Vietnam Holding Limited Fund Data

May proved to be a month that was telling of the times we live in. Wars and geopolitical chaos around the world continued to dominate headlines, oil prices remained volatile, inflation proved harder to tame than many had hoped, and questions about global trade and growth showed little sign of disappearing. Yet beneath the noise, Vietnam continued to do what it has done remarkably consistently for much of the past two decades: grow, adapt and move forward. That made the timing of VNH's 20th anniversary celebration at the London Stock Exchange last week particularly fitting in reflecting on what two decades of investing in Vietnam tells us about this unique country. The economic data speaks for itself. Vietnam's GDP expanded 7.8% in Q1 2026, with growth expected to remain in the 7.5%-8% range through Q2. Retail sales advanced 11.8% in May and 11.2% year-to-date – a pace that continues to impress on the upside given the challenging global backdrop. Exports grew 19.5% in the first five months of the year. Foreign direct investment, registered and disbursed, hit $24.8bn and $9.8bn respectively through May – both up roughly 34.9% and 9.6% year-on-year (YoY). Manufacturing activity rebounded sharply, with the PMI rising to 52.8 in May. These numbers paint a picture of an economy firing on most cylinders despite global turbulence. What complicates the scene today is inflation. CPI rose to 5.6% in May, driven primarily by elevated crude oil prices linked to Middle East tensions. Interest rates also remain elevated as the government maintains a cautious stance on monetary policy, but the path is becoming clearer. We forecast inflation moderating to 4.5% by year-end, and interest rates should begin to normalise as the year progresses. We believe these pressures are manageable rather than structural. The trade story provides useful context. Vietnam recorded a $13.8bn trade deficit in the first five months of 2026. Before investors panic, it is worth understanding what is driving it: machinery, electronic components and inventory restocking in the wake of the Lunar New Year. In other words, productive inputs. Import growth of 30.8% YoY reflects manufacturers building capacity and pre-positioning goods ahead of the second half. A pattern seen in Vietnam before – because when manufacturers import machinery and components, they are typically building capacity for future production. The momentum in tourism also deserves attention. Vietnam is repositioning itself not as a budget destination, but as a large-scale tourism market in its own right. Visitor arrivals are on track to reach 25 million for the full year, a meaningful contributor to consumption, employment and infrastructure investment. As the sector grows, it generates multiplier effects throughout the economy. This is not just a side note for Vietnam's extraordinary consumption story – it helps offset the negative effects of rising inflation. Equity markets proved more volatile in May. The VN All-Share Index declined slightly; its performance remains concentrated in a handful of mega-cap names, most notably Vingroup (VIC), which continues to rally amidst expectations of retail investors. Our underweight in VIC – based on our concerns around valuation, conglomerate complexity, and project execution visibility – remains unchanged, despite detracting from relative performance in May. During the month, the Fund's NAV per share declined by 1.9%; year-to-date, the Fund is down 5.4% against a relatively flat index. Banking remains our largest sector exposure, with positions in VPBank and ACB contributing positive returns, offset by declines in MB Bank and others. Despite clear earnings visibility, robust balance sheets, and structural tailwinds, a number of our core holdings declined during the month and are trading at historically low valuations, lacking a clear catalyst, and amid capital outflows from EM (other than TSMC et al). The FTSE Russell upgrade, confirmed for September, may be one such catalyst. It signals the culmination of years of effective regulatory and institutional reform and opens the door to fresh capital flows. As passive capital flows increase, market dynamics will evolve, likely favouring quality, liquidity and scale – precisely the characteristics the VNH portfolio emphasises. We are using some of our cash to add to some core conviction names and position the portfolio for a possible future re-rating of quality compounding stocks. Looking back over twenty years reveals a consistent pattern: Vietnam has proven more adaptable and more resilient than most expected: an entrepreneurial private sector; a willingness to reform; and an ability to attract and deploy foreign capital productively. These structural strengths remain intact. Growth is strong and the market is entering a more mature phase. Quality companies are cheap. For long-term investors, maturity is often when the real work begins, but it is also where disciplined positioning pays off.

May proved to be a month that was telling of the times we live in. Wars and geopolitical chaos around the world continued to dominate headlines, oil prices remained volatile, inflation proved harder to tame than many had hoped, and questions about global trade and growth showed little sign of disappearing. Yet beneath the noise, Vietnam continued to do what it has done remarkably consistently for much of the past two decades: grow, adapt and move forward. That made the timing of VNH's 20th anniversary celebration at the London Stock Exchange last week particularly fitting in reflecting on what two decades of investing in Vietnam tells us about this unique country. The economic data speaks for itself. Vietnam's GDP expanded 7.8% in Q1 2026, with growth expected to remain in the 7.5%-8% range through Q2. Retail sales advanced 11.8% in May and 11.2% year-to-date – a pace that continues to impress on the upside given the challenging global backdrop. Exports grew 19.5% in the first five months of the year. Foreign direct investment, registered and disbursed, hit $24.8bn and $9.8bn respectively through May – both up roughly 34.9% and 9.6% year-on-year (YoY). Manufacturing activity rebounded sharply, with the PMI rising to 52.8 in May. These numbers paint a picture of an economy firing on most cylinders despite global turbulence. What complicates the scene today is inflation. CPI rose to 5.6% in May, driven primarily by elevated crude oil prices linked to Middle East tensions. Interest rates also remain elevated as the government maintains a cautious stance on monetary policy, but the path is becoming clearer. We forecast inflation moderating to 4.5% by year-end, and interest rates should begin to normalise as the year progresses. We believe these pressures are manageable rather than structural. The trade story provides useful context. Vietnam recorded a $13.8bn trade deficit in the first five months of 2026. Before investors panic, it is worth understanding what is driving it: machinery, electronic components and inventory restocking in the wake of the Lunar New Year. In other words, productive inputs. Import growth of 30.8% YoY reflects manufacturers building capacity and pre-positioning goods ahead of the second half. A pattern seen in Vietnam before – because when manufacturers import machinery and components, they are typically building capacity for future production. The momentum in tourism also deserves attention. Vietnam is repositioning itself not as a budget destination, but as a large-scale tourism market in its own right. Visitor arrivals are on track to reach 25 million for the full year, a meaningful contributor to consumption, employment and infrastructure investment. As the sector grows, it generates multiplier effects throughout the economy. This is not just a side note for Vietnam's extraordinary consumption story – it helps offset the negative effects of rising inflation. Equity markets proved more volatile in May. The VN All-Share Index declined slightly; its performance remains concentrated in a handful of mega-cap names, most notably Vingroup (VIC), which continues to rally amidst expectations of retail investors. Our underweight in VIC – based on our concerns around valuation, conglomerate complexity, and project execution visibility – remains unchanged, despite detracting from relative performance in May. During the month, the Fund's NAV per share declined by 1.9%; year-to-date, the Fund is down 5.4% against a relatively flat index. Banking remains our largest sector exposure, with positions in VPBank and ACB contributing positive returns, offset by declines in MB Bank and others. Despite clear earnings visibility, robust balance sheets, and structural tailwinds, a number of our core holdings declined during the month and are trading at historically low valuations, lacking a clear catalyst, and amid capital outflows from EM (other than TSMC et al). The FTSE Russell upgrade, confirmed for September, may be one such catalyst. It signals the culmination of years of effective regulatory and institutional reform and opens the door to fresh capital flows. As passive capital flows increase, market dynamics will evolve, likely favouring quality, liquidity and scale – precisely the characteristics the VNH portfolio emphasises. We are using some of our cash to add to some core conviction names and position the portfolio for a possible future re-rating of quality compounding stocks. Looking back over twenty years reveals a consistent pattern: Vietnam has proven more adaptable and more resilient than most expected: an entrepreneurial private sector; a willingness to reform; and an ability to attract and deploy foreign capital productively. These structural strengths remain intact. Growth is strong and the market is entering a more mature phase. Quality companies are cheap. For long-term investors, maturity is often when the real work begins, but it is also where disciplined positioning pays off.