Company Announcements

1 August 2024

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

2024 Update - Second Quarter

VEIL is a London listed investment company investing primarily in listed equities in Vietnam and a FTSE 250 constituent. The Company's unaudited NAV performance for Q2 2024, in which NAV per share declined 4.3% compared to a decrease of 5.4% in its reference index (in USD terms), is set out in this notice.

Tuan Le, Lead Portfolio Manager of VEIL, commented:

"Vietnam's 6.4% GDP Growth in H1 2024 (and 6.9% in Q2 2024) exceeded expectations, mainly driven by the processing and manufacturing sectors (+8.7%).  Overall domestic consumption rose 8.8% in H1 2024, supported by international arrivals surging by 58.4% YoY to 8.8 million, 4.1% higher than the same period in 2019. Consumption rose 7.7% and F&B services jumped 17.5%. The government has revised up its full-year GDP target by 50 bps to 6.5%-7.0% based on improving global macroeconomics and strong domestic economic data.

"However, we are mindful of several challenges that could cause near-term volatility. The Vietnamese dong ("VND") depreciated by 4.9% against the USD in H1 2024, exceeding our January forecast of 3.5%. Expected delays in Federal Reserve rate cuts and domestic political movements have influenced this. In response, the State Bank of Vietnam ("SBV") has sold US$6.5bn in currency reserves. The SBV also withdrew excessive money in the interbank system, resulting in some banks raising their deposit rates by 0.5-1.0%. We expect the VND will continue to face further pressure against the USD, and while a Federal Reserve rate cut would help ease this, we believe 12-month deposit rates in Vietnam might rise by a further 0.5% to around 5.3% before the end of the year. Despite this, we do not foresee macroeconomic headwinds derailing Vietnam's current growth trajectory. Stimulus measures, including tax reductions, a 30% increase in the base salary for state employees, and a 6% hike in the minimum wage, are expected to boost consumer purchasing power.

"VEIL's NAV per share decline of 4.3% in Q2 2024 outperformed the Vietnam Index (VEIL's reference index) by 1.1%, although both the Company and the Vietnam Index returned 6.0% in H1 2024.Foreign net selling across Vietnam's equity markets totalled US$2.1bn in H1 2024, this is in contrast with the US$82mn of net buying at the same stage last year, although is in line with the regional sell-off in general: Thailand registered US$3.2bn of outflows in H1 2024, The Philippines US$527mn and Indonesia US$427mn. However, local investor sentiment has been resilient, and in H1 2024 average daily trading across Vietnam's three exchanges reached US$967mn, which is 1.8 times higher than in H1 2023.

"We have been restructuring VEIL's portfolio to reduce its concentration and are nearing the end of this process. We have increased exposure to sectors such as banks, retail, manufacturing, property, and industrial parks with companies we believe are well-positioned to benefit from Vietnam's core growth drivers and outperform the market.

"The retail sector was the largest alpha contributor to the Company in Q2 2024. The increased position in Mobile World Group ("MWG") and new investment into FPT Retail ("FRT") proved fruitful, seeing returns of 20.1% and 9.8%, respectively. We remain confident in the outlook for the sector, supported by increases in domestic consumption and the aforementioned fiscal stimulus.

"FPT Corporation's ("FPT") share price rose 25.6% in Q2, which we believe benefitted from the US$200mn AI partnership signed with NVIDIA and optimism following the March acquisition of the Japanese IT services company Next Advanced Communications NAC Co, Ltd. ("NAC"). FPT reported solid H1 2024 results, with revenue of US$1.2bn and NPAT of US$145mn, up 21.4% and 22.3% year-on-year, respectively. Revenue and NPAT in the company's global IT services division rose 30% and 25% year-on-year, with revenue in Japan rising 35.2% compared to H1 2023, in part attributed to the NAC acquisition.

"The property sector faced challenges with a 14.6% average share price decline in Q2 2024 due to slow pre-sales and subdued earnings. We remain optimistic about a potential recovery in the second half of the year as the new land law takes effect, which we expect will reinvigorate delayed projects. We have increased our holdings in select residential developers such as Khang Dien House ("KDH") and added Nam Long Group ("NLG") to the portfolio, both have substantial clean land banks and promising new project pipelines.

"Two of VEIL's main bank positions, MB Bank ("MBB") and VietCombank ("VCB"), experienced double-digit share price declines in Q2 2024. The key reasons for this weak investor sentiment were thought to be concerns regarding credit growth for VCB and non-performing loans for MBB. Both banks, however, reported positive Q2 results, with VCB's NPAT increasing 17.2% year-on-year and MBB's growing 36.5%."

"Strong Q2 results from Techcombank ("TCB") are encouraging, with revenue reaching US$530mn (+43.9% year-on-year) and NPAT rising to US$245mn (+39.0%). Robust credit growth of 5.4% quarter-on-quarter and 12.9% year-to-date was driven by a disbursement recovery in mortgages and SMEs (especially FMCG and property developers).

"The General Secretary of the Communist Party Central Committee, Nguyen Phu Trong, passed away on 19 July due to old age and serious illness, at the age of 80. The previous day, the Politburo assigned President To Lam to oversee the work of the Central Committee, the Politburo, and the Secretariat.

"Vietnam's Central Party Committee will now vote for the General Secretary position and is expected to convene in October 2024 to address this matter. A smooth transition is anticipated, as only a few candidates meet the criteria to be elected as General Secretary. Vietnam has experienced a number of political transitions this year (including the resignation of the President in March and Chair of the National Assembly in April), and it is important to note throughout the various changes in the Politburo the government has continued to reiterate its commitment to pro-business policies. Noting the limited number of candidates for the position of General Secretary, we expect the commitment to continue. Nevertheless, Vietnam may incur some policy implementation delays until the formal succession of the next General Secretary."

Company Highlights

All quoted data from 28 March to 28 June 2024 due to UK public holidays.

·    In Q2 2024, VEIL's NAV decreased 4.3% over the previous quarter against a decrease of 5.4% for its reference index, the Vietnam Index ("VNI").

·    The Company's NAV per share was US$9.19 as of 28 June, and its total NAV was US$1.8bn.

·    The Company's share price decreased 0.4% over the quarter and rose 4.9% year-to-date, both in USD terms.

·    VEIL's one-year NAV per share performance is +6.1%, -22.1% over three-years and +39.7% over five years. Over the same periods, the performance of the VNI was +4.9%, -16.2% and +30.4%, respectively (all in US dollar terms).

·    In GBP terms, the Company's NAV per share was £7.27 as of 28 June (-4.3% for the quarter and +6.9% year-to-date), and its total NAV was £1.4bn. The Company's share price decreased 0.5% for the quarter and 5.8% year-to-date.

·    The Company's discount to NAV averaged 18.6% for the quarter. As of 28 June 2024, the discount to NAV was 19.0%, compared with -22.1% at the end of Q1 2024 and -18.1% as of 31 December 2023.

·    The Company spent US$24.0mn purchasing 3,179,702 shares in Q2 2024, compared with US$20.0mn purchasing 2,723,307 shares in Q1 2024.

·    A total of 5,903,009 shares were purchased in H1 2024 for US$44.0mn. This is 2.9% of shares outstanding as of 1 January 2024. The indicative accretion to NAV per share from the share purchases is 0.71%.

·    The Vietnamese dong ("VND") depreciated 2.7% against the US dollar in Q2 2024 and depreciated 4.9% year-to-date. The VND depreciated 3.0% against the GBP pound sterling during the same period and depreciated 4.3% year-to-date.

Top Ten Holdings (60.4% of NAV)

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms as of 28 June 2024

For further information, please contact:

Vietnam Enterprise Investments Limited

Rachel Hill

+44 122 561 8150

+44 797 121 4852

rachelhill@dragoncapital.com         

Jefferies International Limited

Stuart Klein                                                                                                                        

+44 207 029 8703

stuart.klein@jefferies.com 

h2Radnor

Iain Daly

+44 20 3897 1830

idaly@h2radnor.com

 LEI: 213800SYT3T4AGEVW864