Positioned for Vietnam’s new ‘era of ascendence’: Vietnam Enterprise Investments

VEIL is positioned for Vietnam’s new ‘era of ascendence’ by Thomas McMahon

Overview

Vietnam Enterprise Investments (VEIL) is positioned for strong domestic growth in the country as the reformist government targets GDP growth of 8%. While tariffs have caused some overseas concern on the outlook for the country, manager Tuan Le and his team have topped up their positions in real estate, banks, and high-quality consumption-linked businesses and are forecasting double-digit earnings growth for their domestically-focussed portfolio in 2025. The government has unveiled ambitious plans to grow the size of the private sector and have it drive development over the coming five years which it has dubbed an ‘era of ascendence’.

Tuan Le took over the lead manager role in February 2024 and delivered strong performance in his first year. A shift to mid-caps was among the factors driving the outperformance in 2024, while the Portfolio was tilted further to the domestic growth story. A raised position in real estate has started to perform well in 2025 too.

It is domestic flows which have supported the Vietnamese market over the past year and a half, with overseas investors withdrawing, and this was enough for the market and VEIL’s portfolio to post double-digit returns in 2024, adding to a strong long-term Performance record. However, Vietnam is expected to be upgraded to emerging market status by FTSE in September, which could see foreign inflows return and provide further stimulus.

The trust trades on a wide Discount which sits at 20% at the time of writing. The board has been buying back shares at a decent rate, while it has committed to a tender offer of 100% of the share capital if the company doesn’t outperform its index over the next five years. There is a discontinuation vote due at the AGM on 18/06/2025. On the same day, the company is hosting a forum open to shareholders and non-shareholders alike, hosted by Dominic Scriven OBE. You can register to attend in person or virtually at the following link.

Analyst’s View

 
We think VEIL is an attractive way to get exposure to Vietnam’s extraordinary development path which seems likely to generate high GDP and corporate earnings growth for years to come. The authorities have committed to a series of reforms and policies which the Dragon Capital team compare to the 1986 Big Bang which saw market forces introduced into the Vietnamese economy. Notably, they aim to ensure the private sector drives growth and becomes a much larger share of the economy, which implies policies that should be supportive of free enterprise, an expansion of the stock market, and growth in domestic and overseas ownership of Vietnamese equities.

Overseas investors have clearly been concerned about the potential for high tariffs to hit Vietnam. While it is true that these tariffs may well be negotiated down significantly, this is unlikely to be a satisfying answer to an investor considering investment. More importantly, we think the strong domestic story is a reason to buy into Vietnam, a market trading at low multiples and with infrastructure spending, tax cuts, subsidies, and an emerging middle class all providing counteracting growth drivers. The inclusion of Vietnam in the FTSE Emerging Markets series should provide a boost to the market late this year, and with foreign ownership having reached record lows late in 2024, we think this, and any resolution to the tariff issue could see strong technical support behind the market.

Investors will shortly have the chance to vote against the discontinuation of the company. Assuming this resolution fails, there will be another vote in 2030 and an additional CTO if the NAV fails to beat the benchmark over the next five years. In the interim, the board are buying back considerable numbers of shares. This focus on shareholder value makes the current wide discount of 20% even more attractive in our view, while it is another layer of value which could reap returns as and when Vietnam comes back into favour.

Bull

• Vietnam is an exciting structural growth story combining internal drivers from middle-class formation with external factors via capitalising on increasing global trade and connectivity
• Dragon Capital is the largest foreign investor in the country, with connections and experience second to none
• VEIL is trading on a double-digit discount, which could boost returns when market sentiment improves

Bear

• US trade policy is uncertain and could have a negative impact on corporates and/or currency
• Single-country funds bring both currency and political risk
• High OCF (like the other specialist Vietnam trusts)

 
See the full research on Vietnam Enterprise Investments here >
 

_Disclaimer

_{Disclosure – Non-Independent Marketing Communication}

_{This is a non-independent marketing communication commissioned by Vietnam Enterprise Investments. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}