Vietnam is a clever way to play Asia
Imagine the amount of money you would have made if you had started investing in China 10 years before the hot money started to flow. Your profits would have been absolutely phenomenal – even after the correction over the last two years.
By Garry White
Published: 5:41PM BST 12 Sep 2009
VinaCapital Vietnam Opportunities Fund
$1.71 +0.01
Questor says BUY
For investors keen on getting in ahead of the crowd, Vietnam could offer you a similar opportunity today.
For the 10 years before the credit crunch hit, Vietnam was Asia's second-fastest growing economy after China. The country tabled an average growth in GDP of 7.5pc a year. This year's government target is 5pc.
The country was hit hard by the financial crisis, but it has now started to recover – and a return to stellar growth in the next few years is very likely. Questor urges investors to buy into Vietnam now, while it is still cheap.
The country certainly has a lot going for it. It has one of the highest literacy rates in Asia, at 90pc, and the workforce is young, hard-working and optimistic.
Almost two-thirds of Vietnam's 85m people are under the age of 35 – and this should support economic growth over the medium term. A young population implies significant population growth in the future, which should stimulate demand further.
Significantly, labour in the country is even cheaper than in China, which should underpin investment in areas such as manufacturing.
A good example of the attractiveness of Vietnam was seen last week when Coca-Cola said it planned to double its investment in the country to $400m over the next three years. The company did not didn't send a minor representative to make this announcement; Muhtar Kent, Coke's chairman and chief executive, went to the country personally.
Arguably, Vietnam is now in the same position as China was a decade ago, but there are limited ways that a UK investor can invest in this fledgling economy.
The Vietnam Opportunity Fund (LSE: VOF), which is managed by country specialist VinaCapital, is one of the easiest ways for UK investors to play growth in the Asian nation.
The shares peaked at $4.78 in 2007, but the sharp risk aversion that gripped the markets means the shares have plunged significantly. They hit a low of 65 cents in December last year, but have since more than doubled to the current level.
The fund's mandate is to invest at least 70pc of its cash in Vietnam, with the remaining 30pc in China, Cambodia and Laos.
Its managers target medium to long-term capital gains with some recurring income and short-term profit taking – which appears to be a sensible strategy. The fund will invest in private companies, not just listed entities, as well as taking part in any privatisations the government proposes.
The largest portfolio constituent of this open-ended investment trust, at 7.6pc, is financial group Eximbank. It also has major holdings in HPG, a steel manufacturer, dairy group VNM, real estate group DI and fertiliser group DPM.
As of August 31, Vietnam Opportunity Fund's net asset value per share was $2.44 – up 12.2pc in just one month.
The shares can be bought as normal through your broker and the investment trust is priced in dollars. For investors seeking substantial long-term capital growth, Questor recommends an investment in this Asian market, as it is not fully recovered from the recent plunge and should return to significant growth soon. Shares in the Vietnam Opportunity Fund are a buy.
Catlin
332.8p +2.60
Questor says BUY
Lloyd's of London insurers had a good first half of the year and Catlin, the largest syndicate in the market, was no exception. The group posted a record half-year profit of $240m (£143m) as investment returns more than tripled.
In February, Questor recommended buying the shares, despite the insurer falling into the red. The group was one of many that needed a rights issue – and £200m was raised at a hefty 47pc discount. The cash call was sensible, as the company could invest in its business.
Insurance premiums had started to rise, as underwriters tried to rebuild their balance sheets following an active hurricane season in 2008 and heavy investment losses.
Since this time, market conditions have continued to improve and insurers including Amlin, Chaucer and Hiscox have benefited as returns from hedge funds and equities begin to improve. With a market capitalisation of more than £1bn, Catlin was always going to be well positioned to seize these fertile market conditions.
The company now covers about 30 different types of risks and has an international network in 17 countries across five continents.
Although short-term risks hang over the Lloyd's market – including the onset of the Atlantic hurricane season – Questor believes Catlin shares are worth buying for their impressive yield, despite the shares being 10pc below their recommendation price.
The shares are currently yielding 7.2pc and the stance remains buy.
Cisco Systems
$23.12 +0.03
Questor says TAKE PROFITS
Shares in networking group Cisco were recommended in January at $16.91. Questor argued that the group's earnings would be supported by the US stimulus package, which aimed to connect many US schools to the internet.
The recent market rally means that the shares have risen by 36pc since that time. Questor thinks that the shares are now looking fully valued and are likely to mark time from here.
After this year's recovery, they are trading on a July 2010 earnings multiple of 17.5 times which, given the fragility of the recovery, looks like a fair rating.
Although global stock markets have rallied significantly, unemployment remains a major problem in Western economies. This means that the recovery could easily be derailed.
Indeed, the gold price crossed the $1,000 barrier last week, which is potentially a warning sign of a return of risk aversion, although it could just be a function of the weakening dollar.
Nevertheless, gold tends to outperform at times of crisis, so the latest popularity of the metal is a sign of investor concern that the market has risen too far too fast.
Investors do not go broke taking profits and, with worries over dollar weakness starting to gather pace, Questor thinks now is a good time to take profits in Cisco and sell.
http://www.telegraph.co.uk/finance/markets/questor/6179041/Vietnam-is-a-clever-way-to-play-Asia.html
Imagine the amount of money you would have made if you had started investing in China 10 years before the hot money started to flow. Your profits would have been absolutely phenomenal – even after the correction over the last two years.
By Garry White
Published: 5:41PM BST 12 Sep 2009
VinaCapital Vietnam Opportunities Fund
$1.71 +0.01
Questor says BUY
For investors keen on getting in ahead of the crowd, Vietnam could offer you a similar opportunity today.
For the 10 years before the credit crunch hit, Vietnam was Asia's second-fastest growing economy after China. The country tabled an average growth in GDP of 7.5pc a year. This year's government target is 5pc.
The country was hit hard by the financial crisis, but it has now started to recover – and a return to stellar growth in the next few years is very likely. Questor urges investors to buy into Vietnam now, while it is still cheap.
The country certainly has a lot going for it. It has one of the highest literacy rates in Asia, at 90pc, and the workforce is young, hard-working and optimistic.
Almost two-thirds of Vietnam's 85m people are under the age of 35 – and this should support economic growth over the medium term. A young population implies significant population growth in the future, which should stimulate demand further.
Significantly, labour in the country is even cheaper than in China, which should underpin investment in areas such as manufacturing.
A good example of the attractiveness of Vietnam was seen last week when Coca-Cola said it planned to double its investment in the country to $400m over the next three years. The company did not didn't send a minor representative to make this announcement; Muhtar Kent, Coke's chairman and chief executive, went to the country personally.
Arguably, Vietnam is now in the same position as China was a decade ago, but there are limited ways that a UK investor can invest in this fledgling economy.
The Vietnam Opportunity Fund (LSE: VOF), which is managed by country specialist VinaCapital, is one of the easiest ways for UK investors to play growth in the Asian nation.
The shares peaked at $4.78 in 2007, but the sharp risk aversion that gripped the markets means the shares have plunged significantly. They hit a low of 65 cents in December last year, but have since more than doubled to the current level.
The fund's mandate is to invest at least 70pc of its cash in Vietnam, with the remaining 30pc in China, Cambodia and Laos.
Its managers target medium to long-term capital gains with some recurring income and short-term profit taking – which appears to be a sensible strategy. The fund will invest in private companies, not just listed entities, as well as taking part in any privatisations the government proposes.
The largest portfolio constituent of this open-ended investment trust, at 7.6pc, is financial group Eximbank. It also has major holdings in HPG, a steel manufacturer, dairy group VNM, real estate group DI and fertiliser group DPM.
As of August 31, Vietnam Opportunity Fund's net asset value per share was $2.44 – up 12.2pc in just one month.
The shares can be bought as normal through your broker and the investment trust is priced in dollars. For investors seeking substantial long-term capital growth, Questor recommends an investment in this Asian market, as it is not fully recovered from the recent plunge and should return to significant growth soon. Shares in the Vietnam Opportunity Fund are a buy.
Catlin
332.8p +2.60
Questor says BUY
Lloyd's of London insurers had a good first half of the year and Catlin, the largest syndicate in the market, was no exception. The group posted a record half-year profit of $240m (£143m) as investment returns more than tripled.
In February, Questor recommended buying the shares, despite the insurer falling into the red. The group was one of many that needed a rights issue – and £200m was raised at a hefty 47pc discount. The cash call was sensible, as the company could invest in its business.
Insurance premiums had started to rise, as underwriters tried to rebuild their balance sheets following an active hurricane season in 2008 and heavy investment losses.
Since this time, market conditions have continued to improve and insurers including Amlin, Chaucer and Hiscox have benefited as returns from hedge funds and equities begin to improve. With a market capitalisation of more than £1bn, Catlin was always going to be well positioned to seize these fertile market conditions.
The company now covers about 30 different types of risks and has an international network in 17 countries across five continents.
Although short-term risks hang over the Lloyd's market – including the onset of the Atlantic hurricane season – Questor believes Catlin shares are worth buying for their impressive yield, despite the shares being 10pc below their recommendation price.
The shares are currently yielding 7.2pc and the stance remains buy.
Cisco Systems
$23.12 +0.03
Questor says TAKE PROFITS
Shares in networking group Cisco were recommended in January at $16.91. Questor argued that the group's earnings would be supported by the US stimulus package, which aimed to connect many US schools to the internet.
The recent market rally means that the shares have risen by 36pc since that time. Questor thinks that the shares are now looking fully valued and are likely to mark time from here.
After this year's recovery, they are trading on a July 2010 earnings multiple of 17.5 times which, given the fragility of the recovery, looks like a fair rating.
Although global stock markets have rallied significantly, unemployment remains a major problem in Western economies. This means that the recovery could easily be derailed.
Indeed, the gold price crossed the $1,000 barrier last week, which is potentially a warning sign of a return of risk aversion, although it could just be a function of the weakening dollar.
Nevertheless, gold tends to outperform at times of crisis, so the latest popularity of the metal is a sign of investor concern that the market has risen too far too fast.
Investors do not go broke taking profits and, with worries over dollar weakness starting to gather pace, Questor thinks now is a good time to take profits in Cisco and sell.
http://www.telegraph.co.uk/finance/markets/questor/6179041/Vietnam-is-a-clever-way-to-play-Asia.html
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