AFC On The Road – Vietnam


Ruchir Desai, co-fund manager of the AFC Asia Frontier Fund, travelled to Ho Chi Minh City and Hanoi in November 2022 to meet with portfolio companies.

Flying into Ho Chi Minh City for the first time in three years, it seemed not much had changed on the ground after the pandemic as the buzz and energy on the street was as strong as before. The hustle and bustle of Ho Chi Minh City is one of its hallmarks and I am glad it has remained this way – this is one of the traits that gives the city its character!

I flew in on a Friday evening and took a walk around the wide Nguyen Hue Boulevard in downtown Ho Chi Minh City. This street livens up on the weekend with locals, tourists, and stand-up performers. This boulevard becomes a “hang out” spot for most on the weekend since it is right in the heart of downtown next to the restaurants, malls, and hotels frequented by almost anyone who is visiting or living in Ho Chi Minh City.

An Evening at the Nguyen Hue Boulevard in Ho Chi Minh City with the People’s Committee Building in the Background

AFC Research

While walking around the city after and in-between meetings, I noticed that restaurants were completely full, and the malls had very high footfalls as Vietnam is still seeing a post-pandemic recovery in consumption since most of 2021 was spent in some sort of Covid-related restrictions.

International tourists are also beginning to make a comeback, and the hotel I was staying at had a very high occupancy and I noticed a lot of tourists everywhere around the city. 2023 should be a much better year for international tourism in Vietnam since the country is still only at 20% of pre-pandemic arrivals and more importantly, since China has removed all Covid restrictions, Vietnam should be able to attract more Chinese tourists who accounted for 32% of arrivals in 2019.

In Ho Chi Minh City, I met with various companies across various sectors including the companies the AFC Asia Frontier Fund holds such as Gemadept [GMD], PetroVietnam Transport [PVT] and Phu Nhuan Jewelry [PNJ]. In between meetings, I went back to one of my favourite Banh Mi spots for a quick lunch. This street facing store which only does take aways is very popular for its Banh Mi and usually has a large crowd outside.

In Line at the Popular Banh Mi Huynh Hoa in District 1, Ho Chi Minh City

AFC Research

Work in Progress at Banh Mi Huynh Hoa

AFC Research

Of all my meetings in Ho Chi Minh City, the site visit to the Gemadept’s subsidiary Gemalink International Port (Gemalink) in Vung Tau was the highlight. The Gemalink port is owned and operated by Gemadept, the largest private seaport operator in Vietnam.

The significant advantage of the Gemalink port is (1) it is a deep seaport which can accommodate two larger container vessels at once and (2) its location at the mouth of the Thi Vai River which runs upstream to Ho Chi Minh City, giving it an advantage over other container terminals which are further upstream. Hence, Gemadept can handle a larger number of containers than the competing ports in the area without the vessels having to move further upstream.

Furthering the port’s strategic location is its ability to expand capacity since it has already acquired land adjacent to its existing terminal and therefore, it is unlikely that Gemalink will face any new competition in the near term.

The Gemalink Port has an Advantageous Location at the Mouth of the River

Google Maps

During my visit to the Gemalink port I was lucky to watch the container handling operations in motion as there was a vessel that had just called on the port. Though exports and in general trade growth in Vietnam could weaken in 2023, we believe Gemadept is one of the best proxies for Vietnam’s long term trade growth since it has large scale seaport operations both in the north and south of Vietnam in very strategic locations. The company has seen its container handling volume increase by an annualised 15% in the past ten years.

Container Vessel at Call at the Gemalink Port

AFC Research

Container Handling Operations in Progress at Gemalink Port

AFC Research

After spending a few days in Ho Chi Minh City, I flew to Hanoi on a packed weekday evening flight. This again shows that domestic consumption has come back strongly in Vietnam and in fact domestic air passenger numbers are now well above 2019 levels.

Sticking to the recovery in air travel, in Hanoi I visited one of our portfolio companies, Taseco Air Services [AST], an airport retailing company. AST operates duty free, food & beverage and souvenir stores in key Vietnamese airports including Da Nang, Hanoi, Ho Chi Minh City and Phu Quoc.

The company has its stores in both domestic and international terminals but the stores at the international terminals have higher profit margins and as international tourism in Vietnam recovers, AST could possibly see a strong uptick in its profitability. Besides AST, I also met with our other portfolio holdings such as FPT Corp [FPT], Vietcom Bank [VCB], and Vincom Retail [VRE].

International Arrivals to Vietnam are Seeing Positive Momentum (Monthly Arrivals)

SSI Securities

Similar to Ho Chi Minh City, my hotel in Hanoi also had a full occupancy and all the restaurants I visited were also enjoying good business. Since I was in Hanoi, I took the opportunity to ride the city’s newly opened metro. Though it was around 2pm in the afternoon, which is not rush hour, the metro still felt quite empty. However, I am told it gets crowded during rush hour.

At Cat Linh Station on the Hanoi Metro

AFC Research

During my last day in Hanoi, I visited one of the Vincom Mega Malls in the city which gave me a chance to check out the Vinfast showroom with one of the EV models as well as the charging stations. The good thing about being in a Vincom Mega Mall is that you find pretty much anything, including a Winmart+ convenience store which is now owned by Masan and is undergoing a very aggressive store roll out.

Modern retail penetration in Vietnam is still extremely low and brands like Winmart+ are well positioned to capture this opportunity since their stores were well stocked with all the basic day to day products that one would need at a reasonable price (we do not own Masan).

Vinfast EV Charging Stations in Hanoi

AFC Research

Winmart+ Convenience Stores Owned by Masan have an Aggressive Store Roll Out Plan

AFC Research

In the evening, I visited one of the most well-known restaurants which specialises in a favourite Hanoi dish called Cha Ca which is catfish grilled on a live stove at your table. This dish is a hit with both locals and tourists alike and goes well with some Hanoi beer!

At the Popular Cha Ca Thang Long Restaurant in Hanoi’s Hoan Kiem District

AFC Research

Vietnam has closed 2022 with record-beating GDP growth of 8% but in 2023 it will most likely see some headwinds from slower exports, some pressure on domestic consumption because of higher inflation and interest rates, and a high base effect.

Vietnam is on a Structural Growth Path – The Current Historically Low P/E Ratio Offers a Good Long-term Opportunity


However, at a trailing P/E ratio of only 11.1x and the country becoming the premier manufacturing hub in the region with foreign investment pouring in, you want to be invested in Vietnam for the next decade, not just the next year. Vietnam is in the midst of sustainable structural growth which began a few years ago and this is set to continue well into the near future. Enjoy the ride.

Some of the ways to get exposure to frontier markets in general are through ETFs such as the iShares MSCI Frontier 100 ETF (FM). However, besides giving exposure to Asian frontier markets, these ETFs would also have exposure to other frontier markets such as Kenya, Morocco, Nigeria and Romania.

Investors can also gain exposure to Vietnam through country focused ETFs like the VanEck Vietnam ETF (BATS:VNM), however such ETFs have significantly underperformed the benchmark Vietnam VN-Index as well as actively managed Vietnam funds.