A 21.7% discount to net asset value (NAV) should entice adventurous investors to look at VinaCapital Vietnam Opportunity Fund (VOF).

A continuation of the investment fund’s strong performance as well as share buybacks offer catalysts to close the discount.

‘VOF’ focuses on the booming South East Asian economy with favourable demographics. Yes, GDP growth moderated from 6.7% to 6.2% in 2016 but this level of growth would be envied by most countries around the world, in our view.

High foreign direct investment, up 7% to $24.4bn in 2016, is driving manufacturing growth, productivity and employment.

This in turn is creating higher living standards and boosting retail consumption.

With urbanisation increasing, the government is spending significant sums on construction and infrastructure. VOF offers a play on these trends.

Get more for your money

The active stock picking of VinaCapital Investment Management differentiates the fund from exchange-traded funds that track companies on the Vietnamese stock market.

The VinaCapital fund also invests in pre-IPO and private equity deals, as well as part of the Vietnamese government’s efforts to convert state-owned enterprises into public limited companies.

Its approach is to take large stakes in businesses with sound fundamentals delivering strong earnings growth and boasting dominant market positions.

‘We are looking for large, profitable businesses that we can grow, take public or sell to a trade buyer,’ explains Andy Ho, managing director of VinaCapital Investment Management which is the entity that runs the investment fund.

Clear proof of success

The formula works. During the six months to December 2016, the trust’s net asset value expanded by 19.9% to 338p, driven by strong performances from the listed and private equity portfolios.

The core, capital markets portion of the book was the main performance contributor.

Star turns included Airports Corporation of Vietnam, whose share price appreciated 194%; and leading steel maker Hoa Phat, a beneficiary of Vietnam’s construction boom. Others included property developer Novaland and food and beverage outfit Vinamilk.

VOF recently backed the highly successful IPO of VietJet Air, a low-cost carrier on a growth tear. On the private equity side in December 2016, VOF sold its 37.3% stake in frozen dim-sum style food exporter Cau Tre to Korea’s CJ CheiJedang, raking in $12.4m.

It is worth considering a key risk to the Vietnamese growth story being President Trump’s termination of the US’ involvement with the Trans Pacific Partnership (TPP).

Vietnam was viewed as the biggest beneficiary of TPP, although bulls point out the country is party to numerous other free trade deals and is well placed to negotiate bilateral deals with other nations too. (JC)

VinaCapital Vietnam Opportunity Fund   (VOF) 282p

Market value: £571m

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