Vietnam Investments : Monthly Report

VIETNAM MONTHLY REPORT

31 October 2023

ECONOMY REVIEW AND OUTLOOK

Exports and services kindle momentum

Trade activity was a bright spot in October as Vietnam's economy continued to recover. Exports escalated to $32.3bn, up 5.3% YoY, and imports increased to $29.3bn, up 2.9% YoY. Thanks to outstanding performance from exporting electronic components and agricultural items, the trade surplus reached $3bn in October and $24.6bn YTD. However, some businesses faced a lack of orders, particularly textiles and smartphones, leading to layoffs and shrinking production, reflected by October PMI data inching down to 49.6 from 49.7 in September. The strong foundation for trade performance is industrial production, increasing 5.5% MoM and 4.1% YoY. Services flourished, with retail sales up 1.5% MoM and 7.0% YoY as inbound visitors neared 10 million in 10M23, 4.2 times higher than 10M22.

Inflation and currency composure

Regional central banks in Thailand, the Philippines, and Indonesia have resumed interest rate hikes to defend FX, but we do not project the same from the SBV. Inflation rose modestly by 0.1% MoM and 3.6% YoY, posing no immediate alarm, with the uptick in rice and fuel prices being offset by a decrease in pork prices. Capital inflows to Vietnam have been resilient on both trade, remittance, and investment, especially after President Biden's state visit; committed FDI investment in October surged to $5.5bn, doubling the five-year average. We maintain the viewpoint that the VND is fundamentally solid and the SBV will continue its commitment to prioritising growth while securing major economic stabilities.

Foreigners withdrew amidst rising

FX volatility

Despite a YTD reduction in VND lending rates of 2.0-2.2%, several variables continue to drive up financial costs for businesses. The strengthening dollar triggered capital outflows from Asia, adding volatility in the FX market. As of 31 October, the VND lost 1.1% MoM and 4.4% since end of June, in line with regional currency trends. Furthermore, post the Fed's recent rate- pause, the Fed funds rate remains at 5.25-5.50%, meaning borrowing costs now need to play catchup as floating rates reset. Reassuringly, Vietnam's exposure is relatively low at only 35% of GDP. However, local companies will require prudent cash flow management and debt refinancing as rates adjust, finding an optimal balance of domestic vs. foreign leverage.

	Legislative stepping	The National Assembly's ongoing session in Hanoi, setting the socio-economic objectives for
	stones to growth	2024 (fig. 4), include a GDP growth rate target of 6.0-6.5%. This translates to a GDP per capita
						between $4,700 and $4,730, while maintaining the State budget deficit under 4% of GDP.
						Average inflation is set to be kept below 4.0-4.5%, with credit growth at 15+%. Significant
						regulatory enhancements are also on the docket, with the Land Law, Housing Law, and Real
						Estate Law poised for substantial amendments, acting as crucial levers in propelling Vietnam
						towards its 2024 economic growth objectives.
Fig. 1	ECONOMIC FORECASTS			Fig. 2	INFLATION IS NOT IMMINENT
										6.0
	31	-Oct-	23		Unit	2021	2022E	2023E	2024F	%
Real GDP Growth	%	2.6	8.0	5.0	6.0	5.0
Nominal GDP	$bn	366.1	408.8	446.4	489.8	4.0				Average 10M CPI +3.2% YoY
CPI (average)	%	1.8	3.2	4.0	4.0
Export Growth (cif)	%	19.0	10.6	-5.5	12.0	3.0
Import Growth (cif)	%	26.7	8.4	-9.9	11.8	2.0
Trade Bal (cif)	$bn	3.3	12.4	26.4	30.2
FX Reserves	$bn	106.5	85.0	95.0	110.0	1.0
FDI Disbursed	$bn	19.8	22.4	20.9	22.0	0.0
VND:$	1	22,800	23,550	24,500	24,300
Dec-22	Feb-23	Apr-23	Jun-23	Aug-23	Oct-23
Fig. 3 COMMITTED FDI RECORDED $5.5BN IN OCTOBER	Fig. 4 KEY TARGETS FOR SOCIO-ECONOMIC PERFORMANCE

6.0
% YoY
5.0
4.0
3.0
2.0
1.0
0.0
Apr-20	Nov-20	Jun-21	Jan-22	Aug-22	Mar-23	Oct-23

Items	Unit	2024 Target
Real GDP Growth	%	6.0-6.5%
GDP Per capita	USD	~4.700-4.730
Ratio of manufacturing & processing in GDP	%	24.1 - 24.2
Fiscal Deficit (Govt's plan)	%	Under 4%
Credit Growth (Govt's plan)	%	15+
Unemployment in urban areas	%	<4
Number of doctors per 10,000 ppl	Doctors	~13.5
Collection & treatment of urban solid waste from	%	95
households meeting standards
Industrial parks & export processing zones having	%	92
concentrated wastewater treatment facilities

UCITS HAVE NO GUARANTEED RETURN AND PAST PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE

1

VIETNAM MONTHLY REPORT

31 October 2023

MARKET REVIEW AND OUTLOOK

Sentiment departs from statistics as SBV net injects

Potential hedging tipped the scales

Rising EBIT amid FX drop

Financials outshine a mixed picture

Market's P/B at Covid lows

October saw the VNI continue to fall from September, dropping 11.7% (TR$), the worst one-monthdecline since September 2022. Vietnam was not singular in its negative performance, with most regional peers also withdrawing. Concerns that dampened sentiment in September, such as the money management operations in the form of SBV bills and rising interbank rates, misinterpreted as policy tightening, continued to spook investor sentiment throughout October. During the latter half of October, however, $4.5bn of the bills expired with new issuances of $2bn, representing a relative net injection of $2.5bn.

The spectre of rising DXY and Fed rate concerns continued to overshadow performance. The VNI found support at the 1,085-1,100 level, still managing to outperform most EM markets, but on 26 October a large volume of VHM sell orders hit the market after parent company Vingroup issued 5-year exchangeable bonds with the option to convert into Vinhomes shares. This triggered another round of panic selling on the VNI, tipping the scales in its final days to close the month from an open of 1,155 to 1,028.

All 80 Companies in our coverage universe have now reported Q3 earnings, and the aggregated growth for NPAT remains flat at +0.5% YoY and -7.0% QoQ. Encouragingly, both revenue and EBIT growth are on the rise, with revenue increasing by approximately 5% YoY and EBIT by nearly 9% YoY. However, following the 4.4% currency depreciation since 23 June, the bottom line was affected by increased loan provisions from some large cap stocks with USD denominated debt. This underlines the fact that while we may be exiting the nadir, the road to earnings recovery is not yet clearly signposted.

Financials, particularly the banking sector, continue to be significant contributors to earnings. Results, however, are slightly behind our quarterly forecast, partially from the impact of earnings sacrifice from State-Owned Commercial Banks to support the economic recovery with preferential rates. IT, energy, metals, and industrials are showing robust results, while consumer, conglomerates, chemicals, and utilities are underperforming. The property sector is in line with expectations, accounting for 12% of overall earnings.

While we are more cautious on commodity prices and credit growth, the trailing P/B of the total VNI is ~1.5x (fig. 3), levels not seen since Covid. In light of easing monetary policy, we believe the VNI is now oversold, evidenced by the switch from foreign net selling to net buying of $15.9m from 30 October to 7 November, who are seeing it as a good re-entry point.

Fig. 1	DC TOP-80 FORECASTS				Fig. 2				MARKET PERFORMANCE
										2,000							1600
31-Oct-23	Unit		2021	2022	2023E	2024F			$m		VNI
		1,800			1500
PER	x	14.5	9.1	9.9	8.2					Volume (LHS)
	1,600					1400
													Index (RHS)
EPS Growth	%		37.1	-1.4	0.1	20.3		1,400					1300
PEG	x	0.4	Neg	90.0	0.4		1,200						1200
Sales Growth	%		22.0	12.3	3.0	11.2		1,000						1100
EBIT Growth	%	50.8	2.5	8.4	20.1		800						1000
PBT Growth	%		38.0	1.5	2.0	20.0		600						900
NPAT Growth	%	41.9	0.0	1.8	20.3		400						800
									200						700
Net DER	x		0.2	0.3	0.19	0.14
Yield	%	1.0	1.9	1.6	1.5		-							600
	Jan-20Jun-20Nov-20Apr-21Sep-21Feb-22Jul-22Dec-22May-23Oct-23
Fig. 3		VNI TRAILING 5Y PB				Fig. 4	VNI MONTHLY VOLUME
4.0										24.0
										$bn
3.5										21.0
										18.0
3.0										15.0
2.5										12.0
2.0										9.0
										6.0
1.5										3.0
1.0										0.0
Jan-17Sep-17May-18Jan-19Sep-19Jun-20Feb-21Oct-21Jun-22Feb-23Oct-23		Jan-23Feb-23Mar-23Apr-23May-23Jun-23Jul-23Aug-23Sep-23Oct-23

Sources: DC, Bloomberg, Credit Suisse / Refinitiv - all adjusted for free float

2

VIETNAM MONTHLY REPORT

31 October 2023

VIETNAM ENTERPRISE INVESTMENTS LIMITED - VEIL

VEIL retracted 13.0% in October, trailing the VNI's fall of 11.7% (TR$). The VNI's decline of 17.5% in the last two months has wiped out the market's YTD gains. However, we observe no substantial deterioration in the core fundamentals of VEIL's holdings and believe the drop in price across the portfolio is sentiment-driven.

MWG declined 29.0% as 9M23 revenue declined 16% YoY to $3.5bn, but Q3 revenue inched up 3% to $1.2bn. MWG's 2023 revenue is less of a concern, however, as we expected lower earnings due to H1 destocking and a successful drive to increase market share via lower retail prices. As the grocery and ICT chains start to perform with normalised product pricing and an increase in domestic consumption, 2024 top and bottom-line performance will recover. We believe the October fall in share price was more influenced by concern over its potential exclusion from the $665m Diamond ETF, of which it makes up 12.5% by weighting. It is worth noting, however, that the next Diamond ETF review is not due until April 2024.

GAS's 16.3% share price decline came as near double digit falls in global oil prices in October dampened investor enthusiasm for energy stocks. The real estate sector was not insulated from the prevailing risk-off environment either, with VHM experiencing a 15.1% sell-off due to the potential hedging by a group of investors against its parent company VIC's bond placement, causing risk aversion to intensify and liquidity to dry up.

HPG's October sales grew by +23.7% YoY and +7.4% MoM as rising steel prices in China had a positive impact on demand and sales volume, beating market expectations. Sales momentum will continue at a steady rate, supported by the Governments infrastructure drive, having disbursed $16.5bn YTD, up 5.5% YoY, and the gradual recovery of the property market. With clear signs of earnings improvement and HPG's furnaces now operating at 85% capacity, we maintain high conviction for the stock.

Within VEIL's banking holdings, VCB and ACB outperformed the VNI by 10.0%, and 8.7% respectively. Notably, despite increased provisioning, sector earnings remained relatively steady QoQ and YoY, at -1.2% and +2.2%, respectively. We expect double digit EPS growth for the sector in 2024, with VEIL's top three holdings forecast to average 18.7%.

														PRICE AND NAV DATA
		Net							Cash			Price				NAV change (%)				Price Change (%)						Sharpe
					NAV/share											Std. Dev.
		Assets					(%	of AUM)		EOD			Monthly			YTD			Monthly			YTD						Ratio
$1,554.9m	$7.70		0.49		-		-13.0%		-1.9%	-13.1%		-10.3%	25.23%		0.05
£1,281.4m	£6.35		£5.18		-12.4%		-2.8%	-12.6%		-11.1%	-		-

25.0

20.0

15.0

10.0

5.0

0.0 -5.0-10.0-15.0-20.0-25.0

NAV PERFORMANCE (in $ terms)

			% TR$ - 31/10/2023			19.4
												15.8	16.5
					VEIL (NAV)			13.9
					VNI (benchmark)			11.0 9.6
					VN30 (comp)	2.5	2.8	4.1
	1.0
							-0.5
	-1.9

-13.0 -11.7-11.7

-18.9-18.5-18.3

1M

3M

YTD

1Y

3Y

5Y

	TOP TEN HOLDINGS (62.6% of NAV)		DISCOUNT TO NAV
	COMPANY	SECTOR	VNI % NAV %	CH %	20
1	VP Bank	Banks	3.3	11.4	-8.7	%
10
2	Hoa Phat	Mat's/Res	3.3	8.6	-13.4
0
3	Vietcombank	Banks	11.9	8.5	-1.7
4	ACB	Banks	2.0	8.3	-3.0	(10)
5	FPT Corporation	Software/Svc's	2.6	5.9	-11.4	(20)
6	Mobile World	Retail	1.4	5.2	-29.0
(30)
7	PV Gas	Energy	3.6	4.2	-16.3
8	Vinhomes	Real Estate	4.2	3.8	-15.1	(40)
9	Vinamilk	F&B	3.5	3.4	-9.2	(50)
10	Khang Dien House Real Estate	0.6	3.4	-4.6
Jan-05Jun-07Oct-09Feb-12Jun-14Oct-16Feb-19Jun-21Oct-23

3

VIETNAM MONTHLY REPORT

31 October 2023

APPENDIX 1: MACRO

Key Indicators

Item	Unit	2017	2018	2019	2020	2021	2022E	2023F	2024F
GDP	$bn	281.4	310.1	334.4	346.6	366.1	408.8	446.4	489.8
Real GDP Growth	%	6.9	7.5	7.4	2.9	2.6	8.0	5.0	6.0
Services Growth	%	7.4	7.0	7.3	2.5	1.2	10.0	6.9	8.0
Agriculture Growth	%	2.9	3.8	2.0	2.8	2.9	3.4	2.6	2.8
Ind'l and Const'n	%	8.0	8.9	8.9	3.3	4.1	7.8	3.5	5.0
Growth
Retail Sales Growth	%	10.9	11.7	11.8	2.6	-3.8	10.2	8.3	8.5
				Prices
CPI (Average YoY)	%	3.5	3.5	2.8	3.2	1.8	3.2	4.0	4.0
			Money, FX & Interest Rates
Money Supply M2	%	15.0	12.4	14.8	14.5	8.9	6.2	9.0	10.5
Average Lending Rate	%	9.3	9.5	9.7	8.6	8.5	13.7	10.5	10.0
5-yr VGB	%	4.3	4.5	1.9	1.1	0.9	4.7	2.2	2.5
VND : $	$1	22,750	23,235	23,150	23,085	22,800	23,550	24,500	24,300
				External Sector
Trade Balance	$bn	2.1	6.8	10.8	19.9	3.3	12.4	26.4	30.2
Current Account	$bn	-1.6	5.8	12.2	15.1	-7.8	-1.5	17.4	20.7
Current Account / GDP	%	-0.6	1.9	3.6	4.3	-2.1	-0.4	3.9	4.2
FDI Registered	$bn	35.9	35.5	36.0	28.5	38.5	27.7	25.2	28.0
FDI Disbursement	$bn	17.5	19.1	20.4	20.0	19.8	22.4	20.9	22.0
FX Reserves	$bn	52.0	61.0	80.0	98.0	106.5	85.0	95.0	110.0
			Public Debt & Fiscal Balance
External Debt	$bn	109.2	112.1	122.8	130.1	138.8	141.2	132.0	140.3
Government	$bn	46.3	47.0	47.7	49.0	47.9	48.8	41.4	44.5
Enterprises (incl. FDI)	$bn	62.9	65.1	75.0	81.1	90.9	92.4	90.6	95.8
External Debt (% GDP)	%	38.8	36.2	36.7	37.5	37.9	34.5	29.1	28.6
Fiscal Balance (% GDP)	%	-2.6	-2.9	-2.6	-3.4	-4.0	-4.3	-6.0	-4.5

4

VIETNAM MONTHLY REPORT

31 October 2023

APPENDIX 2: MARKET

Key Stock Market Data

		HSX			HNX			UPCoM			Total
	31-Oct-22	31-Oct-23	31-Oct-22	31-Oct-23	31-Oct-22	31-Oct-23	31-Oct-22	31-Oct-23
Market Cap ($m)	165,139		168,566	10,309		11,373	41,844		41,090	217,292		221,029
Number of Stocks	401		394	341		330	860		860	1,602		1,584
Number of Large Cap Stocks (> $400m)	57		64	5		9	14		17	76		90
Stocks with No Room for Foreigners	52		62	70		94	186		227	308		383
Market Cap of Stocks with No Room ($m)	25,799		20,715	2,295		1,825	9,712		12,821	37,807		35,361
Share of Market Cap with No Room (%)	15.6		12.3	22.3		16.1	23.2		31.2	17.4		16.0

Top 25 Companies

						31-Oct			Price			Mkt				Wt									PER												PBV													Yield
	No		Company			Price			YTD			Cap			in VNI			2022			2023E			2024F			2022		2023E			2024F			2022		2023E			2024F
						(VND)			(%)			($m)			(%)					(x)					(x)				(x)				(x)				(x)				(x)			(%)		(%)			(%)
1		Vietcombank	86,800		28.1		19,749	11.93		14.4		16.7		14.7		2.8		2.9			2.4		0.9	-		-
2	BIDV	40,200		4.1		8,278	5.00		14.1		12.3		10.1		2.0		1.8			1.5		0.2	-		-
3	PV Gas	76,600		-6.2		7,162	3.61		12.9		15.6		16.0		3.1		2.7			2.5		3.0	3.8		3.8
4	Vinhomes	39,000		-18.8		6,913	4.18		7.2		5.7		5.8		1.4		1.0			0.8		4.5	-		-
5	VP Bank	20,000		11.7		6,460	3.32		6.6		12.6		10.2		1.2		1.0			1.1		-	5.0		2.9
6	Vingroup	40,500		-24.7		6,288	3.80		23.4		39.1		42.2		1.9		1.4			1.3		1.7	-		-
7		Airports Corporation VN	69,800		-17.5		6,186	-		29.0		17.7		15.9		4.2		2.9			2.4		-	-		-
8	Vinamilk	68,000		-7.7		5,785	3.49		20.3		18.3		16.6		5.2		4.4			4.3		5.1	3.6		5.7
9	Hoa Phat Group	23,000		27.8		5,444	3.29		12.6		25.4		16.4		1.1		1.3			1.2		2.2	-		-
10	Vietinbank	27,700		1.7		5,419	3.27		9.2		8.2		7.1		1.2		1.1			0.9		2.9	-		-
11		FPT	83,000		27.0		4,291	2.59		17.0		18.0		15.0		3.9		4.1			3.5		2.6	3.2		3.7
12	Techcombank	27,700		7.2		3,966	2.40		4.7		5.9		5.0		0.8		0.8			0.7		0.1	-		-
13	Military Bank	17,100		17.9		3,630	2.19		4.5		4.5		3.8		1.0		0.9			0.8		-	-		-
14	Masan Group	58,200		-37.4		3,390	2.05		37.1		110.8		47.2		5.1		3.0			2.8		1.0	1.5		1.5
15	ACB	21,400		17.0		3,384	2.04		5.3		5.2		4.3		1.2		1.1			0.9		-	-		-
16	Sabeco	56,700		-31.1		2,960	1.79		20.6		17.3		15.3		4.6		2.9			2.7		2.3	3.3		3.3
17		Becamex IDC	58,600		-27.3		2,469	1.49		49.5		43.7		24.6		4.9		3.4			3.1		0.9	1.2		1.2
18	Mobile World	37,700		-11.3		2,245	1.36		15.2		41.4		11.7		2.6		2.2			1.9		1.2	-		1.4
19	Binh Son Refining	17,400		35.8		2,196	-		2.7		6.5		9.4		0.8		1.0			0.9		3.3	5.8		5.8
20	Vietjet Air	99,000		-9.6		2,183	1.32			neg	38.5		32.5		4.0		3.3			2.8		-	-		-
21	Sacombank	27,000		20.0		2,072	1.25		8.4		6.4		4.3		1.1		1.1			0.9		-	-		-
22	Vincom Retail	22,200		-15.6		2,054	1.27		21.5		11.0		10.8		1.8		1.3			1.2		-	-		-
23	HD Bank	17,200		30.7		2,025	1.23		4.9		5.7		4.9		1.0		1.1			0.9		-	-		-
24	VEAM Corp	35,800		-12.3		1,937	-		7.2		7.1		6.5		2.2		1.8			1.9		11.1	12.3		16.0
25	VIB	17,900		20.9		1,849	1.12		4.5		4.7		3.9		1.1		1.2			0.9		-	-		-

5

VIETNAM MONTHLY REPORT

31 October 2023

Fund	Bloomberg	ISIN	SEDOL	CUSIP	Listed
VEIL	VEIL LN	KYG9361H1092	BD9X204	G9361H109	London (Main Market)
VEF-A	VIETNAM ID	IE00BD5HPH84	n/a	n/a	n/a
VEF-B	VIETEUR ID	IE00BV8WVB25	n/a	n/a	n/a
VDeF-B	VNDEBTB	KYG936151136	B3K9234	G93615113	Ireland

	Price Providers	Funds	Bloomberg	Reuters	Contact
	Jefferies International				Michele White / Trevor Hunt
	VEIL	JCEF	n/a	[phone]
						[e-mail]
	SEI Investments	VEF	-	-	Transfer Agency Department
	[e-mail]
	Operational VEIL
	Trading		Shares trade as depositary interests on the London Stock Exchange
	Clearing	CREST Participant ID 393 (UK Equity)
	Settlement	BIC Code: JEFFGB2X
	Legal Entity Identifier (LEI)	213800SYT3T4AGEVW864
VEF
Subscription & Withdrawals	Daily

The Fund has appointed SEI Investments - Global Fund Services Limited as its fund administrator and transfer agent, and SEI Investments - Depositary and Custodial Services (Ireland) Limited as its depositary. A range of third-party fund platforms also include VEF in their product offerings, including Clearstream (www.clearstream.com),

Fundsettle (www.euroclear.com), Banco Inversis	(www.inversis.com), IFSAM (www.ifsam.lu), Pareto Securities
(www.paretosec.com), Attrax (www.attrax.lu), MFEX (www.mfex.com) , and Allfunds (www.allfunds.com).
VDeF
Subscription & Withdrawals Monthly		Contact:[e-mail]

6

VIETNAM MONTHLY REPORT

31 October 2023

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No disclosure, reference or other information included in this document shall be considered as offering or solicitation of any product or service. Nothing in this document shall be construed as investment advice or a recommendation to acquire or invest in any securities or other instrument or financial product. Any investment performance and market information provided in this presentation, including information about any particular companies, are provided for illustrative purposes only and are not investment recommendations.

No person is promulgating or providing any financial or other advice to any person, and is not making and does not intend to make an offer or solicitation in relation to any product, whether referred to in this document or otherwise. Any person requiring investment advice should consult a suitably qualified professional adviser prior to taking any investment decision.

The information contained in this document is subject to updating, and the accuracy, certainty or completeness of such information is not guaranteed. No representation or warranty, express or implied, is made, and no liability whatsoever is accepted by any other person, in relation thereto.

This document must not be distributed or otherwise made available to third parties without the consent of Dragon Capital, and then only to such recipients who have confirmed that distribution of such information is in compliance with all securities laws and regulations which apply to them.

For UK investors in VEIL: According to an analysis performed on behalf of VEIL by KPMG, VEIL does not meet the definition of an "offshore fund" for the purposes of the Offshore Fund Regulations in the UK. On the basis of this analysis, the Offshore Fund Regulations do not apply to VEIL, and therefore the reporting fund status regime is not relevant to VEIL or its UK investors. Please contact us if you require the full analysis from KPMG.

For Swiss Investors in VEF: This is an advertising document. The representative for Vietnam Equity (UCITS) Fund ("VEF") in Switzerland is Waystone Fund Services (Switzerland) SA, Av. Villamont 17, 1005 Lausanne, Switzerland, and the paying agent is Helvetische Bank AG, Seefeldstrasse 215, CH-8008 Zurich, Switzerland. The VEF prospectus, key information document (PRIIP-KID), the articles of incorporation as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland.

For Belgian investors in VEF: This is an advertising document. This document is intended only for professional investors (A) that are "qualified investors" in the meaning of Article 2, (e) of the EU Regulation 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, as amended from time to time or any successive legislation that may enter into force (each, a "Qualified Investor"), and (B) any such Qualified Investor shall act in its own name and for its own account and shall not act as intermediary, or otherwise sell or transfer, to any other investor, unless any such other investor would also qualify as a Qualified Investor.

For Italian investors in VEF: This is an advertising document (materiale di marketing). For professional investors only.

UCITS HAVE NO GUARANTEED RETURN AND PAST PERFORMANCE DOES NOT GUARANTEE FUTURE PERFORMANCE

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