Frontier and emerging markets (Vietnam)

Dylan Waller

Nomadic Equity

Thematic (Sector/Industry)

Steel Industry UpdatesVietnam's steel industry is still delivering rapid growth and experienced a <a href="http://vietnamnews.vn/economy/273001/domestic-steel-consumption-up.html#Ix6S1SdprrtPVHxt.97" target="_blank">24.4% increase</a> in the purchase of building steel products and a 34.7% increase in consumption of steel pipes during the first half of this year.  Several factors to note moving forward include the following:<ul><li>The current consumption per capita is currently<a href="http://www.seaisi.org/News/5712/Vietnams+steel+industry+makes+a+case+for+more+production+amid+distrust" target="_blank"> 200 kg.</a>, below the global average of 240 kg, and the average of 500-600 kgs. for industrialized nations.  The industry still has ample potential…</li></ul>

Steel Industry UpdatesVietnam's steel industry is still delivering rapid growth and experienced a 24.4% increase in the purchase of building steel products and a 34.7% increase in consumption of steel pipes during the first half of this year.  Several factors to note moving forward include the following:The current consumption per capita is currently 200 kg., below the global average of 240 kg, and the average of 500-600 kgs. for industrialized nations.  The industry still has ample potential…

In my previous insight, I covered how Hoa Phat Group and Hoa Sen Group were strong value investment picks, and were not financially impacted from the plunging price of steel.  This insight will take a further look at how Vietnam stands out as a positive outlier compared to the global steel industry, as a significant number of major steel companies are currently not profitable.  Vietnam can also be considered a positive outlier when compared to frontier and emerging asia, as many stocks in Vietnam are discounted to other frontier and emerging markets in Asia.  Vietnam’s steel industry is therefore a significant area for investment when compared to larger companies in developed markets, as well as frontier and emerging Asia.  The struggle in Vietnam has mainly been for small and mid cap companies in this industry, although some of these companies are exceptions.

In my previous insight, I covered how Hoa Phat Group and Hoa Sen Group were strong value investment picks, and were not financially impacted from the plunging price of steel.  This insight will take a further look at how Vietnam stands out as a positive outlier compared to the global steel industry, as a significant number of major steel companies are currently not profitable.  Vietnam can also be considered a positive outlier when compared to frontier and emerging asia, as many stocks in Vietnam are discounted to other frontier and emerging markets in Asia.  Vietnam’s steel industry is therefore a significant area for investment when compared to larger companies in developed markets, as well as frontier and emerging Asia.  The struggle in Vietnam has mainly been for small and mid cap companies in this industry, although some of these companies are exceptions.

Vietnam's Steel Industry Is a Global Outlier

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are no constituent changes for the index but there are float and capping changes that will be implemented at the close on 15 September.</li>
<li>Estimated one-way turnover is 3.3% and the one-way trade is US$21.5m. There are eight stocks where passive trackers need to trade over 1 day of ADV.</li>
<li>After large creations for <a href="https://www.smartkarma.com/entities/market-vectors-vietnam-etf" target="_blank" data-smartkarma-citation="entities:648:1" rel="noopener">Market Vectors Vietnam ETF (VNM US)</a> at the start of the year, there has not been a lot of follow-on activity as the market moves higher.</li>
</ul>


There are no constituent changes for the index but there are float and capping changes that will be implemented at the close on 15 September.
Estimated one-way turnover is 3.3% and the one-way trade is US$21.5m. There are eight stocks where passive trackers need to trade over 1 day of ADV.
After large creations for Market Vectors Vietnam ETF (VNM US) at the start of the year, there has not been a lot of follow-on activity as the market moves higher.


MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hagl-jsc" target="_blank" data-smartkarma-citation="entities:6632:1" rel="noopener">Hagl Jsc (HAG VN)</a> is an inclusion while An Phat Holdings (APH VN) and CEO Group (CEO VN) are deletes from the MVIS Vietnam Index at the September rebalance.</li>
<li>There are a lot of float and capping changes that will result in one-way turnover of 12% and a one-way trade of US$45m.</li>
<li>There are a lot of stocks that have over 1 day of ADV to trade and there could be opportunities to enter/exit positions on a move in the stocks.</li>
</ul>



Hagl Jsc (HAG VN) is an inclusion while An Phat Holdings (APH VN) and CEO Group (CEO VN) are deletes from the MVIS Vietnam Index at the September rebalance.
There are a lot of float and capping changes that will result in one-way turnover of 12% and a one-way trade of US$45m.
There are a lot of stocks that have over 1 day of ADV to trade and there could be opportunities to enter/exit positions on a move in the stocks.


MVIS Vietnam Index Rebalance: One Add, Two Deletes

Viet Capital Securities Joint Stock Company

Luan Nguyen

Equity Bottom-Up

Dominating the galvanized steel sheet market. HSG controls 32% market share of the galvanized steel sheet segment. Provisional anti-dumping tariff is going to create growth opportunity and stable business for the next few years. Hoa Sen Ca Na Steel Complex will help HSG to profit from construction steel segment. The crucial competitive advantage that sets HSG apart from all other competitors is their unique and unrivalled retail network. Currently, HSG owns 212 branded retail branches nationwide, up from the initial three shops in FY01. According to the management’s plan, total retail branches will reach 300 shops in FY17 and 350 shops in FY18.

Dominating the galvanized steel sheet market. HSG controls 32% market share of the galvanized steel sheet segment. Provisional anti-dumping tariff is going to create growth opportunity and stable business for the next few years. Hoa Sen Ca Na Steel Complex will help HSG to profit from construction steel segment. The crucial competitive advantage that sets HSG apart from all other competitors is their unique and unrivalled retail network. Currently, HSG owns 212 branded retail branches nationwide, up from the initial three shops in FY01. According to the management’s plan, total retail branches will reach 300 shops in FY17 and 350 shops in FY18.

Hoa Sen Group - Dominating Vietnam's Galvanized Steel Sheet Segment

Vietnam

Hoa Sen Group is Vietnam's leading manufacturer and trader of steel sheets and a major exporter of steel sheets in Southeast Asia. The company produces galvanized, pre-painted galvanized, and aluminum-zinc alloy coated steel sheets, as well as steel pipes and plastic building materials. Its headquarters are located in Binh Duong Province, Vietnam, and it was founded on August 8, 2001.

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Hoa Sen (HSG VN)

Updates for Vietnam's Steel Industry

Steel Industry UpdatesVietnam's steel industry is still delivering rapid growth and experienced a 24.4% increase in the purchase of building steel...

Nomadic Equity

Vietnam's Steel Industry Is a Global Outlier

In my previous insight, I covered how Hoa Phat Group and Hoa Sen Group were strong value investment picks, and were not financially impacted from...

Nomadic Equity

MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes

Float and capping changes lead to an estimated one-way turnover is 3.3% and a one-way trade is US$21.5m. There are eight stocks where passive...

Brian Freitas

MVIS Vietnam Index Rebalance: One Add, Two Deletes

There is 1 addition and 2 deletions for the MVIS Vietnam Index. There are a lot of float and capping changes that will result in one-way turnover...

Brian Freitas

Hoa Sen Group - Dominating Vietnam's Galvanized Steel Sheet Segment

Dominating the galvanized steel sheet market. HSG controls 32% market share of the galvanized steel sheet segment. Provisional anti-dumping tariff...

Luan Nguyen

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