Christopher
Johnson:
Welcome
to
Morningstar.
Today,
I’m
joined
by
Ngo
Thanh
Thao,
Deputy
Portfolio
Manager
of
the
Vietnam
Enterprise
Investment
Trust
(VEIL).
Let’s
dive
in.
Over
one
year,
your
investment
trust
achieved
a
0.9%
return
rate
underperforming
its
peer
benchmark.
What
do
you
put
this
down
to?
Ngo
Thanh
Thao:
We
have
a
quite
positive
return
in
the
first
two
months
of
2024
with
the
NAV
increase
by
more
than
3%.
However,
our
one-year
return
is
still
impacted
by
some
lags
in
last
year’s
2023.
As
you
may
consider,
2023
was
a
tough
year
not
only
for
Vietnam
but
also
in
terms
of
global
economy.
So,
with
the
Fed
rising
rate,
the
geopolitics
tension,
and
also
the
weakening
in
domestic
demand
has
also
impacted
the
business
performance
of
the
companies
in
Vietnam.
Therefore,
some
sectors
like,
especially
the
retail
sectors,
have
seen
a
very
tough
condition
last
year
due
to
the
slowdown
in
the
consumption
demand.
Our
two
key
holdings
in
this
sector
are
Mobile
World
and
PNJ
has
faced
a
slowdown
last
year
and
the
share
price
was
underperforming
the
benchmark.
This
mainly
explains
the
0.9%
underperformance
of
the
fund.
However,
we
do
believe
that
the
earnings
of
these
two
companies
and
also
the
retail
sector
will
rebound
in
2024,
firstly,
due
to
the
low
base
effect
for
last
year
and
secondly,
it’s
also
driven
by
the
growth
in
the
consumption
and
also
the
increase
in
the
public
investment
in
Vietnam.
Currently
now,
the
interest
rate
in
Vietnam
is
low,
even,
lower
than
the
pre-COVID
level.
So,
with
the
low
interest
rate
in
the
environment
and
also
with
the
strong
determination
of
the
Vietnam
government
to
deliver
the
economic
growth
this
year,
we
think
the
retail
sector
will
recover.
CJ:
You
mentioned
Mobile
World
and
it
makes
up
4.67%
of
the
trust.
So
why
are
you
still
backing
the
retail
chain?
You
mentioned
that
it
hasn’t
done
as
well.
So
why
are
you
still
bullish
on
this
stock?
NTT:
Mobile
World
is
our
top
pick
in
the
retail
sector.
It
is
the
best-in-class
management
and
also
leading
in
the
retail
transformation
in
Vietnam.
So,
after
suffering
a
difficult
year
in
2023,
as
I
already
explained,
the
company
expects
to
come
back
strongly
this
year.
Profit
will
jump
hugely
and
of
course
it
will
continue
to
recover
in
2025
and
also
see
a
huge
jump.
The
robust
business
performance
is
thanks
to,
firstly,
its
electronic
consumption
and
also
mobile
phone
distribution
has
already
bottomed
out
and
started
to
recover
during
the
year.
The
recovery
momentum
also
repeats
on
the
grocery
business,
which
is
the
new
business
of
Mobile
World.
The
grocery
business
of
Mobile
World
now
has
become
number
one
in
the
modern
trade
player.
And
secondly,
the
grocery
chain
of
Mobile
World
has
achieved
the
breakeven
level
and
started
to
have
profit
this
year.
We
expect
Mobile
World
to
able
to
scale
up
its
grocery
business,
meanwhile
still
manage
to
improve
profitability.
And
recently,
the
pre-IPO
of
the
grocery
business
has
been
completed
with
the
valuation
of
US1.5
billion,
which
already
unlocked
a
substantial
value
for
our
shareholders.
CJ:
Banking
is
a
very
large
sector
of
the
investment
trust
at
38.72%.
So
why
is
that?
NTT:
VPBank
is
our
top
holding.
And
recently,
for
your
update,
we
haven’t
reduced
any
share
in
this
bank
because
we
still
believe
that
VPBank
will
have
a
good
outlook
this
year.
So,
in
general,
for
our
banking
sector,
it
is
the
largest
sector
in
the
bank
portfolio,
which
reflects
our
belief
that
the
banking
sector
will
benefit
most
from
the
economic
recovery.
The
banks
and
technology
are
the
two
sectors
that
have
seen
the
most
aggressive
growth
in
the
past
10
years.
Banks
make
up
40%
weight
in
the
Vietnam
stock
market
and
contributes
more
than
60%
of
the
earnings
on
the
Vietnam
stock
market.
Therefore,
for
this
year,
2024,
we
anticipate
an
improvement
in
the
credit
growth,
also
in
the
net
interest
margin,
and
also
an
improvement
in
the
asset
quality.
This
year,
we
think
the
earnings
in
the
banking
sector
will
increase
from
18%
to
20%
and
also,
the
return
on
equity
stays
resilient
at
18%.
Moreover,
the
bank
valuation
is
now
at
a
very
cheap
valuation,
especially
in
the
private
bank,
only
1
to
1.2
times
price
to
book.
So,
we
think
the
bank
may
deserve
a
re-rate
in
terms
of
the
valuation
this
year.
CJ:
I
wanted
to
get
your
perspective
on
how
Vietnam
may
have
benefited
from
trade
tensions
between
the
US
and
China.
But
have
there
also
been
challenges
that
those
tensions
have
brought?
NTT:
The
tension
between
the
US
and
China
caused
the
supply
chain
shift
out
of
China,
and
Vietnam
has
benefited
from
that.
Vietnam
offers
businesses
an
ultimate
location
for
manufacturing,
which
is
in
line
with
China
Plus
One
strategy
that
many
companies
now
pursue
due
to
the
rising
costs
in
China.
The
foreign
direct
investment
flow
into
Vietnam
was
strong
in
recent
years.
This
year,
Vietnam
received
around
US$20
billion
coming
to
the
country.
And
we
think
this
trend
will
maintain
solid
in
the
coming
years.
Thanks
to
the
strong
FDI
investment,
Vietnam
has
been
moving
from
being
a
low-tech
manufacturer
to
high-tech
manufacturing.
The
investment
from
big
companies
like
Intel,
Samsung,
Apple,
LG
show
that
there
is
a
big
potential
in
the
country.
And
it
is
safe
to
say
that
Vietnam,
although
it
cannot
absorb
all
the
China
manufacturing,
the
country
is
well-positioned
to
take
more
production
and
along
with
other
countries
in
the
region
to
play
an
important
role
in
the
global
value
chains.
CJ:
Coffee
prices
are
soaring
at
the
moment
and
the
main
reason
is
because
Vietnam
has
been
hit
by
drought.
I
want
to
get
your
perspective
on
how
important
agriculture
is
to
Vietnam’s
economy
and
also
how
do
you
see
climate
change
impacting
this
sector
as
food
demand
will
continue
to
increase?
NTT:
Agriculture
is
an
important
industry
in
Vietnam
with
the
contribution
to
GDP
of
around
11%
to
12%.
Although
the
agriculture
listed
companies
in
the
Vietnam
stock
market
are
very
small,
only
0.5%
of
the
Vietnam
index,
the
climate
change
has
a
big
impact
to
the
agriculture
in
Vietnam.
For
example,
the
saltwater
intrusion,
the
rising
sea
level
and
saltwater
intrusion
into
the
coastal
area
can
contaminate
fresh
water
source
and
the
agriculture
land,
especially
in
the
Mekong
Delta
River.
And
also,
the
drought
also
increased
in
both
frequency
and
coverage.
We
also
see
the
increase
in
the
extreme
weather
events
like
the
flood,
typhoon,
and
that
could
impact
the
agriculture
productivity.
As
a
result,
there
was
a
light
reduction
of
the
agricultural
land
area
in
Vietnam
from
2019
until
now.
The
reduction
in
the
agriculture
land
is
around
1.5%.
And
also,
there
is
also
a
drop
in
the
total
rice
production
in
the
two
largest
paddy
fields
in
Vietnam,
which
is
the
Red
River
Delta
and
the
Mekong
Delta
in
the
south.
However,
Vietnam’s
government
has
been
proactive
in
preparing
the
action
plan
policy
and
resolution
to
aim
at
mitigating
and
adapting
to
the
climate
change,
with
particular
emphasis
to
the
two
largest
deltas
in
Vietnam.
For
example,
in
the
Mekong
Delta,
a
sustainable
development
has
been
applied
from
2017,
which
focuses
on
the
climate
change
adaption
and
the
facility
enhancing
the
regional
connectivity
and
also
to
increase
the
production
of
the
rice
field.
So,
thanks
to
the
implementation
of
the
climate
change
mitigation,
the
rice
productivity
in
the
Mekong
Delta
and
also
the
Red
River
Delta
has
increased
by
4%
from
2021
until
now.
CJ:
Finally,
I
wanted
to
get
your
perspective
on
real
estate.
So,
it’s
the
second
largest
holding
at
19.71%
–
or
second
largest
sector,
rather.
Why
is
that?
And
how
is
Vinhomes
allowing
you
to
get
exposure
to
the
real
estate
sector
in
Vietnam?
NTT:
Despite
a
slowdown
in
the
real
estate
sector
in
the
last
two
years,
including
the
recent
debt
crisis,
the
Vietnam
real
estate
sector
remains
an
important
sector
in
the
Vietnam
economy.
An
important
factor
that
impacts
the
real
estate
sector
is
the
mortgage
rate,
where
we
recently
observed
that
has
been
dropped
significantly
and
even
below
the
pre-COVID
level.
So,
the
mortgage
rate
in
Vietnam
now
is
around
6%
to
7%,
so
even
cheaper
than
the
US
market.
With
this
reduction
in
the
mortgage
rate,
we
think
it
could
help
the
financial
affordability
for
homebuyers
and
addressing
the
real
demand
for
the
sector.
So
as
the
interest
rate
is
going
down,
we
see
the
transaction
volume
also
experiencing
a
slight
uptick
from
the
second
half
of
last
year
and
continue
in
2024.
Both
in
the
big
city,
Lai
Ho
Chi
Minh
City
and
Hanoi,
the
number
of
transactions
already
increased
by
50%.
So,
looking
ahead
towards
the
year-end,
we
think
the
real
estate
market
will
see
an
improvement
and
therefore
we
are
prepositioned
in
the
real
estate
sector
for
the
theme
of
recovery.
And
as
you
mentioned,
Vinhomes
is
one
of
our
big
investments
in
the
real
estate
sector.
Vinhomes
is
the
biggest
real
estate
developer
in
Vietnam
and
is
also
one
of
the
best
developers
with
a
unique
model
of
providing
the
ecosystem
in
residential
real
estate.
Last
year,
despite
the
difficulties
in
the
real
estate
market,
Vinhomes
still
could
deliver
the
net
earnings
of
US$1.3
billion,
thanks
to
its
strong
capability,
its
execution,
and
development
and
launch
project.
This
year,
we
predict
that
Vinhomes
could
still
deliver
the
same
level
of
profit
as
last
year
and
this
is
also
our
top
nine
holdings
with
3.4%
in
the
portfolio.
And
together
with
all
the
selected
names,
like
Khang
Dien
House,
is
also
our
key
representative
for
the
sector.
CJ:
Ngo,
thank
you
so
much
for
taking
the
time
out
to
speak
to
me.
NTT:
Thank
you.
CJ:
This
is
Christopher
Johnson
from
Morningstar
UK.
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