Equity funds flock to Vietnamese stocks

Frontier-market equity funds from Sweden to South Africa are pouring money into Vietnamese stocks, lured by Southeast Asia's lowest valuations and an improving outlook for economic growth.

Overseas money managers bought a net US$277.1 million of the country's shares, 5.3 per cent more than the whole of 2013. That has helped propel a 20 per cent gain in the benchmark VN Index.

Coeli Asset Management, RenAsset Management and Asia Frontier Capital say the rally is not done as economic growth accelerates, inflation eases and the outlook for exports improves after the central bank devalued the dong for the first time in 12 months.

Moody's Investors Service raised the country's sovereign rating on July 29, citing an improving balance of payments and rising foreign-exchange reserves.

"We are adding to existing positions in Vietnam," said Thomas Hugger, chief executive at Hong Kong-based Asia Frontier. "Even though it has been among the leading performers in Asia this year, we still think many stocks offer value."

James Bannan, who runs the US$110 million Frontier Markets Fund at Coeli in Sweden, said he was "very positive" on Vietnam. Sven Richter, head of frontier markets at RenAsset, which has offices in Johannesburg, Guernsey and London, is "still finding attractive stocks" to buy.

The VN Index is valued at 13.7 times projected 12-month earnings, the least among the six major Southeast Asian markets.