Vietnam’s underdeveloped infrastructure and rising urbanisation present continuing investment opportunities, according to Lion Global’s Kok Fook Meng.
‘Vietnam’s infrastructure is still under-developed and presents multi-year investment opportunities,’ Kok, who is the portfolio manager of the LionGlobal Vietnam SGD fund, told Citywire Asia. ‘Urbanisation at 30% implies plenty of opportunities for property development, modern retailing and public infrastructure spending as well.’
Kok, who took over the fund in October 2012, said he was positive on the outlook for the Vietnamese stock market over the medium term.
‘In the medium term, demographics (consumption and urbanisation), infrastructure and foreign direct investments will be big stock drivers for Vietnam,’ he said. ‘The country has an exciting consumption story where around 40% of its approximately 93 million population is below 24 years old and the median age is 29 years old.
‘Its high literacy rate (around 93%) and competitive cost structure attracts strong FDI,’ he added.
In the near term, a key trigger could be a government go-ahead for an increase in the foreign ownership limit of listed companies, which is currently capped at 30-49% depending on the industry. ‘Any increase in this limit, which could happen in the next 12-24 months, will have a positive impact on the market,’ he added.
Companies he was backing included those that had exposure to the infrastructure sector, consumer sector as well as those that are ‘well positioned for an earnings recovery after the trying economic conditions of the past few years.’
‘We also like companies that will benefit from strong foreign direct investments, which are likely to continue in the medium term,’ Kok added.
Three top stock picks
He said that recently, he had added to his three largest overweights: Kinh Bac City, PetroVietnam Gas and FPT Corp.
'PetroVietnam Gas is the monopoly gas distributor in Vietnam and is current enjoying a period of higher selling prices and has potential for volume growth in the medium term,’ Kok said.
‘FPT is an IT company that also provides fixed broadband internet access,’ he added.
‘Its domestic broadband business and software outsourcing from overseas clients are doing well, while its IT business is recovering as the Vietnam government and corporates are starting to spend after austerity in the past few years.’
Kinh Bac City, meanwhile, is a play on strong foreign direct investments in Vietnam, pointed out Kok. The share of each stock is about 2-3% in the fund's portfolio.
The Lion Global Vietnam Fund SGD has returned 55% in the three years to August 31, 2014, while the Citywire benchmark FTSE Vietnam index gained 31% in US dollar terms.