DWS Vietnam Fund Limited

Transcription

1 September 2012 As at Factsheet Performance Investment Policy The primary investment objective of DVF is to seek long-term capital appreciation of its assets by investing in a diversified portfolio of Vietnamese-related securities (onshore and offshore), such as equity, fixed-income and money market instruments and closed end fund vehicles which may or may not be listed. In addition, DVF may invest in private equity securities and real estate funds and through structured notes, leveraged notes or any other derivative instruments which provide Vietnam exposure. NAV per share Fund Performance Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 No. of shares/aum Assets Under Management 600,000, ,000, ,000, ,000, ,000, ,000,000 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 VN Index Performance as at 30 September 2012 (USD) 1 Month Performance: -1.10% 3 Month Performance: -6.87% Year to Date: 12.69% 1 Year: -8.28% Fund Information Bloomberg Ticker DWSVIET KY EQUITY Authorised 500,000,000 shares share capital Issued Share Capital 486,931,392 shares Par Value Per Share USD Nav per share as USD at 30 September 2012 Launch date 8th December 2006 Market Maker LCF Rothschild Securities LCFR <GO> Johnny Hewiston funds@lcfr.co.uk Tel: Jefferies International JCEF <GO> Mark Mulholland Tel: Dexion Capital DEXA <GO> Richard Crawford richard.crawford@dexioncapital.com Tel: Numis Securities NUMI<GO> Dave Cumming Tel: Status Update Fund Portfolio Management Comments No. of shares The NAV at the end of September for the DWS Vietnam Fund ( Fund ) was (USD), which was down by 3.08% (USD) for the month. 3Q2012 GDP growth was slightly faster - In the third quarter of 2012, Vietnam s economy showed slightly faster growth due to seasonal factors, as expected. GDP grew 4.73% YoY for the first nine months of 2012, improving from the 4.38% growth in 1H2012 but still slower than the 5.77% pace in the same period last year 1. In the third quarter, GDP grew 5.35% YoY, better than 4.00% and 4.66% in the first and second quarters respectively 1. The two swing factors of GDP showed only slightly positive developments: 1) the construction sector saw positive growth for the first time since Q (+1.98% YoY) 1, due to accelerated pace of public investment; 2) the manufacturing sector grew 4.03% YoY compared to the 3.85% YoY growth seen in Q and 7.64% in Q , due to the combination of weak output pricing, high inventory and weak demand. Indeed, ending inventory in the manufacturing and processing sector was still high despite the decelerating trend to rise to 20.4% YoY in September from the peak of 34.9% YoY in March this year 1. The industrial production index rose 9.7% YoY in September, more than double the 4.4% annual rise in August 1. September HSBC PMI also showed an improvement to 49.2 from 47.9 in August 2. This is the second consecutive month of relative improvement in the index itself although the index is still below 50 suggesting that conditions in the manufacturing segment remain sluggish. From the demand side, retail sales and service revenues in the first nine months of 2012 rose 17.2% YoY, a gradual slowdown from 22.0% in January 1. In light of the current slow growth compared to the previous years, the Asian Development Bank and the International Monetary Fund lowered their forecasts of Vietnam GDP to 5.1% for 2012 and 5.7/5.9% for The Vietnamese government itself is aiming at 6% real GDP growth and 7%-8% inflation for Credit growth showed slow improvements - Anticipating an increase in capital demand towards year end, some large banks have raised 12-month term deposit rates to 13% compared to 12% in June in order to attract funds 5. However, lending interest rates did not follow due to the lending rate cap of 15%, an effort from the Vietnamese government to keep funds accessible for businesses 6. Despite the improvements in lending rates, credit growth remained slow, increasing only 1.82% YTD as of 7 September 7. The credit growth target of 8-10% for 2012 looks increasingly difficult to achieve, as some big banks saw very low or even negative credit growth. As we mentioned in the previous factsheets, the slow credit growth problem results from weak demand, high inventory as well as the unresolved non-performing loans (NPLs) problem. NPLs have been one of the focuses of the National Assembly s economic committee. However, no clear-cut solution has been proposed or implemented in September. A report from the committee mentioned various options of establishing a Debt and Asset Trading Corporation, reducing the current state budget expenditure, selling bad debts to foreign investors or even a bailout from the IMF, which has been denied by the Vietnamese government 6. Banks and their assets quality has been the subject of diverged opinions from the rating agencies this month, with S&P raising the credit ratings for several Vietnamese banks while Moody s lowered them 8. Inflation pressure is back for the last quarter of the year - Vietnam s Consumer Price Index in September is estimated to have increased 2.2% MoM, the fastest pace in 16 months driven by sharp seasonal increases in prices of health care services and education 1. Inflation has thus increased to 5.13% YTD and 6.48% YoY, compared to 2.86% and 5.04% in August, respectively 1. Price levels may continue to be high in the next three months, especially as the holiday season is approaching. However, we believe 2012 will end with just single-digit inflation, which will be one of Vietnam s important improvements compared to last year. AUM MICA (P) 006/10/2007

2 The trade balance continued to perform well - The trade balance data for the first eight months of 2012 from the Customs Office of Vietnam showed a surplus of USD 134 mn 9, compared to the GSO s estimates of a USD 62 mn deficit 1, a significant improvement versus USD 6.2 bn deficit for the same period last year 1. For the first nine months of the year, the GSO estimated a trade deficit of USD 100 mn, with both exports and imports declining MoM 1. The trade surplus has continued to enhance the value of the Vietnam Dong, helping to maintain the exchange rate below the band of VND 21,000/USD 10. Moreover, the government reported that FX reserves currently stand at around US$23 billion or about 11.5 weeks of imports 11. This is still quite low relative to international norms but still represents an important improvement on the levels of Foreign direct investment (FDI) for the first nine months of the year reached USD 8.1 bn about the same as last year. However, registered FDI for new investment projects fell 27.9% YoY 1. The slow FDI activities in Vietnam could be the result of investors concerns about Vietnam s slowing economy as well as the struggle to recover of leading investing economies such as Euro zone and the U.S. Uncertainties dominated the stock market - The VNIndex moved sideways in September in light of uncertainties on the temporary political instability. Investors tried to minimise their risks amid the news of the arrest of Vinalines former chairman and other executives, as well as the resignation of several Asia Commercial Bank s (ACB)top managers 12, sending the index down to its lowest point of However, the index also enjoyed some positive movements in September due to ETF activities (FTSE rebalancing and new Blackrock s ishares ETF launch) and a rise in some banks credit ratings by S&P. The VNIndex closed the month with a decline of 1.10% in USD terms 10. Traded volume declined 14% to 31.5 million shares a day on average 10, despite ETF rebalancing activities and some large put through transactions. The average daily traded value also declined by 17.40% to USD mn 10. As of 28 September, the Vietnamese equity market remained one of the cheapest in its region with a P/E valuation of 9.89x 10. Portfolio Analysis Listed Equities During the month of September, the Fund s listed equity returned -4.26%. The biggest contribution to the Fund s return this month was Vinamilk which increased 11.43% due to speculations on the stock dividend announcement. In the meantime, most stocks continued to decline in value, with the biggest detractors including Vicostone (-22.61%), Hoang Anh Gia Lai (-23.60% due to investor concerns about liquidity risk), Hoa Phat Group (-10.66% due to the news about its shares previously held by ACB s arrested co-founder Kien) and FPT Corporation (-5.49% due to the news on the resignation of its CEO and the disappointing 8-month results) 13. CE Funds The closed-end funds portfolio declined -3.27% in September. The position with the largest impact on the segment retuned was Dragon Capital s Vietnam Enterprise Investment Fund, which declined 3.60% 14 due to its large holdings in declining stocks such as Asia Commercial Bank and Hoang Anh Gia Lai. Fixed Income The Fund s Fixed Income portfolio returned 1.59% during September while the yield on the 3-year Vietnam s government bond index increased 33 bps from 9.58% to 9.91% 10. Unlisted The unlisted portfolio is valued by an independent group within Deutsche Bank which uses various valuation approaches including the Discounted Cash Flow and P/E multiples of comparable companies. It also values convertible structures using a proprietary model. Thus the calculation of the discount rate and movement in comparable P/E multiples affect the valuations in addition to the underlying performance of the companies. The unlisted portfolio was down 1.7% MoM, impacted by declines in valuation estimates for Anova (-13%) and VTC Online (-14%), which were largely offset by an increased valuation estimate for Prime (+15%). The valuation for Anova was down due to a drop in P/E multiples of comparable companies. Fundamentally, Anova performed well, with earnings up 20% YoY for 2Q VTC Online was also valued down due to a drop in P/E multiple of comparable companies and higher assumed cost of equity. The valuation of Prime was up 15%, due to a lower assumed cost of debt as corporate spreads decreased and an improvement in comparables P/E multiples during the quarter. Share Repurchase Program Update During the month of September, the Fund repurchased an additional amount of 4,140,000 shares, bringing the total number of shares repurchased to 39,870,000 as of 28 September 2012, representing 8.19% of the share capital. Details of the purchases are reported on the DWS Vietnam Fund s website.

3 Asset Class Performance 1 mth% 3 mth% Listed equities Fixed Income Securities c Closed End Funds Unlisted equities Top 5 Onshore Listed Holdings % Vinamilk 8.67 FPT Corporation 3.39 Hoa Phat Group JSC 2.45 Petrovietnam Drilling and Well Services 1.97 Vicostone 1.73 Top 5 Other Holdings % Prime Group 7.81 Greenfeed 7.63 Anova 4.62 An Giang Plant Protection JSC 4.44 DWS Vietnam Fund 4.08 Sector breakdown % Food Products Building Materials Real Estate Management & Devel Information Technology Chemicals 7.75 Pharmaceuticals 5.14 Consumer Discretionary 4.62 Diversified Financials 4.36 Energy Equipment & Services 4.07 Metals & Mining 3.58 Banks 3.34 Health Care Providers and Services 3.11 Containers and Packaging 1.54 Marine 0.62 Asset Class Exposure % Listed Equities Unlisted Equities a Closed-End Funds Fixed Income Securities 1.40 Cash 5.60 Cash Exposure % VND 65.6 USD 34.4 (a Unlisted equities include PIPE deals, i.e. Private Investments in Public Companies)

4 Outlook & Strategy Leading indicators, including retail sales, inventory index, credit growth and PMI, indicate that demand has yet to pick up. Political measures to stimulate demand are now limited, given that inflation pressure has reduced room for monetary policy actions and the state budget deficit is not encouraging more expansionary fiscal policy. For the last quarter of 2012, we expect some positive developments thanks to seasonality. However, in order to enter into a fully blown cyclical recovery, Vietnam would now need a clear solution to the bad debt problem to restore the health of the banking system. Once the banking restructuring has been implemented, we believe the Vietnamese economy will rebound quickly and sustainably given its strong fundamentals. Footnote 1 Source: General Statistics Office of Vietnam 2 Source: HSBC 3 Source: Asian Development Bank and International Monetary Fund, respectively 4 Source: Tuoi Tre Newspaper 5 Source: Dau Tu Chung Khoan Newspaper 6 Source: Ho Chi Minh Securities 7 Source: Business Times 8 Source: Standard & Poors and Moody s, respectively 9 Source: Customs Office of Vietnam 10 Source: Bloomberg 11 Source: Vietnam News 12 Source: Tuoi Tre Newspaper 13 Tuoi Tre Newspaper 14 Indicative prices collected from various brokers

5 Important Information Address One Raffles Quay #15-00, South Tower Singapore Tel: Fax: This document is for your information only and is provided at your request. It is not intended to be a complete financial report for the fund. It is not the basis for any contract to deal in any security or instrument, or for Deutsche Asset Management (Asia) Limited ( DeAM ) or its affiliates to enter into or arrange any type of transaction as a consequence of any information contained. This shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer. The forecasts provided are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to risks, including possible loss of principal amount invested. The value of shares/ units and their derived income may fall as well as rise. Past performance or any prediction or forecast is not necessarily indicative of future performance. No assurance is given that the investment objective or the targets will be met. This document does not constitute investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Investors should study all relevant information and consider whether the investment is appropriate for them. DeAM or its affiliates may hold positions in the securities referred. The investment schemes referred are not obligations of, deposits in, or guaranteed by DeAM or any of its affiliates. You are not authorised to redistribute this document nor qualified to make any offer, representation or contract on behalf of DeAM or its affiliates. Although the information was compiled from sources believed to be reliable, no warranty or representation is given in respect of the accuracy or completeness of the information contained herein and no responsibility or liability is accepted by DeAM, its affiliates, sub-managers, agents or any of their directors or employees in respect of the use of this document or its contents or for any error or omission. The information and opinions contained may also change. All third party data (such as MSCI, S&P & Bloomberg) are copyrighted by and proprietary to the provider. DWS is the brand name of mutual funds offered by Deutsche Asset Management (Asia) Limited (Company Reg. No N). Company Registration No N