Vietnam Holding (VNH), the small investment company among a cohort of funds focused on the rapidly-developing Southeast Asian country, is eyeing the next leg of a stock market rally that has bucked an otherwise gloomy period for emerging markets.
With a market value of just £91 million, Vietnam Holding is dwarfed by the largest investment trusts focused on the country, the £707 million Vietnam Enterprise Investments (VEIL) and £565 million VinaCapital Vietnam Opportunity (VOF), whose manager we interviewed last month.
Returns have been strong, with the shares up 158.4% over the last five years, well ahead of the 109.8% delivered by Vietnam's stock market, although lagging VOF's 192.9%.
Its small size does have drawbacks: the bid-offer spread on the shares stands at 3%, while a performance fee, although not unique for the sector, adds to the expense. The fund managers are entitled to 15% of any returns over 5% each year, on top of an effective 2.9% ongoing charge.
But investors who have backed the fund have nevertheless enjoyed strong long-term returns, against the backdrop of a Vietnamese economy where growth has never fallen below 5% since the turn of the millennium.
That contrasts with a bleaker picture for emerging markets more broadly, which only kicked into life last year after a long period in the doldrums. Over five years, the MSCI Emerging Markets index is up just 35.4%.
Chair Min-Hwa Hu Kupfer and manager Vu Quang Thinh believe that despite those strong returns, Vietnam is now set for the next leg of its rally, fuelled by a deepening of the market amid a flood of new listings.
'The Vietnam market is on the cusp of another growth spurt,' said Kupfer. She pointed to the explosive growth of the Upcom index, where listings have doubled to 525 companies, up from 263 at the end of 2015.
While it may be tempting to draw parallels with Upcom and the UK's Alternative Investment Market (AIM), it is more closely aligned with its predecessor, the Unlisted Securities Market (USM), which allowed members to float as little as 10% of their shares.
Companies on Upcom are still unlisted, but the index allows some trading of their shares. Its growth is largely down to the Vietnamese government's ruling that state-owned enterprises that want to launch an initial public offering must list on the index at least three months before an official listing.
The growth of the index shows the pace of privatisation of Vietnam's state-owned enterprises. Among the highest profile listings has been that of state-controlled Sabeco, brewer of Saigon beer, whose shares jumped 20% on their first day of trading, the maximum permitted under Vietnam's stock market rules.
Vietnam Holding has shied away from listings like these, wary of getting caught up in hype. 'Our style is to stay away when the market is very excited,' said Thinh, pointing to a price-earning ratio on Sabeco shares that hit 36 times at their height, and even with a subsequent correction are still trading at 28 times.
The fund is differentiated from rivals by its mid-cap approach and environmental, social and corporate governance investment philosophy.
Kupfer and Thinh believe that the focus on medium-sized companies could find favour in coming months, with the stocks at relatively cheap levels compared to Vietnam's blue chips, whose valuations have been pushed higher by events such as the Sabeco flotation. Against that backdrop Vietnam Holding has lagged rivals such as VinaCapital Vietnam Opportunity over the last six months, losing 10.1% versus a 13.1% gain.
But those valuations mean Thinh is eager to put to work up to $38 million (£29.4 million) of new money should all those investors holding warrants on the trust's shares choose to exercise them. One warrant per three shares was issued in June 2015 at an exercise price at $1.998, with the warrants now changing hands at $2.145, just below the $2.18 share price.
Those holding the warrants can now only exercise them on 1 June, after the board's proposal to create an additional exercise date of 1 November was rejected. 'The warrant money coming in will be very well positioned,' said Kupfer.