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Ian Cowie: why I switched from emerging Europe to Vietnam

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Ian Cowie: why I switched from emerging Europe to Vietnam

Call me barking mad, if you like, but this running dog of the imperialist capitalist press is hoping to make a profit out of investing in Ho Chi Minh.

Yes, that's right, the shrewd old dude with the wispy beard who beat Uncle Sam. Well, alright then, Ho Chi Minh Stock Exchange to be precise.

That's where Vietnam Enterprise Investments Limited (VEIL) allocates assets and has done so for a couple of decades, albeit only since July, 2016, as an investment trust with a listing on the London Stock Exchange (LSE). Before that it was incorporated in the Cayman Islands which was bit too wacky, even for me.

With less than three years' track record in London and emerging markets well and truly out of favour, VEIL won’t be on many wealth managers' radar. But it might reward further scrutiny by contrarian investors seeking capital growth.

By the start of this year, a low cost base - even by Asian standards - and rapidly rising exports had boosted VEIL’s share price by more than 50% since its LSE flotation. Then fears of a trade war between America and China blew 20% off the top, creating a buying opportunity in my view.

So, taking a deep breath before doing so, I invested 1% of my ‘forever fund’ in VEIL at 404p per share. This would be a good point to explain some background because personal finance is ‘personal’ first and ‘finance’ second.

As regular readers may recall, I had reluctantly bailed out of a long-standing holding in BlackRock Emerging Europe (BEEP) in revulsion at Russian involvement in the poisoning of Sergei and Yulia Skrypal in Salisbury earlier this year.

Having first bought BEEP about a decade ago at 150p, I sold the lot at 376p on 7 March. In the very short term, this looks like a good move as the stock would only fetch 333p today.

But it left me with a problem because I have no wish to reduce my exposure to emerging markets at this stage in the economic cycle, whatever crystal ball-gazers may say about a strengthening dollar and other headwinds for the sector. So, what to buy?

My first thought was to stick with BEEP manager Sam Vecht at another of his funds, BlackRock Frontiers (BRFI). But I really couldn’t work up any enthusiasm for its underlying holdings in Kazakhstani and Kuwaiti banks, let alone an opaque pooled fund that is its biggest single asset.

Then this long-term admirer of Asian entrepreneurial flair noticed VinaCapital Vietnam Opportunity Fund (VOF), which is energetically represented in London by Frostrow Capital. Alongside other specialist investment trust I rate highly - including Worldwide Healthcare (WWH), India Capital Growth (IGC) and the Biotech Growth Trust (BIOG) - VOF has strong short-term performance which was almost enough to clinch the decision.

But this high risk investment in a highly volatile market is intended to be a long-term holding. So, after considerable dithering, I decided that VEIL’s longer experience in Vietnam and its larger size - it has total assets of £1.1 billion - tilted the balance in its favour.

Another attraction was noticing that Dominic Scriven, the chairman of Dragon Capital, which manages VEIL, had invested £175,000 in this trust’s shares at £4.82 last February. It’s always encouraging to see managers with skin in the game - and even better when they have paid nearly 20% more than I did.

Also, rightly or wrongly, this DIY investor draws some comfort from considering other significant shareholders in VEIL. Bill and Melinda Gates' Foundation tops the list, with 11% of the shares, followed by Baillie Gifford, Ruffer and Scroders, who all rank among the top 10 investors.

So, even if this most esoteric of oriental investments does mean I have gone barking mad, at least I am in good company.

Here is a complete list of Ian Cowie’s stock market investments. It is not financial advice nor is any recommendation implied.

 

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