More on 2H2019 in stocks

A few more things that I found when diving deep into 2H2019 returns of the stock market.

Currencies had very little impact on performance. The VND, KWN and JPN barely moved at all (+/-0.4% at most). The only “big” move was the GBP, which appreciated almost 5%. But only one stock, Pharos energy (PHAR LN, previously SIA LN), is traded in GDP, and it made up 3.15% of the fund at the end of June, compared to 2.26% in January.

Source: Vietecon.com, returns in local currency - no adjustment for currencies.

Five stocks had the biggest impact, based on on their weighting. First, the ones that helped the index:

Vietcombank (VCB) - It raised the index 166bp on its own because of its strong performance. The bank recently reported very strong earning ($1bn in profit). It’s profit has grown 37% annually since 2015. So it makes sense.
Mani (7730 JP) - It was responsible for 160bps of return. Since 2014, the stock has been on a tear. Since Jan. 2018, it is almost up 2.5x. For a boring medical instruments’ manufacturer. The make the instruments used to sew people up. But it seems to have a good management team that is focused on good capital allocation.
MCNEX (097520) - The impact of this mobile phone camera maker was a positive 111 bps. It mostly supplies Samsung. Samsung was up a lot (around 17%), so it kind of makes sense that MCNEX would be as well. Remember, that MCNEX actually grew 122% in 1H2019. For the year, it was up 192%! That’s crazy.

Now for the ones that hurt the index:

Masan Group (MSN) - Despite my believe that MSN’s acquisition of Vingroup’s retail business was good, the market sure as hell didn’t think so. The stock was down and contributed -149bps to the index. Although, just to be clear, a lot of the decline happened before the acquisition was announced.
FLC Faros Construction (ROS) - Faros continues its long decline and contributed negative 108bps to the index. At first, I thought it would drop off the index in the next six months or so, but it actually has very high liquidity ($16m/day, the limit is at least $1m) and a market cap of $258m (if it falls below $150m, it is out). If it falls another 41% from today’s (Jan 15) close, then we could see it move out, but that seems unlikely.

Those are only the stocks that had more than 100bps impact on the index. There were a number of other companies that had an impact between 50-100 bps, mostly on the downside. That’s what kind of surprised me: the volatility of returns. Out of 25 stocks, only 9 moved less than +/-10%. Everything else moved much more. This compares to 14 out of 27 in 1H2019 that met the same criteria.

And generally the big losers were Vietnamese. If the index only included Vietnamese stocks, it would be down by almost 5% (not counting currency issues). [This is an estimate and doesn’t take into account changes in holdings.]

The halves rhymed: It turns out that many of the stocks that did really well in 1H were also the stocks that did well in 2H. In fact, if you just invested in the stocks that grew more than 10% in 1H (except for Eclat, which was taken out of the index), your return would be 21% (if they were equally weighted). You wouldn’t miss out on any of the stocks that did well. So much for an efficient market!

Because of the relative poor performance of the market, the overall ETF has fewer assets under management at $441m (as of Jan 14) than it did at the end of June, when it had $467m. That’s not great. Of course, if a market is underperforming, and you think it will continue, then you should pull out your money. But most people just see bad results and pull their money out. It could have bottomed! It could be on an upswing! I am NOT saying that the Vietnamese market is headed for a bull market! All’s I’m saying is that people often sell low and buy high, when they should really hold out through the cycle.

VietEcon

More on 2H2019 in stocks

VietEcon