
significantly enhance investor confidence, with passive and active inflows
estimated at US$1.0-2.5bn, primarily directed at large-cap stocks, amplifying
their impact on market liquidity and valuations.

·    Digitalisation and Technology: While long a priority for the
government, there is now a stronger determination to fast-track results. To
Lam's appointment as Head of the Central Steering Committee on Science and
Technology Development is a major statement of intent, a role he has taken on
to personally drive its success. Under his guidance, the issuance of Decree
182 marks a significant milestone. Coming into effect on 1 January 2024, it
offers financial support for initial investment costs of up to 50% in
semiconductor and AI R&D projects, an unprecedented step for Vietnam. The
appeal of Vietnam for tech companies is evident; Samsung has invested over
US$22bn across six factories, and Apple has poured nearly US$16bn since 2019
into its local supply chain, more than doubling its annual spending over that
period and generating over 200,000 jobs. Nvidia also signed an agreement with
the Vietnamese government in December 2024, committing to open two AI research
and data centres, having previously entered a partnership worth US$200mn with
FPT to establish AI data centres.

Legislative Restructuring

The recent National Assembly session, under the leadership of To Lam, was one
of the most productive in recent years, enacting 18 laws and 21 resolutions. A
cornerstone achievement was the passage of the new Public Investment Law,
which decentralises decision-making, empowering local authorities to address
legal ambiguities and regulatory challenges. This reform has the potential to
revitalise stalled infrastructure and real estate projects, key drivers in
achieving Vietnam's ambitious GDP growth targets.

The extension of a 2% VAT reduction until mid-2025 is expected to support
domestic consumption and mitigate the impact of external pressures on
endogenous growth, including currency devaluation and the spectre of US
tariffs. Additionally, the newly established Investment Support Fund aims to
address the challenges posed by the global minimum tax. By providing financial
support to sectors adopting this new tax framework, the fund should help
sustain broader economic momentum and reinforce Vietnam's attractiveness for
FDI.

Implications for VEIL

The banking sector, which remains the largest capital contributor to Vietnam's
economy and accounts for approximately 40% of both the Vietnam Index and
VEIL's portfolio, stands to gain from increased public spending and the State
Bank of Vietnam's 2025 credit growth target of 16%, up from 15% in 2024. This
expanded credit supply and heightened infrastructure spending is expected to
stimulate key economic sectors, including technology, retail consumption, and
industrial materials, while driving a strong recovery in the real estate
market.

The modernisation of Vietnam's capital markets further enhances the outlook.
Anticipated foreign inflows are expected to boost local sentiment, improve
market valuations, and broaden investment opportunities. This evolution will
likely drive increased demand for capital, leading to a new wave of structured
transactions and IPOs over the next five years, a domain where VEIL has
established a market-leading position. As Vietnam's largest closed-end fund,
VEIL is uniquely equipped to utilise its reputation and expertise, having
participated in over 60 IPOs since inception and serving as the anchor
investor in most of the largest IPOs in the past decade.

 

Top Ten Holdings (57.6% of NAV)

      Company                 Sector                   NAV Weight %  VNI Weight %  Weight vs Index %  Q4 2024    1-Year Rolling Return %

                                                                                                      Return %
 1    Mobile World            Consumer Discretionary   8.1           1.7           +6.4               -13.6      36.8
 2    FPT Corporation         IT                       8.1           4.3           +3.8               10.1       76.2
 3    VP Bank                 Financials (Banks)       7.0           2.9           +4.1               -7.9       0.4
 4    Asia Commercial Bank    Financials (Banks)       5.9           2.2           +3.7               -3.4       22.4
 5    Vietcombank             Financials (Banks)       5.8           9.8           -4.0               -4.4       8.2
 6    Techcombank             Financials (Banks)       5.2           3.3           +1.9               -1.8       52.3
 7    Hoa Phat Group          Materials                5.1           3.3           +1.8               -2.5       -0.1
 8    Vietinbank              Financials (Banks)       4.7           3.9           +0.8               -1.4       32.8
 9    Khang Dien House        Real Estate              4.0           0.7           +3.3               -1.6       20.4
 10   Duc Giang Chemicals     Materials                3.7           0.9           +2.8               0.1        20.9

      VEIL NAV               -                         -             -             -                  -3.1       12.2
      Vietnam Index          -                         -             -             -                  -4.8       8.8

 

Source: Bloomberg, Dragon Capital

NB: All returns are given in total return USD terms as of 31 December 2024

 

 

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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