The VN Index inched up as investors looked through the grim macroeconomic numbers for the past quarter and look forward to a better final quarter of the year.
“The market is absorbing the gradual re-opening of the economy whilst looking to the third quarter earnings for clues of the impact on corporates earnings from the lock-down period,” said Dien Vu Huu, portfolio manager at VEIL’s investment manager, Dragon Capital.
“Once these impacts are fully priced in we can start to be cautiously optimistic – assuming global market conditions permit – regarding the outlook for the rest of the year and into 2022.”
While VEIL does have a high level of exposure to the real estate sector, he said Dragon does not see any fallout from the China Evergrande problem impacting Vietnam.
“Aside from the two countries having different policies, Vietnamese developers are also far less reliant on debt and have far stronger balance sheets than their highly leveraged Chinese counterparts.
“One of the reasons VEIL has such high conviction on the property sector in Vietnam is because over the last few years these companies have improved their capital efficiency and developers have continued to benefit from the emerging middle class and urbanisation trends being witnessed in Vietnam.”
Dragon noted that while Vietnam’s GDP print for the third quarter down 6.2, this is “now history” and the fourth wave of the pandemic is being contained, thanks to lockdowns and accelerating vaccination, with re-opening of the economy firmly underway.
Q3 “will likely be the bottom”, the investment manager said, noting that even with the -6.2% result, nine-month GDP was still up 1.4%.
There is optimism that GDP for October to December “will turn around sharply QoQ, not to mention whatever it might do in 2022”, as the Q3 number came with positive readings for industrial output and exports as some sectors start to unlock as early as mid-September.