GreatLink Lion Vietnam Fund

Investors who are looking for opportunities to invest in emerging markets may want to check out the GreatLink Lion Vietnam Fund from Singapore life insurance provider, Great Eastern. The fund is currently the only Singapore-registered Vietnam unit trust available to retail investors.

According to Lion Capital Management who manages the fund for Great Eastern, Vietnam remains an attractive investment for the long term despite the lowering of the government's forecast for economic growth from an earlier target of 8.5%-9%, to 7% for 2008.

While the impact of US slowdown may affect Vietnam's export growth, exports in the first four months of 2008 had remained robust and grown by 28% year-on-year.

Lion Capital Management notes that the country's economic growth will be sustained by its favourable cost structure as well as a young workforce which has a a high literacy rate of 94%. More than half of Vietnam's 84 million population is below the age of 30 and with income levels rising, this is expected to fuel domestic demand in the coming years.

The rapid shift in the population from rural areas to urban centres for example has already seen a huge demand for housing in cities like Ho Chi Minh City and Hanoi, both of which are likely to see a doubling of their urban population within a decade.

Meanwhile, the rapid privatisation of Vietnam's state-owned enterprises and market deregulation are expected to greatly expand its stock market capitalisation.

At the same time, Vietnam's membership into the World Trade Organisation (WTO) as of January 2007 can only add impetus to development and market-oriented reforms and more opportunities for exporters, including many foreign investors and multinational firms looking to set up alternative manufacturing bases outside of China.

GDP per capita has more than doubled in the last 10 years while the average annual economic growth of 7.5% over the last seven years has made Vietnam the fastest growing East Asian economy after China.

The GreatLink Lion Vietnam Fund feeds into the Lion Capital Vietnam Fund, which seeks to provide medium- to long-term capital appreciation by investing primarily in Vietnam-listed companies as well as those listed elsewhere that have operations in, or derive part of their revenue from Vietnam and the Indochina region.

About 42% of the fund's portfolio is currently invested in Vietnamese stocks, 10% in Vietnamese bonds and 40% invested in companies with operations or exposure to Vietnam such as Malaysia's Gamuda Berhad, Sanyang Industrial of Taiwan and Ascott Residence Trust, a Singapore real estate investment trust (REIT).

A Lion Management spokesperson says, "Since inception, we have been accumulating stocks selectively and cautiously adhering to our strict criteria on quality and valuation. We also sought to diversify market risks by investing in companies with moderate exposure to Vietnam which are listed in overseas markets. We also participated in several initial public offers (IPOs) which came to the market."

The Lion Capital Vietnam Fund was first launched in February 2007 and has fallen by 32.8%, but the benchmark VN Index had declined by an even bigger margin of 50.7%, in Singapore dollar terms.

In 2006, the VNI posted the biggest advance in Asia with a 144% rise and was the world's third-best performer after gauges in Peru and Venezuela that year.

According to JP Morgan, current market valuations are beginning to look reasonable, with the market forward price earning ratio now been reduced to 15.5 times compared to 37.5 times at the peak of the market in March 2007.

Short-term wise, the Vietnam stock market is likely to be volatile due to concerns over further tightening measures by the State Bank of Vietnam and rising inflationary pressures.

Nevertheless, recent measures to stabilise the stock market such as reducing the daily stock trading limits from 5% to 2% as well as allowing the State Capital Investment Corporation to buy stocks have led to lower market volatilities.

Other positive developments have included the raising of the cap on foreign ownership in unlisted public companies from 30% to 40% and the removal of income tax imposed on stock investors. The State Capital Investment Corporation also announced measures to support the stock market in an unprecedented plan to buy shares.

Investors should stay invested in the fund for the long term to take advantage of the likely growth potential of the Vietnam market. Investors can choose to invest a minimum of $100 per month or a lump sum of $5,000 using cash or SRS Funds.

By A J Leow

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