The Vietnam Stock Exchange started in 2020 with an index reading of 960 (A). The Vietnamese economy was having good growth and the earnings expectations of listed companies were rather robust. At the turn of the year, a period of 20 months had past, during which the index had fallen from its peak 1,200 points in 2018 (B) downwards by about 20%.
In less than two years of poor index performance, listed companies had had a strong earnings growth, and the declining stock prices had made the shares reasonably attractive taken into account Vietnam’s long-term good growth prospects and peer market valuations.
The COVID-19 epidemic took Vietnam’s stock market lower with it. The index is now 100 points below the beginning of the year reading of 860 (C). The Vietnamese economy took a hit, the negative impact on tourism and foreign trade will last long, but the Vietnamese economy can despite the negatives, record a positive growth of 3-5% in 2020.
We believe foreign investors will increase their net buying towards the end of the year because foreign outflows were strong during March-April and Vietnamese stocks are now even more attractively priced. The growth outlook for the Vietnamese economy and earnings over the next few years remains excellent. Our long-term index target of 1,800 points remains unchanged.
VN Index chart
Source: Bloomberg & PYN Fund Management
Through the hedging of the EUR/USD currency pair, we are able to control portfolio’s returns to align with the underlying stocks performance. We can ignore possible quick moves at the currency markets for this currency pair.
In the long run, the EUR/USD trend has correlated relatively with the interest spread. Since December 2018, the interest rate spread has been narrowing, but the direction of the currency pair has not yet responded to this change.
EUR/USD spot and 3 month interest rate spread
Source: Bloomberg & PYN Fund Management
Greetings from Sipoo Island with long daylight, where a special portfolio management center has been established with enhanced telecommunications connections for the current state of emergency period.