Vietnam’s Stock Rout Puts Top Fund Manager in Buying Mode

The six-week tumble in Vietnam stocks that’s turned the benchmark index into the world’s biggest decliner is attracting the nation’s largest money manager.

“We have been very busy buying stocks these days,” Andy Ho, chief investment officer at VinaCapital Group, which oversees about $1.6 billion, said in a telephone interview yesterday from Ho Chi Minh City. Equities are “extremely attractive” because valuations are low relative to other markets in Southeast Asia, he said.

The VN Index slid 1.7 percent yesterday, extending losses to 4 percent in the past two days on speculation that leveraged traders are selling shares used as collateral for loans. The Ho Chi Minh City-listed gauge, which was this year’s best performer in Asia through March 24, has since tumbled 8.6 percent, dragging its valuation to the lowest level in three months.

The decline has “created huge opportunities for us to buy,” said Ho, whose Vietnam Opportunity Fund has gained 18 percent in dollar terms in the past year, versus 13 percent for the VN index, according to data compiled by Bloomberg. He declined to name specific stocks.

The VN Index’s price-to-earnings ratio fell to 13.3 yesterday, the lowest level since Feb. 7, Bloomberg data show. By comparison, the ratio for Southeast Asia’s benchmark indexes range from 16 in Thailand to 20 in the Philippines and 22 in Indonesia.

Global Concerns

The selloff comes amid rising tensions with China over disputed waters, along with unrest in Ukraine that has reduced global demand for riskier investments. Vietnam denounced China this week for setting up an exploration rig off the smaller country’s central coast. China’s foreign ministry the said oil rig was erected in Chinese territory.

“There are global issues to worry about,” Ho said. “Vietnam is no longer an isolated market. It’s part of the global market.”

Even with the recent slide, the VN Index has advanced 11 percent this year as the central bank cut the benchmark refinancing rate to a six-year low and inflation slowed to less than 5 percent for the first time in more than four years. The index has jumped 59 percent since the start of 2012.

The benchmark measure gained 0.9 percent at today’s close, versus a 1.4 percent drop in the MSCI Asia Pacific Index.

Vietnam’s economic outlook is still beneficial to the stock market, with inflation likely to come in at about 5 percent to 6 percent this year and the currency remaining stable, Ho said.

Economic Stability

The economy will grow 5.8 percent this year, compared with 5.4 percent last year, according to government estimates. Vietnam aims to keep inflation at about 6 percent in 2014, Prime Minister Nguyen Tan Dung said in March.

“Right now, all macro indicators point to the direction of stability,” said Ho, whose fund shareholdings include Vietnam Dairy Products JSC, Hoa Phat Group JSC and DHG Pharmaceutical JSC. “We love stability.”

The valuation of some large companies such as Vietnam Dairy, known as Vinamilk, and DHG Pharmaceutical are “very attractive” relative to peers, Ho said.

Vinamilk trades at 17 times earnings, compared with the global industry median of 24, according to data compiled by Bloomberg. The shares rose 0.8 percent today, paring this year’s loss to 0.7 percent.

— With assistance by Giang Nguyen

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