445: Craig Martin of Vietnam Holding gives an overview of the funds positive performance in October

The Vox Markets Podcast

Craig Martin, Chairman of Dynam Capital, Investment Manager of Vietnam Holding #VNH gives an overview of the funds positive performance in October and what's to come.

Monthly Investor Report

A report detailing the activities of the Company for the month of October 2021 has been issued by Dynam Capital Limited, the investment manager of the Company. Electronic copies of the report have been made available to shareholders on the Company's website and a summary of the report is included below.

Reopening on a greener and keener keel

Vietnam's unique economic growth story made the international stage again in October. This time in Glasgow where Prime Minister Pham Minh Chinh pledged alongside more than 40 other countries around the world to phase out coal and commit to achieving net-zero carbon emissions by 2050. Speaking at the 26th session of the Conference of the Parties (COP26), he called for fairness and justice in dealing with global climate urgencies and discussed the Government's plans for trying to align its policies both with international investors' corporate governance expectations and Vietnamese citizens' own health and prosperity in mind.

Cities in the country's southern provinces were gradually reopening at the end of October and the vaccination rollout continued to pick up pace with nearly 60% of the population having at least one jab. Additionally, the Government fuelled domestic expenditure with more information about its stimulus programme (which is expected to include stricter green components) while some select companies surprised the market with solid earnings results for Q3 despite the Delta variant outbreak.

Vietnam's equities market also made news for setting another record high in October and continuing its outperformance of other stock markets across the wider Asia-Pacific region, including China and India. The Fund sustained its outperformance of the Vietnam All Share (VNAS) index and NAV increased by +7.3% for the month, with gains stemming mainly from real estate investee companies as well as HPG, FPT and brokerage VND.

As COP26 continue to dominate headlines, it is important to consider how these companies can overcome the challenges of transitioning to clean energy and plan for a future without fossil fuels. Vietnam has quickly become a key country in global supply chains, and local company directors know they will be required not only to report about sustainability and their strategies for reducing carbon emissions but also take more action to ensure they achieve their goals and meet stakeholder demands.

VNH has always believed its stewardship role as a responsible investor is a very important one when it comes to environmental and social matters in Vietnam, and we will be enhancing our active engagement with boards and senior management of our portfolio companies in regard to climate risks. We will work with them more on how to measure and report about sustainability by providing training and encouraging them to adopt internationally accepted accounting standards. Earlier in 2021 the Fund's board pledged its own allegiance to the Paris Agreement and commitment to the Task Force on Climate-related Financial Disclosures (TCFD) in addition to becoming a member of the Asia Investor Group for Climate Change (AIGCC). The portfolio's carbon footprint is also 32% lower than the VNAS index. This has been a result of the Fund's active management style in sector allocation and selection of best-in-class companies. VNH is nimble and can navigate small to large companies and maintain the high-level of engagement with investee companies on progressing their own ESG journeys too.

In our view, the climate change transition requires everyone to play their part and Vietnam is currently the largest market for renewable energy in the region and is proactively directing investment into a greater mix of clean sources that can interconnect in the grid over time. Foreign multinationals have continued to set up operations in the country partly given its strategic location at the cross point of Southeast and Northeast Asia and as the government carries on with its privatisation process and the freeing up of state capital. Foreign investors can also play an increasingly essential part of the ESG story in Vietnam, which now makes up 30% of the MSCI Frontier Market. As Vietnam's listed companies begin to raise their game on reporting on sustainability and other issues, and as capital market reforms continue to be implemented, the prospect of an eventual inclusion in the MSCI Emerging Market index may whet appetites further.