September 2008
VIET NAM BOND FUND
(VFMVFB)Mar 2013
September 2008
CONTENT
1. VIETFUND MANAGEMENT (VFM)
2. VIETNAM MACRO OVERVIEW
3.FIXED INCOME INVESTMENT OPPORTUNITY
4. VIETNAM BOND FUND (VFMVFB)
5. MANAGEMENT TEAM
6. TRADING GUIDELINE
7. CONTACT
September 2008
1. VFM INTRODUCTION
“We are trusted and preferred
by local and international investors.”
VIETFUND MANAGEMENT (VFM)
For more detail, please see the VFM’s pitch book
VFM was established in July 2003, initially as a joint-venture company of the
two leading financial institutions which are Dragon Capital – a British
intergrated invesement firm centred around the emerging financial markets of
Vietnam and Sacombank – one of the largest commercial banks in Vietnam.
Since January 2009, the company has conversed to its legal status as
Vietnam Investment Fund Management Joint Stock Company.
With the initial raised capital of VND300 billion for VF1 in 2004, the total assets
under VFM’s management at present has reached nearly USD200 millions
which are from 9 years of the capital raising and establishment of new funds
process.
VFM continuously plans to mobilize new capitals through new financial
products and services applying new updated legal framework.
September 2008
2. VIETNAM MACRO OVERVIEW
No. Indicators 2012 Data
Targets 2013
1 GDP Growth 5,03% 5.5%
2 CPI(YoY) 6,81% 7%-8%
3 Export Growth (YoY) 18,3% 10%
4 Trade Surplus (% of export) 0,25% -8%
5 Total Social Investment (% GDP) 34% 29.5%
6 FDI (USD Bil) 12,7 13-14
7 FDI Disbursement (USD Bil) 10,5 11,5-12
8 Reserve(USD Bil) 24 30
9 Retail Growth (Adjusted for inflation) (YoY) 6% 6.5%-7%
10 Industrial Production Growth (YoY) 4,8% n/a
11 Credit Growth (Vs 31 December of prior year) 8,91% 12%
12 M2 Growth (Vs 31 December of prior year) 22,4% 14%-16%
Stabilized Economy:
After a period of macro economy unstability in
2010-2011, thanks to the serious adjustment in
monetary policy, Vietnam macro economy is more
stable in 2012. The agreesive moves of Government
resulted in possitive condition of the economy.
Macro economy has been stablized in 2H 2012.
Economy improvement has been noted since Q4 2012
with better indicators of reserver, export, trade
balance, balance of payment, FDI, inflation control...
Vietnam enterred a deleveraging period for the
whole economy in 2012. This will continue in 2013.
Slower Growth for a Stable Economy
In 2013, the Government has prioritized inflation
control and stablizing economy the first targets. In its
2013 plan, the Goverment selects a low growth option
to enhance its capability to control the inflation. With
the selection, the Goverment policies will help to
improve performance of economy and looking foward
to a long term growth.
The moderate targeted GDP growth of 5.9% in
2013 is suitable to undergoing deleveraging.
Source: GSO, SBV, VFM
VIETNAM MACRO OVERVIEW
InflationCPI has been slowed down significantly in early
months of 2012 and YoY CPI reached to a single digit
since May 2012 . CPI for whole 2012 is only 6.81%.
Inflation is targeted to be controlled under 6.8% in
2013. In the first months of 2013, introduced policies by
Government are to control inflation.
Interest rateInterest rates has been reduced significantly in 2012
and be stable in 4Q 2012.
The rate is expected to hit the bottom in 2H 2013 and
gradually increase affter a period of credit crunch.
Export & Trade Surplus
Trade surplus is USD400 million in 2012. Export
growth is 18.3% and maintain in high level. The export
growth surpassed other large export countries such as
China, India, Thailan and Indonesia... and can be
considerred as a plus in a situation of world economy
slow down.
Trade surplus is expected in 2013 together with
positive balance of payment.
Source: VFM, Dragon Capital
VIETNAM MACRO OVERVIEW (cont.)
Reserve
Reserved increased significantly in 2012 and equals
to more than 12 weeks of import by December.
In the first 2 months of 2013, reserve increased by
USD 8 billion and reached to over USD 30 billion,
equals to 14-16 weeks of import.
Foreign Exchange Rate
Exchange rate between VND and USD has been
maintained stable for a long period since early 2012. The
gap between official and black market exchange rates
for VND/USD has virtually disappeared since February
2012. Thanks to good export growth, significant
reduction of trade deficit and increasing of reserve, the
VND/USD exchange rate is expected to be stable in
2013. Concensus forecasts show that the exchange rate
will move within a range of 3% in 2013.
In Mar 2013, State Bank of Vietnam sold USD to
market in order to keep VND-USD exchange rate stable.
Source: SBV, Dragon Capital
VIETNAM MACRO OVERVIEW (cont.)
Deleveraging the Economy
The deleveraging period started in early 2011 help to
purify the economy.
The loan to deposit ratio of banking system is now
95% in comparison to 106% in 2011.
Liquidity of banking system improves significantlly
considering the signals of lower interbank rates. One
month interbank rate at the current is 3% to 7%.
Non performing loans of banks have been identified
and a solution for NPL may be reached in 1Q 2013. The
establishement of Vietnam Asset Management Company
(VAMC) will be a push to NPL problem
Potential of a New Development Cycle
Get over the seen obstacles, Vietnam economy is
heading to a new development cycle in medium term.
The Vietnam ecomony is in the phase of slow growth
for deleveraging. Vietnam economy is expected to come
to a new development cycle in 2014. Historical data
shows large improvements of Vietnam economy after
restructurings are observed since 1986.0
500
1000
1500
2000
2500
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
'000 tons
20
40
60
80
100
120
140trn VND
1986 Economic Reform
Focusing on Agriculture
1999 Economic Reform
Enterprise Law
2011 Economic Reform
SOEs, Financial Sector
Barely have
enough food to
avoid famine
Rice Export
(LHS)
Private Sector
Industrial
Production
???
Source: Dragon Capital
VIETNAM MACRO OVERVIEW (cont.)
September 2008
3.FIXED INCOME
INVESTMENT OPPORTUNITY
a) Comparative advantages:
- Fixed income instruments generally should be the defensive parts for a diversified investment portfolio.
- Fixed income instruments in Vietnam will remain attractive for the next few years for investors who desire relatively stable and
decent returns.
Equity Property Fixed income Gold/ FX/ Deposit
Advantages -Liquidity
-Flexible amount and
timing
-High return.
-Fast earnings.
-Big investment.
-High return.
-Long run investment
-Liquidity (not
immediately but doable
in 1-2 weeks)
-Safe
-Low lost
-Liquidity
-Flexible but not too
big amount
-Price defensive
instruments
Weakness -High volatility, high
risk.
-Fast lost
-Information driven
-Liquidity
-Big loss in crisis
-Big investment (solve
by investing in fund)
-Low return
-Storing problem
-Just work in special
shocks, low carry.
Example (source: Dragon capital)
Equity Property Fixed income FX Gold Deposit
Vn-index (estimation)
DC Government
bond index (estimation) (estimation)
(port: o/n,
1m,3m,6m,12m)
Jul-06 to Mar-07 (8m)
142%
(282%pa.)
2008 and
2009
Hanoi: +35-55%
HCMC: +25-30% 2008 -3%
Mar-08 to
Jun-08 (3m)
+20%
(105%pa.)
20-Jul-2011 to
20-Aug-2011
(1m)
+24%
(650%pa.)
July-08 to
July-09
+15.6%/
12m
Jan-07 to May-08 (8m)
-58%
(-80%pa.) 2012
Hanoi: -30-50%
HCMC: -20-30% 2012 +18.5%
Jun-08 to
Jul-08 (1m)
-10%
(-75%pa.)
22-Aug-2011 to
26-Sep-2011
(1m)
-12%
(-74%pa.)
Jun-09 to
Jun-10
+6.1%/
12m
5yr return: Feb-08 to
Feb-13
-39.5%
(-9.4%pa.)
5yr return:
Jan-08 to
Jan-13 ~0%pa.
5yr return:
Dec-07 to
Dec-12
+61%
(+9.9%pa.)
5yr return:
Dec-07 to
Dec-12
+30%
(+5%pa.)
3.5yr return:
Dec-07 to Dec-
12
+102%
(22%pa.)
5yr return:
Dec-07 to
Dec-12 +9.7% pa.
COMPARATIVE ADVANTAGES
Advantages Products
Bankers -Returns: Higher carry compared to cash.
-Credit : Government bonds are safe and not impact
liquidity ratios.
-Liquidity: Can use as collaterals in OMO to get
liquidity. More liquid than other investment asset.
-Government bonds
-Government guaranteed bonds.
-Banks’ notes/interbank deposit
-Corporate bonds (but be counted as
loans)
-Derivatives; fund unit (FI)
Insurers/
other
institutions
-Credit risk: Diversified fixed income portfolio is
safer than other investment instruments, even
banks’ deposit.
-Liquidity: higher than property, private equity.
-Allocation issue: possible for storing big value.
-Government bonds
-Government guaranteed bonds.
-Banks’ notes/ deposit
-Corporate bonds and commercial
notes.
-Derivatives; fund unit (FI)
Individuals -More stable return and limited loss.
-Safer than equity and property. Well regulated by
law.
-Banks’ deposits.
-Fund units (FI)
How can Fixed income investment match different investors’ tastes:
INVESTOR’S TASTES
b) The market
Basis:
- Size: more than VND 500trillion (or USD 25bn), around 17%GDP.
- Average daily trading volume: VND 400-1000bn (USD 20-50m)
- Institutional, professional investor base.
- Centralized electronic platform in Hanoi Stock Exchange.
- Size of government is enlarged, easier to trade and create benchmark bonds.
- Primary dealer system has been being established.
Market’s products:
- Straight bonds:
•Government bonds 59%
•Government guaranteed bonds 25%
(VDB, VBS, VEC)
•Municipal bonds: 2%
•Corporate bonds: 14%
- Banks’ notes or corporate commercial notes (<1year).
- Equity linked-notes: Convertible bonds, bonds with
warrants, exchangeable bonds.
- Derivatives: FX swap has been used for hedging.
Futures and options are not officially traded but are
now discussed by SSC.
BOND MARKET OVERVIEW
Source: Dragon Capital
0.6%0.8%2.3%
3.5%
5.2%
8.7%
14.8%
13.8%
14.6%
17.3%15.5%
16.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012
USD billion
BOND MARKET GROWTH ( 2001-2012)
Oustanding bonds USD bn
Outstanding bonds/GDP (RHS)
Challenges:
- Big trading size: 50-100bn/normal trade (20-30bn is doable)
- Very binary market based on narrow investor base.
- Affected directly by monetary policy and macro condition.
- There are spread btw Screen rates and trading rates.
Market status
- 90% of government bonds are less than 5
years and average life is 2.7 years.
- 2 and 3 years have more favour as key buyers
are banks with short-term finance.
- Longer maturities beyond 5 years are primarily
bought by life-insurance companies on buy-
and-hold basis.
- Corporate bonds are rarely traded.
0.0
1.0
2.0
3.0
4.0
2013 2015 2017 2019 2021 2023
MATURITY PROFILE OF VND GOVERNMENT BOND
(updated Dec-2012)
BOND MARKET OVERVIEW (cont.)
Municipal2% Corporate
14%
Government guaranteed
bond25%
Government bond
59%
BOND MARKET BREAKDOWN (as end of 2012)
Source: Dragon Capital
Macro conditions: more stabilized
Inflation risk has reduced.
FX/gold markets are regulated in narrow
band.
Restructuring has been processed in banking
system and SOE.
Economic growth based more on capacity
than monetary eases.
Interest rate / Yields:
The normal range of the yields is 8 to 12.5%
with quite long cycles.
The curve has backed to normal shape.
VGB yields were at 8.2-9.8% for 1 to 10yrs as
end of 2012. In Mar-2013, it’s around 7.6-
9.5%. Comparatively higher than other Asian
countries. Possible for foreign investors do
carry trade in short-term bonds.
Good outstanding corporate bonds are now
traded at 350-450 bps spread to government.
Secondary market: more transactions and big
traded volume. Daily transactions reached 2
trillion in Mar-2013.
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Sep-08 Sep-09 Oct-10 Nov-11 Nov-12
1yr GovInflation (yoy)FX change (yoy)
9%
10%
11%
12%
13%
Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12
5 yrs Screen rates vs Primary market
Bloomberg rate
Primary rate
WHY NOW
Source: Dragon Capital
- The shape of VGB yield curve is changing time to time.
- The spread among different tenors reflect market’s risk attitude and psychology.
- Corporate bonds is trading at 350-600bps spread over government . These spread used to be at 150-
300bps. In a fund with 30% corporate bonds, this will provide an additional return of approximately 1%.
- Equity market in some period can provide attractive equity linked notes.
Understanding and well following it help to find out trading / hedging/ arbitraging/ switching
opportunities.
6%
8%
10%
12%
14%
Dec-08 Dec-09 Dec-10 Jan-12 Jan-13
Spread btw different tenors
5year VGB
1year VGB
6%
8%
10%
12%
14%
1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 15 yr
VGB YIELD CURVES
28-Dec-12 30-Dec-11 31-Dec-1031-Dec-08 29-Dec-06
MARKET MOVEMENTS NEED TO SCREEN
Source: Bloomberg
Vietnam Debt Fund SPC (VDeF)
-Managed by Dragon Capital Debt Management
- Created in Dec -2007. Listed on Irish Stock Exchange. Cayman Islands incorporated.
- Dedicated fund for Vietnamese debt.
-Monthly custodian valuations: Custodian is Standard Chartered Bank. However, internal reports can be
produced at any time.
- Segregated A and B portfolios targeting different risk levels. Class A-shares primarily for Government.
Class B-shares broader mandate.
VDeF performance:
- As end of Feb-2013, since inception (Dec 2007):
• In VND, A-share up 65% and B-shares up 107%
• In USD, A-share up 26% and B-share up 59%.
- As a foreign fund, VDeF has to pay coupon/
transaction tax and high expenses (Costs >
2.5% pa) and not allowed to enter deposit in
Vietnam
- VDeF compares itself with VGB 1, 2 and 5 year
indices and the DC Liquid Bond Index.
- DC Government bond index: weights proportional
to government debt outstanding.
-30%
0%
30%
60%
90%
120%
150%
Dec-07 Oct-08 Aug-09 Jun-10 Apr-11 Feb-12 Jan-13
VND comparable return since inception
VDeF B Gross
VDeF B Net
VDeF A Gross
VDeF A Net
DC Vietnam Liquid Bond Index
VDEF TRACK RECORD
Source: Dragon Capital
- This graph, which doesn’t make any prediction of future returns, suggests that it is possible to benefit from
capital gains from active trading strategy and corporate bonds investment comparing to a pure investment
on short-term government risk.
5%
15%
25%
35%
Sep-08 Jul-09 May-10 Feb-11 Dec-11 Oct-12
1-year VGB yoy returns compared with VDeF Gross yoy return (since Dec 2008)
Amount weighted VDeF A and VDeF B
1 yr Generic Vietnam Government bond
VDEF TRACK RECORD (cont.)
Source: Dragon Capital
September 2008
4. VIET NAM BOND FUND (VFMVFB)
• Fund name : Vietnam Bond Fund (VFMVFB)
• Fund type : Open ended fund
• Type of investor : Domestic and foreign individuals, institutions
• Term of fund : Unlimited
• Minimum capital mobilization : 50bio VND
for the IPO
• Par value : 10.000 dong/fund unit
• Issuing price : 10.100 dong/fund unit
• Minimum subscription : 20 mio dong
• Fund Manager : Vietfund Management (VFM)
• Technical advisor : Dragon Capital Debt Management Limited (DCDM)
SUMMARY OF ISSUING PLAN FOR THE
INITIAL PUBLIC OFFERING OF VFMVFB
• Transfer Agency : Deutsche Bank AG, Hochiminh Branch.
• Custody/Supervision/ FA : Deutsche Bank AG, Hochiminh Branch.
• Auditor : PWC, or KPMG or E&Y
• Distributors :
VietFund Management
Address: 17th Floor, MeLinh Point Tower, HCMC, Vietnam
Tel: (84.8) 3825 1488 Fax: (84.8) 3825 1489
Ho Chi Minh Securities Corporation– HSC
Head office in Ho Chi Minh City
Address: 5-6 Floor, A&B Tower, 76 Le Lai, Ben Thanh Ward, Dist 1, HCM
Tel: (08) 3823 3299 Fax: (08) 3823 3301
Hanoi Branch Office
Address: 4-5 Floor , 66A Tower, Tran Hung Dao St., Dist Hoan Kiem, Ha Noi
Tel: (04) 3922 4693 Fax: (04) 3933 4822
SERVICE PROVIDER & DISTRIBUTORS
• Fund raising for the IPO : From 25 Mar 2013 To 23 Apr 2013.
• First transaction : End of May 2013 (est.)
• Unit transaction interval : Bi-weekly
• Trading day (T-day) : Second Friday and the fourth Friday of the month
• Order placing time : Till 10:30am on T-1 day
• Valuation period : Weekly
• Redemption cut off : Limited at 10% NAV.
• Subscription fee : 1% of subscription amount
• Redemption fee : 0.5% - 2% of redemption price (depends on unit holding period)
• Management fee : 0.9% NAV per year
TRADING TIMELINE & FEE
INVESTMENT OBJECTIVE/ STRATEGY &
ASSET ALLOCATION
To achieve a profit from fixed
income investment:
Vietnamese government bond
Government guaranteed
bonds
Municipal bonds
Corporate bonds
Commercial notes; and
Money market instruments.
Investment Objective
Active management based on
fundamental analysis of macro
conditions, as well as
quantitative models, statistic or
corporate analysis in making
decision
For Corporate bonds, the
analysis shall base on at least
one of credit rating models that
are developed by VFM and
fund’s consultant - DCDM.
Investment Strategy
Mainly on Government
bond.
Bond portfolio structure
shall be maintained to
ensure the portfolio’s
duration not over 8 years.
Asset allocation
September 2008
5. MANAGEMENT TEAM
Technical Advisory Team(*)
• Dan Svensson Director and VDeF Manager
Graduate degrees in Sciences/Economics/Finance
• Hoa Le Thi Senior analyst, performance and risk
MSc in actuarial sciences
• Hong Nguyen Thi TuyetSenior analyst, credit research and analysis
MSc in actuarial sciences
• Tuan Le AnhHead of research and Chief economist
PhD Economics
• Tuan Vo Nguyen KhoaSenior economist
BSc computer sciences
• Khang Diep QuocSenior officer, execution
MSc banking
Investment Team• Tran Le Minh
VFB Manager cum Economist
Master in Financial Management
(*) Technical advisory team is currently managing VDeF A&B
MANAGEMENT TEAM
September 2008
6. TRADING GUIDELINE
INVESTOR
TRANSFER AGENCY
DISTRIBUTION AGENTS
Research the
fund offering
documents
Transfer the
subscription money
During the raising
fund period
Place Subscription
order
During the raising
fund period
Allotment trading units
After closing Fund
Website
Consolidate all the trading
orders send to the Transfer
Agency
Securities
companieswww.vinafund.com VFM office
Open account
trading for the
open-ended fund
certificates
Trading
confirmation
and waiting for
fund certificates
in the account
ISSUING PROCESS FLOW FOR IPO
How to BUY
Research the fund offering Docs
Approach to Distributor
Open A/C trading for fund & place
Subscription order
Transfer subscription money to
Supervising bank, the details is:
Beneficiary: QUY DAU TU TRAI
PHIEU VIET NAM
A/C No.: 1020155-05-5
Bank name: Deutsche Bank HCMC
Branch
Content: [Investor’s full name]
[ID number/Business
License] [ Fund name]
at [Distributor name]
Trading confirmation
Consolidate all the trading
orders send to the
Transfer Agency
INVESTOR
TRANSFER AGENCY
DISTRIBUTORS
Research fund
offering
documents
Transfer
subscription
money
Before 10:30am
,T-1
Place orders
Before 10:30am ,T-1
Allotment trading
units
T+3
Check for fund
unit outstanding
balance
Before 10:30am
,T-1
Trading
confirmation
T+3
SUBCRIPTION
REDEMPTION/
SWITCHING
How to trading the fund
Research the fund offering Docs
Approach to Distributor
Place Subscription order before
10:30am T-1
Transfer subscription amount to
Supervising bank (for buying fund
unit)
Trading confirmation in T+3
Redemption payment shall be to
investors’ bank A/C within 5 days
(T+5)
PROCESS FLOW FOR NEXT SUBSEQUENT
TRADING CYCLES
September 2008
7. CONTACT TO US &
DISTRIBUTORS
VIETFUND MANAGEMENT
Head office in HCM
1701-1704 , 17th floor, MeLinh Point Tower
02 Ngo Duc Ke St., District 1, HCMC
Tel : +84 8 3825 1488/ Hotline: +84 8 3825 1580
Fax : +84 8 3825 1489
Email : [email protected]
VFM OFFICE & DISTRIBUTORS
HOCHIMINH SECURITIES - HSC
Head office in HCM
Address: 5-6 Floor, A&B Tower, 76 Le Lai, Dist 1, HCM
Tel : +84 8 3825 1488/ Hotline: +84 8 3825 1580
Fax : +84 8 3825 1489
HOCHIMINH SECURITIES - HSC
Hanoi Branch office
Address: 4-5 Floor , 66A Tower, Tran Hung Dao St.,
Dist Hoan Kiem, Ha Noi
Tel: (04) 3922 4693 Fax: (04) 3933 4822
September 2008
THANK YOU