Frontier and emerging markets (Vietnam)

Dylan Waller

Thematic (Sector/Industry)

My previous insight <a href="https://www.smartkarma.com/insights/top-consumer-themes-in-vietnam" target="_blank" data-smartkarma-citation="insights:27656">Top Consumer Themes in Vietnam</a> notes the clear cut strategy of investing in consumer growth stocks at reasonable valuation, while avoiding some of the over-hyped momentum names that trade at unreasonable multiples.  Another interesting trend to note in the market includes the lower valuation of select stocks that are positioned in key, high growth sectors, which are by no means value traps.  After eliminating value traps and overvalued momentum names, it is clear to see the VN Index offers asymmetric value for investors.  The attractively priced consumer growth stocks and value names are both relatively favorable compared to that of other frontier markets ( less favorable macro picture but similar valuation in many cases). Some of the themes mentioned in this insight are an indirect play on China's economic transformation, as it chooses to "export" some of its less sophisticated economic activities to other frontier markets ( ie. coal in Mongolia and textiles in other frontier markets).  This has intensified recently on the back of trade war tension.  Stocks in Vietnam that are in sectors positioned to benefit from this trade at relatively depressed valuations. I included an overview of the following themes and some stocks positioned in these areas:
<ul class="">
<li>
Power is an appropriate way to access Vietnam’s broad based economic growth: Investment in power stocks is an indirect play on Vietnam’s continued growth in manufacturing and the country’s improved standards of living.</li>
<li>
Industrial park operators are attractively priced and offer exposure to Vietnam’s manufacturing narrative, which is a very straight forward growth narrative: Industrial park operators have relatively guaranteed success and have been able to attract large names such as Samsung and LG.</li>
<li>
Vietnam’s textile industry will be a key driver of growth moving forward: Vietnam’s textile industry has continued its course of growth, even though it has been moving into electronics exports and also facing increased competition from lower cost countries such as Bangladesh.</li>
<li>
Port stocks are extremely cheap, as perceived risk is greater than actual risk: The valuation for port operators has also become very depressed in recent years, though this is clearly a strong long term growth areas for Vietnam’s stock market.</li>
<li>Vietnam’s agriculture growth recently reached a 7 year high, though growth still remains in the lower single digits and below the country’s average GDP growth.</li>
<li>Plastic and steel stand out as high growth areas, though margins are sensitive to commodity price movements.</li>
</ul>

My previous insight Top Consumer Themes in Vietnam notes the clear cut strategy of investing in consumer growth stocks at reasonable valuation, while avoiding some of the over-hyped momentum names that trade at unreasonable multiples.  Another interesting trend to note in the market includes the lower valuation of select stocks that are positioned in key, high growth sectors, which are by no means value traps.  After eliminating value traps and overvalued momentum names, it is clear to see the VN Index offers asymmetric value for investors.  The attractively priced consumer growth stocks and value names are both relatively favorable compared to that of other frontier markets ( less favorable macro picture but similar valuation in many cases).  Some of the themes mentioned in this insight are an indirect play on China's economic transformation, as it chooses to "export" some of its less sophisticated economic activities to other frontier markets ( ie. coal in Mongolia and textiles in other frontier markets).  This has intensified recently on the back of trade war tension.  Stocks in Vietnam that are in sectors positioned to benefit from this trade at relatively depressed valuations.  I included an overview of the following themes and some stocks positioned in these areas:


Power is an appropriate way to access Vietnam’s broad based economic growth: Investment in power stocks is an indirect play on Vietnam’s continued growth in manufacturing and the country’s improved standards of living.

Industrial park operators are attractively priced and offer exposure to Vietnam’s manufacturing narrative, which is a very straight forward growth narrative: Industrial park operators have relatively guaranteed success and have been able to attract large names such as Samsung and LG.

Vietnam’s textile industry will be a key driver of growth moving forward: Vietnam’s textile industry has continued its course of growth, even though it has been moving into electronics exports and also facing increased competition from lower cost countries such as Bangladesh.

Port stocks are extremely cheap, as perceived risk is greater than actual risk: The valuation for port operators has also become very depressed in recent years, though this is clearly a strong long term growth areas for Vietnam’s stock market.
Vietnam’s agriculture growth recently reached a 7 year high, though growth still remains in the lower single digits and below the country’s average GDP growth.
Plastic and steel stand out as high growth areas, though margins are sensitive to commodity price movements.


Vietnam Market Update: Deep Value Found in Salient Themes

Vietnam

Power Construction Joint Stock Company No 1 provides power grid project construction services. The Company constructs power operation systems and transmission networks. Power Construction serves customers in Vietnam.

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Power Construction JSC (PC1 VN)

Vietnam Market Update: Deep Value Found in Salient Themes

My previous insight Top Consumer Themes in Vietnam notes the clear cut strategy of investing in consumer growth stocks at reasonable valuation,...

Dylan Waller

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52-week Range

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