Equity strategy

Becoming investible
What would make 2009 better?
The Vietnamese market is becoming increasingly marginalised. In 2008, the VN Index was down 69% in US dollar terms, the worst performance of any Asian market. MSCI Asia ex Japan, by comparison, fell 53%. Neither did Vietnam share in the rebound in equity markets in the last six weeks of the year: while Asian equities rose 23% from 20 November to the end of the year, Vietnam actually fell by 3%. have been net sellers consistently since September (see Chart 3) and have sold a total of USD127m net over that time. The selling slowed in December but perhaps only because most foreign investors, except for specialist Vietnam country funds, have now sold out. The market’s largest IPO in the past 12 months, by Vietinbank on 25 December, was fully subscribed (just) but only three foreign institutions bid for shares. With this backdrop, in our latest Asia Insights Quarterly, we dropped to zero our small nonbenchmark recommended weighting in Vietnam. We take the view that, even when risk appetite does come back to global markets, there are other markets in Asia that look more attractive as a first entry-point. Vietnamese companies’ earnings are highly non-transparent, and massive macro policy errors last year have put the long-term attractiveness of the market in doubt. Furthermore, Vietnam’s high dependence on FDI flows and exports means that 2009 growth is under significant pressure. Vietnam’s entrepreneurial spirit and appealing demographics will make this market interesting again one day, but not for the next few quarters.