‘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