Portfolio theory and investment analysis assignment

Investment Policy Statement IPS -Investment Objectives -Constraints -Asset Allocation -Diversification Policy -Rebalancing Policy FUNDAMENTAL ANALYSIS -Macro economy -Industry analysis -

Vietnam National University – HCMC

International University SCHOOL OF BUSINESS ADMINISTRATION

Portfolio Theory and Investment

Analysis Assignment LECTURER: Le Hong Nhung

(Tiger Fund)

List of group's member:

Trần Trung Đức - BAFNIU17024 Lê Duy Hiếu - BAFNIU17017 Lâm Hoàng

Nguyên - BAFNIU17008

Vũ Huỳnh Minh Ngọc - BAFNIU17005

Investment Policy Statement (IPS)

-Investment Objectives

-Constraints -Asset Allocation -Diversification Policy -Rebalancing Policy

FUNDAMENTAL ANALYSIS

-Macro economy -Industry analysis -Stock pricing

CRITICISM REFERENCES APPENDICES

Tiger Fund

‘We are your trusted investment.’

INVESTMENT POLICY STATEMENT

Target clients: People aged 25 to 40 years old

Time horizon: 5 – 10 years

Investment Objective: Primary objective: Capital appreciation

Secondary objective: Income generation Overall risk level: Moderate in relative to Vietnam stock market

Asset allocation: 100% invested in stocks listed on both HOSE and HNX

This Investment Policy Statement aims to

- Establish the investor's expectations, objectives and guidelines in portfolio's investments

- Create the framework for a well-diversified portfolio that can be expected to generate acceptable long-term returns at a level of risk suitable to all investors, including:

+ appropriate risk posture for the investment of the portfolio

+ the target securities allocation policy

+ investment guidelines regarding the selection of investment managers,

permissible securities and diversification of assets

+ the criteria for evaluating the performance of portfolio

- Encourage an effective communication between Investment Manager(s) and all investorsThis IPS is not a contract Therefore, any legal counsels do not review this statement and themanager and investors use it for their own discretion However, it must be in accordance with relatedlegal documents This IPS is a summary of an investment philosophy and the procedures that provideguidance for investors and the manager The investment policies described in this IPS should bedynamic These policies should reflect the investor’s status and philosophy regarding the investment

of the Portfolio These policies need to review and revise periodically to ensure that they adequately

reflect any changes related to the portfolio, to investors or the capital market Therefore, there is no guarantee that financial objectives written in the investment statement policy will be achieved by the following investment proposal.

Introduction

The client’s interests, benefits and constraints must be taken into account when developing along-term investment recommendation and actions It is the mission to understand the client’sinvestment experience, financial and risk objectives We must determine suitable investmentregarding the aforementioned information and update it regularly

The purpose of the investment statement policy is to provide guidelines for investing decisions.This is not, nor it is intended to be a contract, and it does not address legal responsibilities ofeither the Advisor or the Client, nor has it been reviewed or approved by an attorney It is alsoused to establish a clear understanding between investors and Investment Manager (“Manager”)

as to the investment goals, objectives, and management policies applicable to the investment portfolio (“Portfolio”).

Authorized Decision Makers

Their capacity is any decision is be approved by 75% of investors

I INVESTMENT OBJECTIVES

The portfolio objective is mainly concerned with capital appreciation by investing in stocks ofVietnamese companies listed on HOSE and HNX The average risk of the fund isapproximately close to the market with VN-Index as the benchmark The target customers ofthis fund are 25 to 40 years old individuals who are suitable for a time frame of about 5-10years of investment When preparing the portfolio, a number of factors that influence thereturn as well as the risk facing the portfolio are assessed and taken into consideration

The primary investment objective is capital appreciation The desired long-term rate

of return on assets ranges from 18 to 20%.

The target customers of this fund are 25 to 40 years old individuals who are in the prime workingage group and have a stable financial condition Therefore, aging has affected portfolio choices aswell as risk tolerance They usually have well-paid jobs and good financial health They are

willing to take risks in order to earn a higher return for future financial stability The fund has a moderate risk policy that is comparable to the risk level of the market.

II CONSTRAINTS

There are constraints regarding the liquidity needs of the client Although the fund clients havestrong financial health, the investment statement policy and investment decisions should bereviewed if unexpected events occurred Sources of short-term fund need may come fromdecisions such as real estate purchase, tuition fee payment, or health-related issues.Therefore, the policy statement and financial plans need to be revised at least twice a year

- Time horizon

The time horizon for the fund is a long-term investment with a time frame from 5 to 10 years.Investment with a long time horizon may be exposed more to risk and investors may have higherrisk tolerance However, any losses can be recovered in long-term investments over the years

- Legal and regulatory issues

The stock market in Vietnam is relatively young and not well-regulated High intrinsic value sharesare not always truely price-reflected in the market and vice versa, the phenomenon of stock priceblowing is also common to take unfair profit from the small investors This hinders the objectivity,transparency and efficiency of the market compared to developed markets such as the UnitedStates, Japan, Singapore, etc Another noteworthy factor is the introduction of

Derivative also raised a lot of concern about the feasibility of this type As a result, theVietnamese government is still working on the regulatory structure for the stock market.

III ASSET ALLOCATION

Regarding the Vietnamese financial market, interest-earning assets such as bonds may sufferfrom liquidity risk on the secondary market and interest risk due to expected growing inflation.Therefore, bonds are not included in the portfolio Common stocks have a higher expectedreturn, accompanied by a big range of return variability The allocation of the assets thataligned with the financial objectives and constraints is 100% invested in common stock Astrategic asset allocation strategy should be used to determine the policy asset weights in aportfolio based on the information from both the capital market and the investors

Asset class Sub-asset class Target allocation

Technical/Speculation 30%

IV MANAGEMENT STRATEGY

The portfolio purpose is to follow the VN-Index with investment in high potential stocks Consequently, passive management is employed, which includes tracking the VN-Index with buy and hold strategy.

V MONITORING & REVIEW

Investment performance will be monitored and reported to the client on a quarterly basis The investment performance will be compared against VNI-Index, the aforementioned benchmark The investment decisions and strategy will be reviewed

in order to match the objectives, constraints as well as adapting to any new issues.

VI REBALANCING

The weight of each stock in the portfolio may vary depending on the market Rebalancing isalso carried out and reported to the client on a quarterly basis, if necessary

telecommunication was improved in order to keep the growth rate relative to previous years.The total number of passengers is estimated to be 5,143 million which is an 11.2% increaseover 2018 Vietnam is still one of the top destinations for foreigners in Asia with 18,000thousand arrivals from international tourists - a 16.2% increase compared to the figure of

2018 Vietnam financial market in 2019 has improved with a rise of 12.5% in capitalmobilization from credit institutions while credit growth of the economy is 12.1% The stockmarket mobilized 313.9 trillion VND for the economy By the end of 2019, Vn-Index closed at960.99 points with its market capitalization of 4.4 million billion VND

However, despite the outstanding performance in 2019, there are uncertainties regarding the worldeconomy in the year 2020 It starts off with the augmentation from the tension between US-Iranrelation and from the US-China trade war Followed by the oil price war between Russia and SaudiArabia that leads to the slump in crude oil price Vietnam, as well as the whole world, has to facethe huge threat of the new coronavirus pandemic - COVID-19 - as the pandemic started spreadingfrom Wuhan, China Vietnam acted quickly by restricting its borders with people from abroad -including both foreigners and Vietnamese - and imposing strict restriction and guidance on healthchecks and travelling This action initially affected airlines and the hospitality industry Theeconomy was struck harder when COVID-19 was declared pandemic by WHO and Vietnaminitiated lockdown and social distancing First of all, revenue from tourism sectors such asaccommodation and restaurants for the first 4 months was 143 trillion VND, which plummeted23.6% compared to the same period in 2019 Revenue from travelling

also dropped 45.2% and only achieved 7.9 trillion VND On 31st March, VN-Index hit a recordlow of 662.53 points in 2020 as red indicators were dominating the market following political

events and the pandemic Manufacturing industry is another victim of the lockdown as logisticsand material shortage put the manufacturing on hold Moreover, the unemployment rate in the firstquarter of 2020 was 2.22%, a 0.05% increase from the corresponding period of 2019.

However, Vietnam has effectively tracked infected cases and introduced quarantine measures

in order to stop the spreading of COVID-19 These timely and effective acts have madeVietnam free from community infected cases since April Since May, as lockdown has beenlifted, airlines and tourism companies have stimulated domestic travelling within Vietnam Aseverything is going back to normal, the stock market also follows that trend It started torecover its momentum and cross 850 points at the end of May Although Vietnam’s economyseems to rise back to its normal level, GDP is still estimated to achieve a growth rate of 4.4 to5.2%, much lower than the planned figure of 6.8%

INDUSTRY ANALYSIS

There are over 25 different industries in the market, which are listed on HSX and HNX According to prospect reports, we’ve classified potential industries that we can allocate asset: Manufacturing & Processing, Energy, Consumer & Retail, Real estate, Banking, Medical & Healthcare, Technology and Insurance industries.

Manufacturing & Processing industry is still leading GDP growth with the highest proportion Thefollowing industries are Energy, Consumer & Retail, Real estate, Banking industries account for alot of the proportion of structure as well as the GDP growth rate Furthermore, we believe Vietnam

is in significant development, so people's standard living is also increasing in level as

well Therefore, we take into account Medical & Healthcare, Technology and

Insurance as potential industries.

Industry Classification Potentials

of industry

Manufacturing Cyclical Manufacturing and processing industry keeps high growth

& processing industry momentum Recently, the Government's policies, to

ministries and branches in supporting and promoting the development of mechanical engineering Generally, in the first 11 months of 2019, the industrial production index was estimated to increase by 9.3% over the same period last year, lower than the 10% increase of the same period

in 2018 But the manufacturing and processing industry group increased by 10.6% over the same period.

Report from the General Statistics Office, in 11 months

of 2019, the processing and manufacturing industry wasgranted the biggest new foreign investment license withthe total registered capital of projects reaching 10.33billion USD, accounting for 70.4 % of total newly

registered capital In the coming time, the mechanicalengineering industry will have many prospects fordevelopment, it is necessary to have support mechanismsfor domestic SMEs to approach and connect more deeplywith businesses FDI and large domestic enterprises.

In order to support the manufacturing and processingindustry to continue to be a bright spot and contribute tothe overall development of the industry, Deputy Minister

of Industry and Trade, Mr Cao Quoc Hung said, theMinistry will continue to remove obstacles and improvethe investment environment business, creating a faircompetition environment and protecting the interests ofdomestic manufacturing industries (especially industriessuch as steel, automobiles, fertilizers, chemicals ) tocontinue increasing production and freeing upproduction forces associated with renovating economicstructures and improving competitiveness

Energy Defensive Positive outlook

industry

Vietnam Energy Outlook 2019 is a collaborative productbetween the Department of Electricity and RenewableEnergy under the Ministry of Industry and Trade and theDepartment of Energy under the Danish Ministry ofEnergy, Technical Infrastructure and Climate, providingthe foundation on a scenario-based basis to supportpolicy decisions by clarifying the prospects for energysystem development to 2050 based on a fullydocumented and detailed energy system model.

Regarding the dependence on the import of raw materials,the Vietnam Energy Prospect Report 2019 shows that thedependence on future fuel imports may be reduced from60% to 51% in 2030 and from 71% to 58% by 2050, ifsimultaneously developing renewable energy, using naturalgas (gross profit) and energy-saving measures to replacemost coal-fired power plants The report shows that earlystopping investment in new coal-fired power plants canhelp Vietnam avoid the "stuck" effect of coal-fired powerand depend on imported coal in the long term Thenewspaper investigated a scenario of not investing in newcoal power after 2025 This scenario

proves that 42 million tons of coal could be reduced

in total coal consumption by 2030 If the investment

is stopped in plants New coal thermal power, total coal consumption of Vietnam can be reduced by

221 million tons by 2050.

Furthermore, since 2013, the Danish and Vietnamese

governments have signed long-term cooperation

agreements in the field of energy Recent cooperationprojects with Denmark have contributed positively to therealization of Vietnam's goals to ensure energy securityand develop the energy sector in a sustainable manner.This will help Vietnam to meet the increasing demand forenergy, reduce the level of energy dependence and solve

the problem of greenhouse gas emissions as well as air pollution”.

Consumer & Defensive Attractive Vietnamese retail industry has some special

Retail industry industry advantages such as:

+ Golden population structure; 40% of the

population is under 24 years old; High growth of

the middle class.

+ The country is developing with annual GDP growth in the top of the world and stable inflation, high urbanization rate, which helps the retail industry have a growth rate higher than 10% / year.

year Consumer goods and milk industries have a stable growth of 5-6% / year.

The retail industry has benefited from mega trends urbanization and increasing middle class Vietnam is at aperiod when the growth rate of income per capita isstrongly increasing, the labor structure is shifting stronglyfrom agriculture to industry and service sectors, leading tothe number of people from Very low income changes to amiddle income level and consumption can increasesharply, leading to an increase in purchasing power

-For example, rural workers are shifting to workers due tolarge FDI inflows, rural people moving to urban areas tojoin the service sector; In rural areas, the accumulation ofland and the application of science to production have led

to a sharp increase in rural productivity and income.

With Vietnam at the beginning of a period of strong

purchasing power, essential consumer products will be themost consumed product group Therefore, the retail andconsumer staple sectors will be the biggest beneficiaries in

the growing segment of Vietnam's middle class.

Therefore, the retail industry continued to maintain a highgrowth momentum thanks to both increasing demand and

expanding network expansion.

Real estate Cyclical The real estate industry is supported by favourable

industry socio-economic conditions:

+ The geographical location adjacent to the East Seaoffers great potential for the development of the

marine economy.

+ The Government of Vietnam is promoting urbanconstruction and urban economic developmentthrough "a national urban development strategy to

2020 and a vision to 2025". Based on thedistribution of 6 national socio-economic regions,

the large and very large central cities will be

Hanoi, Ho Chi Minh City, Hai Phong, Vinh, Hue, Da Nang, Quy Nhon and Can Tho.

working age.

stably.

gradually improving, especially in Ho Chi Minh City & Hanoi.

Looking at the long term, the prospects for real estategrowth in Vietnam are very positive The developersactively accumulate land banks for future preparation,especially in suburban provinces However, in thecurrent context, only projects in the CBD such as Hanoi

or Ho Chi Minh City will achieve high absorption rates,and the situation will be more difficult for the remainingprovinces

Industrial real estate market: Increasing prospects thanks

to new policies In the context of the global recession, 2019

is a special year for Vietnam's economic

growth Impressive macroeconomic growth indicators havesupported the performance of the real estate market,especially the industrial real estate segment, with a totalinvestment of US $ 24.56 billion, accounting for over64.6% total investment Vietnam's economic prospects inthe medium and long term are mostly positive Althoughthere were difficulties from the beginning of this year, it stillcreated a positive start, reflected in attracting FDI.

Recent free trade agreements (FTAs) and global tradenetworks will continue to push Vietnam to become the maindestination of FDI inflows The new European Parliamenthas officially ratified the Vietnam-EU Free TradeAgreement (EVFTA) and the EU-Vietnam InvestmentProtection Agreement (EVIPA) That increases theprospects for industries Vietnam's economy

Since June 2019, more and more industrial real estateinvestors in Vietnam are confident that EVFTA willpromote investment in production, thereby expandingthe number of tenants With the deal approved this year,investors hope to see an increase in demand from

European manufacturers between 2020 and 2021.

Banking Growth industry The operational safety ratios of the banking system will

tend to tighten according to the roadmap to ensurelong-term growth Banks that have been recognized by the

SBV to meet Basel II standards under Circular 41/2016

will continue to be given priority in granting credit growthlimits For the remaining banks, since the equity is notlarge enough to meet the increasing demand of credit, theneed for capital increase is urgent to meet Basel II andother safety ratios Accordingly, a credit will focus largely

on credit institutions with good asset quality, and a creditwill be less satisfactory for credit institutions that have not

yet settled outstanding debts.

In the context that pressure on deposit rates and lendingrates is expected to remain stable, the banking industrymay face difficulties in expanding NIM in 2020

- The trend of expanding the loan portfolio to the retailsegment of the system will continue to increase in 2020 to allow banks to improve loan yieldsand minimize centralized risks Banks that are able to increase the

proportion of the retail segment to total outstandingloans will be able to improve the profitability of interestrate reproduction by restructuring the credit portfolio totarget profitable products Lending rates are higher

2021 - 2025: All commercial banks apply Basel IIaccording to the standard method; strive to have at least2-3 commercial banks in the top 100 largest banks (intotal assets) in Asia and 3-5 banks listed on the foreignstock market by the end of 2025; increase the proportion

of income from non-credit services to the total income ofcommercial banks to about 16-17%; bad debt of the whole

system of credit institutions is below 3%.

Medical & Defensive Vietnam is a country with a rapidly aging population, the

Healthcare industry period of "golden population" Vietnam is not long, it is

estimated that by 2020, there will be 7.4 million people

over 65 years old (7.9% of the population) ; even this

number is expected to increase to 9.5% by 2025 Thisshows the potential of the healthcare industry in general,

as well as pharmaceuticals in particular.

The increasing income per capita, especially the rise of the middle class, contributes to increased spending, including health spending By 2020, it is forecasted that the proportion of community spending on health care and protection in Vietnam will increase in a positive way, from 13 billion USD

to 24 billion USD Fine, that is equal to 13, $%.

According to statistics, the level of per capitaVietnamese spending on drugs from USD 38 in 2015increased to about USD 56 in 2017, and it is forecasted

to maintain an increase of at least 14% per year until in

2025, compared to the world average in 2016 at about147.4 USD / person Along with that, health insuranceexpanded with the coverage of 88.5% in 2018, the target

is to reach 100% by 2020

The abundant growth of the land, together with thesupport of increasing living standards, populationstructure, and self-protection, have made the wholepharmaceutical industry of Vietnam continuously grow inrecent years Specifically, the pharmaceutical industryreached an increase of 11% in 2017, in the period of