tbli tokyo 2010 vietnam holding ltd

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  • 1. Sustainable Investing in Vietnam Vietnam Holding Ltd. TBLI Asia, 27 May 2010 1
  • 2. The Emerging Market Challenge Large universe of investable companies Grow now, clean up later Quality of information is spotty at best Government and market regulators lagging behind OECD Few offshore listings Local managers with limited ESG sensitivity Language and cultural challenges High ESG pressure Rapidly increasing pollution Neglect of human resource development Low Transparency 2
  • 3. Vietnam 86 million population and favorable demographics Pragmatic policies avert overheating in 1H08 Swift measures after global crisis in 3Q08 Resilient despite lower exports and capital inflow Export mix and new markets soften the blow GDP growth at 5.5% in 2009 Attractive valuation and expected EPS growth 1,700 State-owned Enterprises to be privatized Political stable and low social inequality Sources: Fitch Report, HSBC, VNHAM, Economist Intelligence Unit 3
  • 4. Economic Indicators 2005 2006 2007 2008 2009 2010e 2011e Industrial production (% change y-o-y) 25.5 16 18.2 15.9 8.6 17.5 11.5 Exports (% change y-o-y) 22.5 22.1 22.7 29.9 -10.0 15.0 20.0 Imports (% change y-o-y) 15.7 33.4 41.2 28.5 -14.0 26.0 3.0 Total external debt (% of GDP) 23.8 22.9 23.4 23.6 24.5 25.5 25.0 Limited 2009 damage to export success story Agricultural price volatility explains discrepancy between export vs. production growth Large amounts of imports linked to large direct foreign investments External debt levels continue to be very well managed Source: EIU Vietnam Country Forecast 2010 4
  • 5. FDI and Inflation Foreign Direct Investment Inflation FDI in % of GDP 2007 2008 2009 Foreign direct investment flow stays high India 2.1 3.4 2.4E Disbursed FDI result in positive BOP China 4.0 3.8 1.6E Vietnam 9.4 10.7 7.8 Inflation 9.2% y-o-y as of 30 April, 2010 Sources: GSO, Bloomberg, Credit Suisse 5
  • 6. Investment Environment USD bln VNIndex Market Cap (left axis) Foreign Market Share 30Dma (right axis) 1,250 1,000 750 500 200 Price / Earnings Region Avg Vietnam VNH At high 2007 : > 40 17.73 13.04 10.2 P/E Growth: > 20% p.a. Source: Bloomberg 30 Apr 2010 6
  • 7. Growth and ESG Development GDP growth in past 20 years second only to China Accelerates from 5.3% in Q4 2009 to 5.8% in Q1 2010 Growth causes ecological strain which is 10 yr delay compared to China GDP Growth p.a. - BRIC vs. Vietnam Deteriorating water and air quality 600 China Vietnam India Brazil Russia 9.8% 500 Disclosure standards applied selectively 400 7.2% 300 6.6% Poor monitoring and limited institutions 200 3.0% 100 1.7% 0 Developing regulation and political agenda 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Bottom-up social and environmental awareness developing Sources: Fitch Report, HSBC, VNHAM, Economist Intelligence Unit 7
  • 8. SRI Strategy Vietnam Holding Asset Management Ltd. Engagement | Analysis | ESG Assessment Culture Selection INrate VNH Forum Know-How Leadership Valuation Integration Value Approach Engagement Sector Analysis Portfolio Call Schedule ESG Indicators Analysis Macro & Micro Follow-up Request for Disclosure Exclusion Fundamentals Voting Policy Key Issues Due Diligence Action Items Investment Universe Research Partnership Return Vietnam Holding Ltd. ASrIA | UN PRI | CDP 8
  • 9. ESG Integration Investment Analysis ESG and Financial analysis Investment context Availability of market data Integrate ESG to investment process Key Issues Portfolio Assessment ESG Grading Core Indicators Controversial Practices Proactive and progressing investees Product Screening Analysis and Data reveal ESG awareness 9
  • 10. Investment Process Sector Approach Key Issues Material Investment Proposal and Update Actionable Priorities 1. Investment Return 2. Compliance 3. Risk : reputation, disruption of business etc. 4. Opportunities: differentiation, new markets etc. Monitor improvement through active engagement 10
  • 11. ESG Assessment GRADING SYSTEM Business Ethics Criteria Labour Controversial Human rights Practices Score 124 Sustainability Criteria 38 CRITERIA Environment Governance IN