A month with Coronavirus

— 19.02.2020

The coronavirus has brought VN Index from 990 level to 920 in a month, with the weakest trading days visiting below 900. The first 3 weeks of the year were very promising. The index performed nicely due to good company earnings news and indicated a strong performance for the whole 2020, thanks to the banking sector, which has been our accumulation focus in fall.

The authorities have been able to act vigorously to prevent the virus from spreading uncontrollably to the world. In Vietnam, for example, only 16 infections have been detected and 11 of those cases have already been recovered. Outcome over the coming months remain difficult to assess, but at least the measures taken have proved effective.

Prudent government measures are likely to lead to a significant slowdown in the Chinese economy in the first quarter. The ceased manufacturing will also have significant negative effects elsewhere. In Vietnam factories and offices have remained open nor-mally, but schools have been closed following TET holidays. The closure of the Vietnamese border with China has led to a shortage of components at certain production facilities and a slowdown in Chinese exports. Samsung has begun replacing ground transportation from China by flying components to Vietnamese factories, and the reduced utilization of Chinese Samsung factories may lead to increased production in Vietnam. The Vietnamese authorities have instructed cautious in organizing public events and this has led to the cancellation of several events.

We have taken advantage of the weak trading days. However, recent performance of the EUR/USD currency pair has forced us to increase the cash collateral of our hedge contracts, which has partially tied our cash. Further, the EUR / USD hedging works precisely to offset the currency fluctuations in the portfolio, daily changes in the PYN Elite NAV are purely driven by stock holdings. Our intention is to continue forex hedging for the next few years, although in the recent weeks the act has not resulted to bring us additional gains of the further weakening euro.

As I was writing this, I just received an email informing me that the date for the Vietnam Renewable Energy Conference scheduled for March has been changed to early June. A concrete and illustrative consequence of the effects of a viral epidemic, it is likely that everything will slow down for the first quarter and accelerate during the second quarter. Good reason to subscribe the fund now.


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