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The VN Index is the third-best performer in Asia this year, rebounding from a 27 percent loss in 2011 amid speculation the central bank would ease monetary policy to bolster growth. The gauge is valued at 9.9 times estimated profit, from a record low of 7 times in January. The MSCI Emerging Markets Index traded for 10.4 times on Aug. 3.

The government said on July 24 that it will lift from Sept. 15 the amount of registered capital companies must have to list on Vietnam’s exchanges in a bid to improve the quality and size of publicly traded equities.

The combined value of stock changing hands climbed 65 percent this year through Aug. 1 from the same period last year. The total slumped to 14 trillion dong ($671 million) last month on the Ho Chi Minh City Stock Exchange, from 23.45 trillion dong in June, according to data from the bourse.

The VN Index has fallen 14 percent from a May 8 peak as data on June 29 showed Vietnam’s gross domestic product grew 4.38 percent in the first half, compared with 5.63 percent a year earlier. The government’s Deputy Minister of Planning and Investment Cao Viet Sinh said in June that full-year expansion may be as low as 5.2 percent.

A strong account surplus and the complimentary effect by the better performing members in the Association of Southeast Asian Nations (ASEAN) on the rest of the bloc could cushion the impact of the Eurozone economic crisis, said an economist.

Malaysia’s Maybank regional head of research and economics, PK Basu told Xinhua in an interview recently that ASEAN has been progressing well with the old ASEAN six, composed of Indonesia, Malaysia, Thailand, Singapore, Brunei and the Philippines, recording large account surpluses that complimented the financially weaker countries in the region to overcome extreme volatility in the global economic environment.

“Within ASEAN, there were a few countries, such as the Philippines which traditionally has current account deficits but even the Philippines now has structural account surpluses so the old ASEAN six economies now have current account surpluses which have cushioned them from the impact of the global financial crisis, ” Basu said.

“There are some new ASEAN economies like Vietnam which has current account deficits still but there is a nice complimentarity between old ASEAN and new ASEAN. The old ASEAN countries have excess capital that increasingly flow to ASEAN economies. That is creating a symbiotic relationship that is driving ASEAN forward. There have been a few countries like Vietnam, Cambodia that have suffered some imbalances during this global financial crisis and some macroeconomic challenges but they have largely overcome them,” he added.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam.

Vietnam’s inflation rate moderated to 14 percent in March from a peak of 23 percent last August while its trade deficit narrowed significantly from last year, signaling an improvement in the more vulnerable economies that are now on a more stable path with the stronger economies in the bloc.

The International Monetary Fund had earlier cut its growth projection for ASEAN to between 5.2 and 5.6 percent next year, down from the previous forecast of 5.6 to 5.8 percent before it bounces back at 6.5 percent in 2013.

ASEAN’s partners — China, Japan and South Korea — have contributed to ASEAN’s growth, particularly in helping the bloc achieve its target by 2015 to become an integrated, single economy.

“China has become ASEAN’s largest single trading partner as it has become the largest trading partner for most countries in the world. There is good two-way trade between ASEAN and China,” Basu said. “Chinese investments have been heavily focused on countries like Indonesia, there are some interests in Malaysia as well and some growing interest in Thailand. Singapore has a long- established relationship with China as lots of Singapore corporates have invested heavily in China in the past. China is continuing to show interest in not only the old ASEAN but also some of the new ASEAN economies,” he said.

Although the amount of foreign direct investment was relatively small — less than 1 percent of the GDP on either side, it is growing given the substantial projects introduced from either side recently.

Statistics showed China’s investment in ASEAN countries totalled 3.5 billion U.S. dollars in 2010, a 13-fold increase from 2003.

ASEAN’s investment in China reached 6.3 billion U.S. dollars, up 35.2 percent over the same period last year.

On average, investment ratio in 2010 of three emerging ASEAN economies — Thailand, Malaysia and Indonesia — are about 10 percent of GDP, below the 90?s pre-crisis levels, according to the International Monetary Fund.

Basu predicted Malaysia’s economy growth at 4.5-5.5 percent in the second half of the year after the central bank put its first quarter’s GDP at 4.7 percent.

He said interest rate in Malaysia is likely to maintain at 3 percent, where it had been kept by the bank for the 11th time since May last year, providing a leeway for the bank to cut the rate should the Eurozone breaks up or its crisis deteriorates.

Market Vectors Vietnam ETF. (NYSEARCA:VNM)

VNM only holds 32 companies and is highly focused on three sectors which make up almost 65% of the fund’s total assets; financials, energy, and industrial materials. This is achieved by tracking the Market Vectors Vietnam Index, which provides exposure to publicly traded companies that, predominantly, are domiciled and primarily listed in Vietnam and which generate at least 50% of their revenues from Vietnam.

The Index comprises:
A diversified group of many of the largest and most liquid companies in the investable universe
Companies eligible for inclusion in Index:

Predominantly*, companies domiciled and primarily listed in Vietnam, or generating at least 50% of revenues from Vietnam

To a lesser extent*, non-Vietnamese companies that generate, or are expected to generate, at least 50% of revenues from Vietnam or that demonstrate a significant and/or dominant position in the Vietnamese market and are expected to grow

Market cap exceeding $150 million

Three-month average daily turnover greater than $1 million

Trade on recognized domestic or international stock exchanges

*Currently, approximately 70% of the market capitalization of the Index; this percentage is expected to increase in the future.
Holding

Shares

Market Value (USD)

% of net assets
VINCOM JSC VIC VN 5,078,450 24,811,581
7.91%
SAIGON THUONG TIN COMMERCIAL STB VN 18,778,380 22,955,354
7.32%
VIETIN BANK CTG VN 22,442,962 22,776,981
7.27%
BAOVIET HOLDINGS BVH VN 8,824,836 22,578,907
7.20%
JSC BANK FOR FOR VCB VN 15,134,288 22,200,825
7.08%
PETROVIETNAM FER DPM VN 10,966,210 19,770,685
6.31%
CHAROEN POK-NVDR CPF-R TB 12,374,100 14,709,566
4.69%
GAMUDA BHD GAM MK 11,417,491 12,369,495
3.95%
OIL & NATURAL GA ONGC IN 2,629,298 12,173,293
3.88%
PREMIER OIL PLC PMO LN 2,249,788 11,673,025
3.72%

Trai Thien USA Inc (PINK:TRTH)

Trai Thien USA is a fast-growing Vietnam-based dry bulk shipping company operating a 21,990 DWT fleet comprised of six geared bulk vessels specializing in providing ocean transportation services for raw material input items such as coal, ore, grain, lumber, cement, steel and fertilizer throughout the Southeast Asia region.

After China, the primary sources of future bulk demand are India, Brazil and Vietnam. The region contains three of the four global BRICs (Brazil, Russia, India, China), seen by economists as the future growth leaders in the world economy.

The Asia Pacific region accounts for 60% of the world’s population and almost 70% of world sea-borne trade in bulk commodities.

In order to meet anticipated continued growth in demand from an expanding base of overseas and domestic Vietnamese customers, as well as to expand the geographic regions that it can service to include potentially more profitable routes in East and South Asia.

The Company’s Vietnam-based operations are located in Ho Chi Minh City, which together with the surrounding areas, accounts for more than seventy percent of Vietnam’s total annual cargo traffic.

Pink Sheets TRTH

Current Price $0.51

Current PE 4.19

Revenue Growth 148%

Target Price 2013 $3.40

HCM Rating Strong Buy

Financial Highlights

The emerging economies of the Asia Pacific (ASEAN) region will continue their growth pattern despite the continuing financial crisis in Europe according to the Asian Development Bank.

Free Trade Agreements including ASEAN, AFTA, CAFTA, ASEAN +3 will more than triple regional trade.

· Year-end 2011 revenues increased over 20.9% as compared to the previous fiscal year, from $12,232,991 in 2010 to $14,794,939 in 2011.

· Income from Operations increased over 148% from 2010 to 2011, from $1,051,543 to $2,615,000

· Net Income increased from a loss of $539,452 in fiscal 2010 to a positive $1,377,391 in 2011.

· The Company is operating a 21,990 DWT fleet comprised of six geared bulk vessels specialized in providing ocean transportation services for raw material input items such as coal, ore, grain, lumber, cement, steel and fertilizer throughout the Southeast Asia region.

The HCM Trade Forecast is predicting that world trade will grow by 73% in the next 15 years, with merchandise trade volumes in 2025 hitting $43.6trillion compared to today’s $27.2trillion.

Investing in Tra Thien

ASEAN +3 is the Association of Southeast Asian Nations (ASEAN), the People’s Republic of China (including Hong Kong), Japan, and South Korea. Home to 600 million people, ASEAN has a combined gross domestic product (GDP) of US$1.8 trillion with total trade valued at $2 trillion among the countries.

ASEAN is set to explode as an economic force in 2015 as financial, trade and investment rules become integrated and seamless. ASEAN last year secured $78.5 billion in investments. Regional trade also increased by 32.9 percent to more than $2 trillion and Trai Thien is well positioned to capitalize on the growing Inter-ASEAN +3 trade.

ASEAN is beefing up various frameworks for cooperation and development within the region and with its trading partners, in preparation for regional economic integration by 2015.

The changing trade barriers have seen fast paced growth in agricultural and mineral exports around the region, these changes have already reflected themselves on the books at Trai Thien USA as revenue has almost tripled in the last year.

The Trai Thien fleet has the distinct advantage of having been designed to suit the region, while huge Dry Bulk Carriers service many areas. Most of the trade in agriculture and minerals is done from ports in ASEAN that cannot accommodate the large ships, nor can the large ships be loaded and unloaded at these smaller ports due to the lack of stevedoring infrastructure.

Trai Thien smaller fleet can service these ports directly, removing the additional costs of trans-shipping and adding savings in terms of cash and time to purchasers.

Based on corporate and market growth and given a conservative set of ratios in our financial model, we see Trai Thien trading over $3.40 in 2013.

The Fleet

• Fleet of highly versatile geared bulkers with average capacity of 3,700 DWT and average age of 3 years.

• Optimal payload capacity for growing small and medium production sector that dominates economic activity throughout the region.

• Focus on dry bulk commodities such as forestry products, grains, cement, steel, ore and coal.

• Vessels equipped with deck-side cranes which provide flexibility in cargo handling and accessing and servicing underdeveloped, lower cost secondary ports throughout the region.

• Draft efficiency and deck-side gears reduce dependency on major ports and reduce risk exposure to growing operational inefficiencies affecting them.

• In order to meet anticipated continued growth in demand from an expanding base of overseas and domestic Vietnamese customers, as well as to expand the geographic regions that it can service to include potentially more profitable routes in East and South Asia, Trai Thien has made deposits to acquire six larger 7600 DWT capacity new-buildings, which depending on the company’s ability to meet additional capital resource requirements, are expected to be delivered in 2011 and 2012.

• Depending on the ability to raise approximately $50m in external funding required to cover outstanding balances due on vessels in construction, for which there is no assurance, the Company will focus on what it believes to be more profitable 7000-8000 DWT vessels in order to meet growing demand for larger payload capacities while still maintaining an ability to broadly access the secondary coastal and river ports that characterize the trade.

• Located in Ho Chi Minh City, the economic heart of Vietnam’s trade and transportation activity.

• ASEAN satellite market benefits from geographic proximity to major world economic activity drivers China and India.

Trai Thien and China

Our research indicates that rising trade in ASEAN +3 will propel the ASEAN trade bloc of Southeast Asia nations to become China’s largest trading partner by 2015.

The China Council for the Promotion of International Trade said the 2010 ASEAN-China Free Trade Agreement removed trade barriers, and that the value of imports and exports between China and ASEAN states could surpass $500 billion within three years.

As China moves away from its dependency on export markets and encourages more trade with countries with which it has signed FTAs, the value of goods moving between the ASEAN bloc and China is forecast to increase at a faster rate than imports and exports between China and its more established trade partners.

“Thanks to zero tariffs, preferential trade policies and geographic advantages, both the increasing speed and scale of that trade will be in the forefront globally and ASEAN will become China’s No. 1 trading partner by 2015,” said Zhang Wei, vice chairman of the China Council for the Promotion of International Trade.

First quarter 2012 trade between China and the ASEAN nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — increased 9.2 percent year-over-year. That is compared with a 2.6 percent gain in trade between China and the U.S. and a 1.6 percent decline in trade between China and the EU.

That growth followed the 24 percent increase in trade between ASEAN and China last year when the ASEAN bloc surpassed Japan to become China’s third-largest trade partner after the EU and the U.S.

Trai Thien is located at the geographic centre of ASEAN +3 and is perfectly placed to capture increasing market share in a rapidly growing market.

VINACAPITAL VIETNAM O/FD (PINK:VCVOF)

VinaCapital is the leading investment management and real estate development firm focused on Vietnam, with a diversified portfolio of almost USD2 billion in assets under management. VinaCapital was founded in 2003 and boasts a team of managing directors who bring extensive international finance and investment experience to the firm.

VinaCapital believes the energy, creativity and entrepreneurial spirit of the people of Vietnam make it the world’s top emerging market investment opportunity. Our mission is to produce superior returns for investors by using our experience and knowledge to identify the key trends and opportunities that emerge as Vietnam continues to develop its economy. To achieve this, VinaCapital has industry-leading asset class teams covering capital markets, private equity, fixed income, venture capital, real estate and infrastructure.

VinaCapital’s core business is VinaCapital Investment Management Ltd, which manages three closed-end funds trading on the AIM Market of the London Stock Exchange. These funds, at a combined net asset value (NAV) of USD1.6 billion as of December 2011, make VinaCapital the largest asset manager focused on Vietnam and its neighbouring countries. The funds are:

VinaCapital Vietnam Opportunity Fund Limited (VOF), a diversified fund that invests in all asset classes, including listed and private equities, real estate, and bonds.
VinaLand Limited (VNL), a real estate fund that makes direct investments in residential, retail, hospitality and office sectors.
Vietnam Infrastructure Limited (VNI), a fund that invests in infrastructure sectors including transport and logistics, power, telecommunications, and the environment.

VinaCapital Investment Management Ltd also co-manages the USD32 million DFJ VinaCapital L.P. technology venture capital fund with Draper Fisher Jurvetson.

VinaCapital also holds stakes in VinaProjects, a specialist real estate services company encompassing project management, construction management and urban planning; and in VinaSecurities JSC, a full-service securities company offering a range of brokerage and investment banking products and corporate financial services.

VinaCapital has offices in Ho Chi Minh City, Hanoi, Danang, Nha Trang, Phnom Penh (Cambodia) and Singapore.