Top Finnish Fund Deserts Thailand for Vietnam Seeking Growth

PYN Elite, Finland’s best-performing fund, is helping to drive a stock rally in Vietnam as it abandons Thailand, where the portfolio has reached annual returns of almost 25 percent for the past 14 years.

Petri Deryng, who manages 220 million euros ($285 million) in two funds called Elite and Populus, has sold over 100 million euros in Thai stocks during the past five months, while investing about 40 million euros in 51 different Vietnamese companies, including PetroVietnam Drilling and Well Services JSC and Dinh Vu Port Investment & Development JSC.

“Vietnam’s economy will grow faster than Thailand’s economy during the next 10 years,” Deryng said in an e-mail. “As Vietnam’s stock exchange is trading below historical average valuations and Thailand above them, it’s clear that the Vietnamese market has a more attractive growth potential.”

International investors are buying the most Vietnamese stocks in five years, lured by Southeast Asia’s cheapest valuations and government efforts to boost growth. The country’s benchmark index rose the most in Asia to a 27-month high on May 30.

PYN Elite has had an average annualized return of 23.4 percent since its 1999 inception, returning more than 18 times the initial capital over 14 years and beating the Bangkok SET Index, according to data compiled by Bloomberg. It is the top performer among funds domiciled in Finland over the past 10 years, according to data compiled by Bloomberg.

Asian Crisis

Deryng started buying Thai stocks shortly after the Asian financial crisis of 1997, which brought the booming economy into a halt and caused the baht to be disconnected from its U.S. dollar peg.

During his first visit to the country in 1998, he bought a data CD containing balance sheets and price quotes of Thai listed companies at the library store of the Bangkok stock exchange, Deryng said. The CD cost the equivalent of 15 euros.

“I focused all my time into studying Thai stocks, made company visits and bought shares through a Finnish broker,” he said. He established Elite in February of 1999.

Thailand’s central bank cut its benchmark interest rate this week as slowing economic growth bolstered government calls for easing. The government had earlier lowered its 2013 growth forecast to as little as 4.2 percent. The SET reached a 20-year high of 1643.43 on May 21, compared with 363 points when Elite started.

Overhaul Plan

Vietnam’s government is currently preparing a plan to overhaul state enterprises and recently approved a formation of a debt asset management company to absorb bad loans.

“The reform of state-owned companies seems to proceed very slowly,” Deryng said. “The more essential thing now is to recognize the problematic credit in Vietnamese banks and move them in a separate company under the central bank.”

The country is set to benefit from a young population, access to natural resources like offshore oil and gas, strong agriculture and a long coastline suitable for ports, according to Dennis Lai, a Hong Kong-based senior portfolio manager at Allianz Global Investors.

“Nordic investors are more familiar with Asia and more willing to take risk,” Lai said in an interview in Helsinki after meeting clients in Finland and Sweden. “Even the smaller frontier markets in Asia are attracting attention -- Vietnam, Sri Lanka, Pakistan. These are high-volatility markets where the valuation is attractive for long-term investors.”

Damped Demand

Vietnam’s economy expanded 5 percent last year, the slowest pace in 13 years as a slump in bank lending damped domestic demand. The growth will accelerate at an annual rate of 0.5 percentage points, reaching 6.5 percent in 2015, according to estimates by 13 economists in a Bloomberg survey. The VN Index fell 0.6 percent to close at 518.39 in Ho Chi Minh City today.

The yield on Vietnam’s five-year government bonds fell to the lowest level since 2007 today on speculation interest rates will be cut as inflation slows.

After a burst property bubble, Vietnam is restructuring its economy gradually, said Lai, who manages about $700 million in Asian small- and medium-sized company equity and a separate $75 million frontier market fund.

“The growth isn’t very high at the moment because of this restructuring,” Lai said. “It’s still a very attractive economy for the long term. Out of all my frontier countries, I prefer Vietnam.”

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