Will fortune favour brave in Vietnam?

WARREN Buffett’s words about the shrewd deployment of capital could equally be applied to Vietnam, until recently one of the strongest performing regions in the emerging markets universe.

Despite an economy that is heading for eight per cent growth this year on the back of a mix of major inward foreign investment and a growing middle class with money to spend, its stock market has gone into reverse.

According to the managers of investment trust VinaCapital – listed on the London Stock Exchange – there are two reasons for the 31 per cent fall in the Ho Chi Minh Index this year. First, international investors, fazed by global recession, have pulled their money out of risky emerging markets such as Vietnam. The stock market has also been hit by a regulatory crackdown on wealthy people manipulating share prices for their own gain.

In a conference call last week, VinaCapital told me that the Vietnamese stock market needs ‘time to heal’. Provided there are no more scandals, it believes the market will move forward as company earnings rise and the economy remains in growth mode.

Despite losses of 14.1 per cent in the last year, the trust’s five-year returns are still a healthy 61 per cent. The manager’s forensic approach to the businesses it invests in is admirable. If the stock market turns the corner, this trust could do well.

Fortune favours the brave – and no, this isn’t another one of Buffett’s famous quotes. It comes from the Latin proverb: ‘Fortes fortuna adiuvat.’