The NAV of PYN Elite plummeted last spring. At the time, the most significant reason seemed to be the disciplinary measures at the Vietnamese bond market and stock exchange, when the market’s best-known manipulator, a billionaire businessman was arrested. It seemed that Vietnam crashed precisely because of these reasons, as all the other Southeast Asian markets remained stable.
Inspired by the crash, I ended up making a substantial subscription to the fund myself on May 31, 2022. Since then, the Vietnamese market has been on a downward trend, and now my subscription is already about 15 percent at a loss. Lately, the increased tensions in the market are related to the weak outlook for Europe and the USA. For comparison, at the time of the previous significant US-origin financial crisis in 2008-2009, I ended up taking a bank loan and making a relatively large subscription on September 30, 2008. During the following months, the NAV, unfortunately, declined a further 30 percent lower. At the time of that crisis, PYN Elite was investing in Thai and Chinese stocks. The portfolio also contained substantially more small and medium-cap companies than today.
At the time of the 2008-2009 crisis, the slump of global foreign trade hit the emerging exporting countries of Asia the most during 2009, but the Asian stock markets bottomed already during the previous year, in December 2008. Eventually, the value of my subscription in PYN Elite doubled compared to the subscription price in two years, even though I made the subscription too early, at a 30 percent higher level than the bottom NAV of PYN Elite.
Currently, PYN Elite’s portfolio is allocated into Vietnamese quality names. Vietnamese stocks are already too cheap, but they can of course decline further due to weak global sentiment, as valuation ratios in major stock markets try to adjust to rapidly rising interest rates and the cuts in earnings growth outlook caused by luring recession.
The ongoing weak market conditions hurts, but there is not much one can do about it. You must rely on the portfolio to be prudent, full of stocks purchased at low valuations. One must lean on Vietnam’s healthy economy and sustainable earnings outlook, which will push the Vietnamese market quickly back up, once the turbulence subsides. The data from PYN Elite’s entire period of operation shows that strong emerging economies, whose stocks haven’t been overvalued but get hit due to the weak global market sentiment, are able to recover from shocks quickly to new levels, led by solid earnings growth. It took six years for the S&P 500 index to recover from the dot.com bubble of 2000. Similarly, the S&P 500 took six years to return to the peak levels it reached before the 2008 financial crisis. In both cases, it took six years before the old record levels were met again.
The NAV of PYN Elite declined along with both of those crises. However, PYN Elite surpassed the pre-crisis peak values faster, it took only two years, as funds allocations were in an emerging country whose stock market had collapsed from moderate valuations to extremely low valuations. After this, PYN Elite was able to continue its strong performance to new highs
After a heavy storm, there is sunshine.
Important information regarding the text and the Fund
The attached publication is marketing material and should not be regarded as a recommendation to subscribe or redeem units of the PYN Elite Fund. Before subscribing please familiarize yourself with the Key Investor Information Document, the Prospectus and the Rules of the Fund. The material presented in this text is based on PYN Fund Management’s view of markets and investment opportunities. PYN Elite Fund (non-UCITS) invests its assets in a highly allocated manner in frontier markets and in a small number of companies. This investment approach involves a larger risk of volatility compared to ordinary broadly diversified equity investments. The value of an investment may decline substantially in unfavorable market conditions or due to an individual unsuccessful investment. It is entirely possible that the estimates of economic development or a company’s business performance presented in this presentation will not be realized as presented and they involve material uncertainties.