One secret of success in life is for a man to be ready for his opportunity when it comes. (Disraeli).

I wonder if Boris Johnson is feeling that his opportunity has now come as he picks up the reins from Mrs May. He has got quite some task to lead the country through this Brexit ordeal, and towards a socially acceptable, and economically flourishing future.

I guess it is excusable if he likens his own situation to that of Winston Churchill at the start of the Second World War. Certainly, in one sense, with politics as it has now become it must be more difficult today to tell friend from foe. It’s going to be interesting to see his cabinet selection and then to see how long that holds together as negotiations with the EU hot up.

Here at Saltydog it has become vital that we do not get diverted away from following the numbers and sector performance as we move towards the 31st October.

The following are some of the thoughts, and distractions, that are rock and rolling around my cranium at the moment; unfortunately, without any answers.

  • Will the EU wise up and admit to the internal economic pain that they will suffer from a no-deal Brexit, and soften their approach?
  • The EU has many other internal problems, both financial and political, to contend with at the moment. Another reason to soften their approach and make Brexit go away.
  • The UK stock market has not yet taken a dive at the thought of a Boris government intent on leaving with or without a deal. The question is why?
  • Does this mean that leaving without a deal will not be as harmful as the “Fear campaign and Hammond” are leading us to believe?
  • How much of an attraction to the EU, if at all, are the billions of euros offered as a divorce settlement for a trade deal?
  • Sterling has recently weakened against most currencies, but not down to the level immediately after the referendum. Does this mean that the markets believe a favourable solution to Brexit is possibly on the horizon with a Boris led government? Otherwise, why has it not fallen further?

The above are all questions to which today do not have a definite answer.

We should consider the consequences of the effect on Sterling of a successful outcome to the negotiations. One would expect it to rise in value, thereby impacting adversely on all funds in foreign denominated currencies. Bad news for many of today’s investments in Technology, U.S. and Global sectors.

This being the case it is probably the time for moving into reverse and re-examining the U.K. sectors.

A Brexit deal might liven up the inflow of inward investment from abroad. Perhaps car companies and financial houses might be more inclined to stay, thereby producing a knock-on effect on employment and a growth in the country’s technical skills.

Fingers crossed, we should be able to track these movements using our numbers and graphs. Then perhaps it will be “toe in the water” time for UK smaller and mid-cap funds.

Conversely, if the country falls out of bed and we leave without a Brexit deal, then our existing investments should continue to thrive as Sterling falls further in value, thereby boosting the worth of foreign currency denominated funds. I cannot see that a Brexit rout will affect the economies of the USA, China and the rest of the world outside of the European Union. It is going to be interesting to see whether a Boris led country will make the changes to taxes, infrastructure spend, education and to the NHS, which have all been indicated in the last few weeks.

As Robert Kennedy said, “We live in interesting times.”

Best wishes and good investing,

Douglas.

Founder & Chairman

‘Hello Vietnam’

Over the last five years I have visited my younger brother in Vietnam three times. He is a doctor, and lives very comfortably with his son, Vietnamese daughter-in-law and three-year-old grand-daughter in Ho Chi Min City. The son is a teacher and the daughter-in-law runs her own business. I mention all of this because when I visit, it gives me an insight as to how the economy and life in general is progressing. To get around in H.C.M.C. you need a scooter and there are thousands and thousands of them, not cars but scooters! A noticeable change from my visit two years ago is that these scooters are being upgraded. Yes, they do still carry the whole family and some livestock, but with more security and in more comfort.

Another observation is about schooling and its importance to Vietnamese parents. Rose, now that she is three years old, spends a full day at school and her education is the family’s top priority. It is not free, but the costs are the first on the list in their budget. Not surprisingly she is speaking both English and Vietnamese and will probably acquire a third language when she is older.

I mention this not because it is exceptional, but because it is the norm. This is a very young race of people who are intent on making their mark on first the Asian, and in future on the world stage. The government spends around 5% of its GDP to provide educational facilities, and this is a high percentage when compared with much of the rest of the world.

Vietnam is intent on becoming the breadbasket for the Asian world. It has a climate that allows parts of the country to produce three crops of rice per year, a lot of which it exports. It is also the largest producer of coffee in the world which is also exported. Its biggest markets are China and America, and it recently has signed a trading agreement with the European Union.

It is, however, in the production of electronic components that it really excels, and many Japanese, American and Chinese companies outsource their production to Vietnam. Foreign Direct Investment has risen to more than $22 trillion per annum after five years of ever-increasing inward investment. It would be nice to think that the UK was capable of attracting this sort of investment after Brexit is finally completed!

All of the above would seem to me, to be a very good reason for looking for the fund that is invested fully in Vietnam. I have said before that this fund exists in the form of the VinaCapital Vietnam Opportunity Fund (VOF), and I have held this fund since my first visit in 2016.

  • October 2016 price 238p…..October 2017 297p an annual gain of 24%
  • October 2017 price 297p…..October 2018 344p an annual gain of 16%
  • Today`s price is 341p – down on last October, but a small gain on the year to date.

I believe that the VinaCapital price has been held back for one reason only, and that reason is the tariff war between the USA and China. Unlike Chinese fund prices it has not fallen back, but its rise has been temporarily put on hold.

A country with a stable economy, low inflation, and an average GDP per person of less than a third of that of China has plenty of room to continue its expansion. No wonder my brother is witnessing an ever-increasing growth in the middle-classes.

I am adding to my holding in this fund on the expectation that the tariff wars will come to a positive conclusion and Vietnam’s trade with China and the USA will return to normal. In addition, it will enjoy an increase in trade with the European Union, whilst internal consumption will continue to grow to support the aspirations of its acquisitive population.

So why not “Hello Vietnam”.

Best wishes and good investing,

Douglas.

Founder & Chairman