Vietnam Enterprise Investments Regulatory News (VEIL)

18 September 2023

Vietnam Enterprise Investments Limited

("VEIL" or "the Company")

Monthly Update

VEIL is a London-listed investment company investing primarily in listed equities in Vietnam and a FTSE 250 constituent. The Company's NAV performance for August 2023 is set out in this notice.

Company Performance

· As of 31 August, VEIL's NAV decreased 1.4% over the previous month against a fall of 1.2% for its reference index, the Vietnam Index ("VNI"), both in total return US dollar terms. The Company's NAV per share was US$9.37 and its total NAV was US$1.9bn.

· VEIL's share price decreased 8.8% in August and has risen 9.4% year-to-date, both in US dollar terms.

· VEIL's three-month NAV per share performance in US dollar terms is +13.7%, -8.5% over one year and +46.6% over three years. Over the same time periods, the performance of the VNI was +11.8%, -5.3% and +40.4%, respectively.

· In GBP terms, VEIL's NAV increased 0.1% over the previous month and 13.2% year-to-date. The Company's NAV per share was £7.39 as of 31 August and its total NAV was £1.5bn. The sterling share price decreased by 7.5% for the month and has increased 3.8% year-to-date.

· The share price discount to NAV as of 31 August was 18.1%, compared with 11.4% at the end of July and 10.7% as of 31 December 2022.

· The Company repurchased 391,143 shares in August, compared with 129,339 shares repurchased in July. Year-to-date to 31 August, 2,427,071 (1.2% of shares outstanding as of 1 January 2023) have been repurchased.

· The Vietnamese dong ("VND") depreciated 1.7% against the US dollar in August and has depreciated 2.0% year-to-date. The VND depreciated 0.4% against the pound sterling in August and has depreciated 7.4% year-to-date.

Dien Vu, Portfolio Manager of VEIL commented:

"In August, the Vietnamese market was influenced by the US on two fronts - the NASDAQ listing of electric vehicle manufacturer Vinfast Auto Ltd. ("VFS"), and ongoing media reports that the likely outcome of President Biden's September trip to Hanoi would be an upgrade in trade relations between the two countries. The latter was ratified in Hanoi on 10 September when the US signed a 'comprehensive strategic partnership' ("CSP"), the highest level offered by Vietnam. This is two levels up from the previous arrangement and is expected to increase trade between the two countries (which totalled US$124bn in 2022), with a particular focus on semiconductor supply chains.

"Accordingly, FPT Corporation ("FPT") had a stellar month, rising 12.3% due to optimism on what an upgrade to US trade could mean for technology companies in Vietnam. FPT's semiconductor division was launched in late 2022 and has successfully released its premier integrated circuits - these are designed in Vietnam and manufactured in South Korea (which signed a CSP with Vietnam in December 2022). FPT's core business continues to perform, with the company projecting growth of 20% per annum in their Global IT Services segment. While emphasising Japan as a key market in this sector, FPT also plans to grow its presence in the US, which constituted 35% of their 2022 global IT services revenue, marking a 50% year-on-year growth. FPT is VEIL's 6th largest holding, accounting for 5.7% of NAV and has been the portfolio's best performing top-ten holding over the past year, increasing 27.9%.

"On 15 August, Vingroup's ("VIC") subsidiary VFS became Vietnam's first notable overseas listing. With free-float below 1%, this resulted in well-documented volatile trading. The VFS listing also caused increased volatility in the VNI, mostly driven by VIC, which prompted a major broker to cut margin lending as the market overheated. This resulted in a knee-jerk sell-off of 4.3%, the largest one-day drop YTD. The market found its footing, and average daily trading in August was US$1.1bn across Vietnam's three exchanges, the highest level since April 2022. VIC itself ended the month up 10.9%, contributing 10.6 points to the VNI's performance.

"In contrast, one of VIC's Vietnam-listed subsidiaries, Vinhomes, was a notable laggard in the VEIL portfolio, falling 14.6%. The Manager believes this was due to a combination of foreign net selling and local divestment from the stock after its YTD peak in July (during which it rose 14.0%). Foreign investors sold a net US$107mn in August, which can be attributed to overall emerging market outflows (Indonesia US$1.4bn; Thailand US$443mn; Philippines US$131mn) and growing apprehensions surrounding China's real estate conundrum and economic concerns. The Vietnamese Government has strongly committed to supporting the real estate sector since February 2023, with ongoing policy changes and monetary stimulus packages to revive the property market. Only very select major developers can access international financing, and the majority of listed property companies have a net debt to equity ratio below 0.7x.

"VEIL reduced the concentration of its top-ten holdings by selling nearly half of its position in Asia Commercial Bank ("ACB"). This off-market transaction commanded a 7% premium, 3% higher than the stocks' all-time-high. A long-term holding of 27 years, ACB has grown from five branches at the time of investment to 384 branches and transaction offices today, with over US$26bn in assets. Prior to August's partial divestment, ACB accounted for 12.9% of VEIL's NAV and was its top holding. It is now 7.2% of the portfolio, moving down from seven times to four times overweight against the VNI. The Manager remains bullish on the stock due to its loan book being less exposed to cyclical risk, conservative lending approach, strong asset quality, and large retail presence. However, the Manager has also identified other top-tier commercial banks offering attractive valuations, growth opportunities and sound risk management.

"VEIL's discount widened from 11.4% at the end of July to 18.1% at the end of August, and is currently higher than its one, three and five year averages of 14.3%, 14.6% and 13.6%, respectively. The VEIL Board repurchased 391,143 shares over the course of the month to help manage the discount and has bought back 4.3% of shares outstanding since the beginning of 2022. Aside from the aforementioned emerging market outflows in August, rising interest rates and government bond yields have also been regarded as catalysts for the recent widening of discounts across the UK's investment trust sector."

Top Ten Holdings (60.3% of NAV)

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms

For further information, please contact:

Vietnam Enterprise Investments Limited

Rachel Hill

Phone: +44 122 561 8150

Mobile: +44 797 121 4852

rachelhill@dragoncapital.com

Jefferies International Limited

Stuart Klein

Phone: +44 207 029 8703

stuart.klein@jefferies.com 

Buchanan

Charles Ryland / Henry Wilson / George Beale

Phone: +44 20 7466 5111

veil@buchanan.uk.com

LEI: 213800SYT3T4AGEVW864