VinchyCapital if not now then when

IF NOT NOW, THEN WHEN? Addressing the confidence crisis in Vietnam’s capital markets "Thoughts lead on to purpose, purpose leads on to actions, actions form habits, habits decide character and character fixes our destiny" Tryon Edwards info@vinchicapital.com EXECUTIVE SUMMARY (A) CONTENTS OF THIS PAPER How Perceptions change – The Then (2007) and the Now (2008) Analysis of various aspects of Economy - Fundamentals Remain Strong – Export, FDI, industrial production, agriculture production, consumer spending, remittance and tourism Analysis of various aspects of Economy - On currency scares and NDF and Government Response Analysis of Measures put in place so far to gain confidence Investor’s Perspective and Proposal - The Now and Possible Measure for regaining confidence – Equity Performance The time is NOW (B) SUMMARY OF PAPER AND RECOMMENDATIONS The crisis, if it is a crisis, is a crisis in confidence In other words, it is the perception of the market or consumers which is driving this crisis Vietnam’s fundamentals remain strong In order to restore confidence, several measures are proposed:(a) Establishing central buying agri-bodies and implement mechanisms for basic essential goods for Vietnam domestic subsidy (b) Use of administrative measures rather than monetary policies e.g to control inflation (c) Use of other measures to improve confidence and participation in capital markets to jump-start confidence in a crucial funding platform for Vietnam (C) CONCLUSION Vietnam’s fundamentals are strong It is just a perception issue which needs to be addressed Some proposals are contained in this paper, for consideration Chief among the proposals is the formation of a fund which due to it being a joint investment with others will cost less but will potentially reap significant rewards for the government, if the investment is timed properly If not now then When? Page info@vinchicapital.com I PERCEPTIONS – THE THEN AND THE NOW (HOW THINGS DON’T CHANGE BUT PERCEPTIONS DO) 1.1 THE THEN - Success story of Vietnam in 2003 - 2007, focusing on 2007: Vietnam is considered as the fastest growing economy of ASEAN GDP achieved growth at 8.48% in 2007, and considered to continue at least 8% for the next years 2008-2012 In 2007, export jumped 21% to US$48.4 bil with import growth 35% to US$57.8 bil This made Vietnam as one of most open trading countries in the world No of foreign tourists exceed 4.2 mil, up by 16% compared to 2006’s FDI continued to make a record with actual disbursed amount of US$6.5 bil in 2007, more than times higher than 2006’s US$1.8 bil, mostly for industrials and real estate FDI commitments also reach new height with US$20.3 bil at the end of 2007, compared to only US$12.0 bil of 2006 Real GDP growth (% change) 2003 2004 2005 Vietnam 2006 2007 Asia (excl Japan) 2008 2009 World Source: Economist Intelligence Unit All the analysis about perspectives of Vietnam economy, except for rising inflation of 12.63% in 2007, has made the world view Vietnam as the next Asian Tiger Vietnam became the dream destination for investments, tourism development, and all sources of capital inflow were trying to get a piece of the action Stock market continued to develop strongly with market cap about 44% of GDP at over US$30 bil Interest in Vietnam was so strong, asset managers’ assets under management increased multiple times! Even the pace of stock market development was unable to catch up with the asset managers Assets under Management (AUM) If not now then When? Page info@vinchicapital.com These asset managers, given the shortage of free float in the stock market, became the market Market Capitalization / Nominal GDP 400% Malaysia 350% Thailand Indonesia China Vietnam 300% 250% 200% 150% 100% 50% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Economist Intelligence Unit If not now then When? Page info@vinchicapital.com 1.2 THE NOW - Vietnam in controversy in 2008: GDP growth slowed down to 7.4% in Q.1 2008 Inflation jumped 25% in May 2008, caused primarily by food prices which increased over 42% Oil prices are now above US$130 per barrel, even when Vietnam is a net exporter of energy products Sharply tightening policies, focusing on monetary and later on public finance, has been implemented to curb inflation In Feb 08, interest rates rose above 40%! As a result, Vietnam stock market continued to fall sharply from Jan-08 at 924 to May-08 at 414 or loss 55%, the heaviest loss in Asia Vietnam’s first asset bubble has burst and now it is cascading to land and house prices, with high end real estate developments’ prices decreasing 50%-60% in many areas Trade deficit of US$14.4 bil (16% of GDP – up till May 2008) has caused serious concerns about a possible balanced of payments crisis These factors resulted in fluctuations of USD/VND forex rate, shortage of USD in commercial banks, high yield in bond market up to 24% in late May 2008 Anecdotal evidence is that the trading or purchases of gold and foreign currencies has reached alarming proportions Many foreign commentators draw parallels to the current Vietnam crisis of confidence with that of Thailand’s 97 crisis The Thailand crisis more than 10 years ago snow-balled into the Asian Financial Crisis, affecting many, many countries of Asia The questions have been raised about whether Vietnam has strong economic fundamentals to sustain its high rate of economic development or will fall into same crisis as Thailand did in 1997-98? If not now then When? Page info@vinchicapital.com The equity market stumbles 1200 1000 800 600 400 200 2004 2005 2006 2007 2008 HCMC Stock INDEX Source: CEIC, Merrill Lynch calculation II ANALYSIS OF VARIOUS ASPECTS OF ECONOMY – FUNDAMENTALS REMAIN STRONG But who is watching the positives? However, positive developments in last months are recorded as (i) export growth of 27.2% is amongst the best in Asia, (ii) industrial production expanded 16.7%, (ii) consumer spending reached growth at 29.7%, (iv) FDI approval of US$23 bil until now, more than the entire 2007’s, and (v) no of foreign tourists up by 16% If it is a crisis, it is a crisis in confidence, no more  Vietnam in 2008 is still the same Vietnam as the Vietnam in 2007  The fundamentals have not changed with further development of export, FDI, industrial production, agriculture production, consumer spending, remittance and tourism Stock Markets and signals about the economy Many retail observers around the world use the stock market indicators as a representation or proxy of economic growth Whilst that may be somewhat appropriate in the developed markets/economies context, this is inappropriate in an emerging market like Vietnam The relevance between GDP growth and stock market share index is one of little or low correlation Please see the charts and correlation figures on emerging markets in general and how they contrast with S&P, the stock indicator for the US in Appendix I In our view, the stock market is a sentiment indicator for Vietnam, nothing more If not now then When? Page info@vinchicapital.com Growth in GDP vs Equity Market Performance 20% 150% 15% 100% 10% 50% 5% 0% 0% 2001 2002 2003 2004 Nominal GDP Growth 2005 2006 Real GDP Growth -50% 2007 Q1 2008 Change in VNINDEX Sources: ADB, Bloomberg, GSO Data from the Vietnamese capital market’s short history also shows a weak relationship between share price volatility and real economic performance as stated in GDP growth and Industrial production growth Conflicting Advice from Reputed Economists Although many say that Vietnamese policy makers were instrumental in creating the current worrisome situation, our sympathies go out to them It is very difficult to identify the appropriate macro-economic policy responses when leading observers (such as global economists, global institutions and NGOs) continue to make (in our view) erroneous pronouncements on what should and should not be done This is because their analysis is often made in an environment of incomplete and/or inadequate analysis When reputed economists/analysts make comments and seemingly provide knowledgeable advice, has anyone closely analysed if those comments are well informed, relevant, or appropriate? Who should the government of Vietnam listen to? There is such a sea of noise! Policy Measures to manage inflation - Need for subsidy mechanisms Take for instance the policy measures to manage inflation So far, many people talk about using monetary policy In our view, the instruments of monetary policy not yet function well in Vietnam Thus, we are worrying that even if the interest rate rises to 50% pa that would not stop inflation from reaching 30% pa (especially when more than 60% of CPI is accounted for by food and energy prices’ sharp inflation) If not now then When? Page info@vinchicapital.com Indeed, if there is a 50% pa interest rate, there will probably be a run on the banks and all Vietnamese people will take money out and shift to hard assets, e.g rice, gold, petrol and cause an even more dangerous spiral in inflation in domestic Vietnam We thus highlight the urgent need to set up central buying agri-bodies, and implement domestic subsidy mechanisms for these basic essential goods for Vietnam We encourage all to review our Research Paper, “Recommendations from a Friend” CONFIDENCE MY FRIENDS, IS SO LACKING The only thing that differs from 2007 and 2008 is confidence, or to be precise, a lack of confidence No confidence that this time, Vietnam is not a Thailand, no confidence that the government can manage inflation, no confidence that Vietnam will not collapse as a result of inaction by its people Unfortunately, policies need time to be more effective, and inflation needs time to be curbed; that means, this crisis of confidence from both local and foreigners is not going away so soon Why Vietnam’s situation is different from Thailand – Please learn from history There is little evidence that Vietnam’s situation is bad like the Thailand of 1997, or in anyway similar Even whilst Vietnam’s state budget has remained in high deficit, foreign debts have decreased to the current 33% of GDP (as compared to Vietnam’s 40% in 2000 or 73% in Thailand in 1997) Most of Vietnam’s debts are from ODA which if need be can be rescheduled by long term decision makers For Thailand and the rest of Asia’s affected countries during the Asian financial crisis, the key issue was the dominance of short term capital flows to fund their current account deficits These significant current account deficits were in turn driven by a combination of high investment growth, and wasteful investments into speculative activity like real estate and large state backed projects E.g Thailand created a monster petrochemical and refinery complex which was meant to produce more than was required for domestic usage They wanted to be a petrochemical giant for Indochina and Asia When the providers of short term funding got nervous, the pulled out, and left a sea of destruction and anguish for Asian countries involved Here, these providers of short term capital were primarily behaving a little like “retail investors” As referred to in the paper “Vietnam and its Myths”, there is no balance of payment issues for Vietnam Indeed, Vietnam is in a very enviable position with much of its infrastructure projects supported by very long term funding flow, including significant FDIs This is very positive for Vietnam If not now then When? Page info@vinchicapital.com III ANALYSIS OF VARIOUS ASPECTS OF ECONOMY – ON CURRENCY SCARES 3.1 On Currency scares In addition, the VND is not a freely convertible currency However, everyone believes in market forces, and this obviously applies to exchange rates: From the non-deliverable forwards (NDF) market, where 12m contracts are at above 21,900VND/$ against an official rate of 16,200, recently adjusted to 16,459; people translate it into devaluation of nearly 30% in next 12 months But the NDF market is very illiquid and it does not reflect the true demand against supply in Vietnam So when observers review this attention grabbing figures of the extremely illiquid Non-Deliverable Forwards (NDFs) played by foreign speculators, they immediately draw the conclusion that VND is going through a nose dive “Vietnam is going to have a currency crisis!” goes the newspaper headlines! Nothing can be further from the truth! Why did the Malaysia move towards M$ currency capital controls during the 97-98 crisis? Vietnam is already there, whereas because M$ was under attack during the 97-98 crisis, Malaysia had to move to a model similar to Vietnam’s, and consequently, none of the speculators managed to speculate against Malaysia M$ 3.2 Recent government response After speaking publicly that there are no plans to devalue the currency, the Vietnam government/SBV days later adjusted the VND by a 2% devaluation and raised interest rates! This has seemingly stabilized the markets and received positive feedback in both Vietnam and overseas We however, feel that the flip-flop nature of official communication may damage the credibility of the anyone in its resolve to manage the current confidence crisis In other words, investors may lose confidence in the institution if they think that what the institution says may not be what it means Who will believe the announcements again? Explanations of actions are required and communication of not carrying out the same mis-management of expectations must be made to all, domestic and foreigners And in succumbing to the inappropriate pressures to raise interest rates further, and depreciating the currency, this may signal a lack of understanding of the key issues involved and that Vietnam does not have the appropriate solutions to handle this confidence crisis It is our view that Vietnam does not need high interest rates, it is high enough now Many businesses, even good, will fail and be in trouble in this high interest rates environment Furthermore, Vietnam needs an appreciating currency to manage imported inflation as well as control domestic liquidity growth IV ANALYSIS OF VARIOUS MEASURES PUT IN SO FAR Measures put in place so far to gain back confidence: - During the last months, the management of inflation has been implemented with monetary policies such as central bank rate increases, compulsory rate If not now then When? Page info@vinchicapital.com increase, strong control on credit growth at 30%, revitalising the basic central bank rate to monitor closely market moves; public finance policies as 10% decrease in government regular spending; and VND4 trillion has been cut from investment spending - V Fiscal administrative action has become one of the tools for the State to control inflation of certain key economic sectors such as fuel, cement, power and to delay price increases But are the market participants adhering to these price controls? We think not The issue is not so much strategy, but implementation, and adherence to the measures Just like managing the SOEs, the government needs to implement very, very stern measures INVESTORS PERSPECTIVE AND PROPOSAL – PROPOSALS FOR REGAINING CONFIDENCE 5.1 Summary 5.1.1 In this paper we have set out the background noting that the key issue is change in perception or market sentiment as the fundamentals for Vietnam’s economy in key sectors has not changed or in fact has even improved In this section we also include prognosis of how these sectors will perform and what may need to be done 5.1.2 Thus to address the issue of confidence or market perception, a very fast means could be to “jump-start” the capital markets In the nature of markets, we can encourage greed to replace fear as the driving force and participants will then again jump into the market and carry on the momentum The timing of this activity should be carefully timed and preferably take place soon 5.1.3 We produced papers titled “Actions required for Vietnam Capital Markets”, and “Q&A: Can Market Stabilisation Funds work? Yes, if there is total commitment” We highlighted a possible avenue to address the confidence issues in the capital markets may be done through a fund 5.1.4 The details of a plan which we consider workable is summarised below 5.2 Prognosis – “Focus and be steady” 5.2.1 With detailed analysis, we expect that the economy will improve and continue to perform well from Q.3, forecast of GDP at over 7.0%-7.5%, export over US$60 bil (up 25%), import over US$80 bil (up 40%), record FDI approval of aprox US$40 bil (up 100%) Balance of Payment at surplus in excess of US$1 bil 5.2.2 Strong FDI, remittance (expected over US$8 bil in 2008), and continued inflows of capital will be the key factors to support the economy to overcome current difficulties and make it stable from 2009 5.2.3 The government is slowly but surely coming round to see that they need to implement administrative measures to control inflation CPI will in the short term slow down to 22%-24% When the administrative central buying bodies If not now then When? Page 10 info@vinchicapital.com are put in place and functioning well, inflation figures will effectively be decided by the government, with reference to regional inflation figures to ensure that they are not too out of line Cannot stand out too much, and need to just be better than China, to generate confidence among investors Vietnam does not have food security issues, just lack of adequate price control! 5.3 Opportunity of a lifetime! – Our view of the Marketplace and Why we propose the “Jump Start” Solution focusing on Capital Markets 5.3.1 History has shown that whenever a market falls significantly as a result of the loss of confidence, it represents the best buying opportunity 5.3.2 Long term investors, who understand the key issues involved, use these opportunities to pick up attractive assets and sit pretty and wait for all the other followers to join 5.3.3 To elaborate on this point, there are different perspectives/ behaviours of major market participants which we set out below Because of this it is necessary for a substantial fund to make the first decisive move and then trigger the “herd mentality” of other market participants The following are different types of investors:- (a) Retail Investors They are generally clueless, they need to invest by watching momentum Retail investors invest based on their friends' recommendations and their friends are usually equally clueless (b) Institutional Investors Many institutional investors also behave like retail investors The decision makers usually have none of their own money on the table They are salary men, meaning, they cannot be expected to risky things They want to keep their jobs So, when their own national newspapers are saying Vietnam is going to have a financial crisis, and should they allocate funds to Vietnam, and if things not turn out well – then they will be accused …."it is already in the newspapers, did you not read the risks involved? You did something stupid, you will be sacked" The institutional investors thus tend to be very, very conservative although they carry out better due diligence than the retail investors (c) The really smart investors are the ones who can differentiate noise from facts Successful investors such as George Soros and Warren Buffet are credited with being smart investors For instance, Warren Buffet did not invest during the internet mania when everyone did, and when he started buying companies, other retail investors thought that it was contrarian (against the market sentiment) (d) We at Vinchi try to be the really smart investor and to guide the really smart, sophisticated, and dedicated investors to understand the things which VinChi herself draws comfort from, in an independent, unbiased fashion and to focus on the key issues 5.3.4 Our philosophy and confidence draws from our study of history History shows us that investors make a lot of money, in times of crisis, and especially when there is a loss of confidence In those times, long term investors who have a If not now then When? Page 11 info@vinchicapital.com steady hand and have vision and courage to act when no one else does, usually emerge as the overall winner 5.3.5 Here are examples of how those with a steady hand emerged during the following crises:- (a) Winners of the Asian financial crisis The 1997 Asian financial crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven The crisis had significant macro-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 1997-1998 Indonesia, South Korea and Thailand were the countries most affected by the crisis HANG SENG INDEX 18000 16000 14000 12000 10000 8000 Dec-99 Oct-99 Nov-99 Sep-99 Jul-99 Aug-99 Jun-99 Apr-99 May-99 Mar-99 Jan-99 Feb-99 Dec-98 Oct-98 Nov-98 Sep-98 Jul-98 Aug-98 Jun-98 Apr-98 May-98 Mar-98 Jan-98 Feb-98 Dec-97 Oct-97 Nov-97 Sep-97 Jul-97 Aug-97 Jun-97 Apr-97 May-97 Mar-97 Jan-97 Feb-97 6000 Source: Bloomberg (b) Winners of the Long term capital management crisis The Long-Term Capital Management (LTCM) crisis in late 1998 caused the U.S stock market drop of 20% and the European markets to drop 35% Since many banks and pension funds were investors of LTCM To save the U.S banking system, then-Federal Reserve Chairman Alan Greenspan personally convinced 14 banks to remain invested in the hedge fund, averting disaster In addition, the Fed started lowering the Fed Funds rate as a reassurance to investors that the Fed would whatever it took to support the U.S economy Without such direct intervention, the entire financial system was threatened with a collapse If not now then When? Page 12 info@vinchicapital.com “What is an investor to in these circumstances?” A research paper by Brian Gendreau, Ph.D., Investment Strategist, provided us a look at how stock markets in the United States and abroad fared before and after such a financial crisis The three episodes in which the Fed has provided liquidity to stem a financial crisis included: The 1987 crash, the 1998 Russia/LTCM crisis and September 11, 2001 In all three episodes the Fed flooded the markets with liquidity and cut the Federal funds rate The table below shows the Average Returns Before and After the 1987 crash, 1998 Russia/LTCM crisis, and September 11, 2001 12 months months before months after 12 months after before crisis crisis crisis crisis 1987 18.4% 11.7% 10.9% 23.2% 1998 12.9% -5.9% 17.4% 25.4% 2001 -26.6% -12.9% 9.4% -12.4% 1987 49.2% 8.5% -9.9% 6.1% 1998 -7.1% -10.2% 15.0% 20.8% 2001 -28.5% -33.4% 5.0% -8.8% S&P 500 EAFE Emerging Market 1998 -47.3% -22.8% 12.9% 50.3% 2001 -30.6% -13.5% 12.2% 7.0% Source: Standard & Poor’s, Morgan Stanley Capital International and ING IM estimates EAFE is MSCI’s index of stock returns in Europe, Australasia, and the Far East NASDAG 100 INDEX 18000 16000 14000 12000 10000 8000 6000 4000 2000 Oct-99 Source: Bloomberg If not now then When? Page 13 Nov-99 Sep-99 Jul-99 Aug-99 Jun-99 Apr-99 May-99 Mar-99 Jan-99 Feb-99 Dec-98 Oct-98 Nov-98 Sep-98 Jul-98 Aug-98 Jun-98 Apr-98 May-98 Mar-98 Jan-98 Feb-98 Dec-97 Oct-97 Nov-97 Sep-97 Jul-97 Aug-97 Jun-97 Apr-97 May-97 Mar-97 Jan-97 Feb-97 info@vinchicapital.com The above chart and table could apparently shows the answer to our mentioned question (c) Winners of the SARS debacle Severe acute respiratory syndrome (SARS) is a respiratory disease in humans which is caused by the SARS coronavirus (SARS-CoV).[1] There has been one near pandemic to date, between November 2002 and July 2003, with 8,096 known infected cases and 774 deaths The Hang Seng Index dropped from 10.2227 at the outbreak of SARS in Dec02 to 8.435 in late Apr-03, then bounced back to 12.575 as at Dec-03 A Profit margin of nearly 50% was recorded for investors who dared to invest in April and May 2003 when SARS was nearly controlled HANG SENG INDEX 13000 12500 12000 11500 11000 10500 10000 9500 9000 8500 Dec-03 Nov-03 Oct-03 Sep-03 Aug-03 Jul-03 Jun-03 May-03 Apr-03 Mar-03 Feb-03 Jan-03 Dec-02 Nov-02 Oct-02 Sep-02 Aug-02 Jul-02 Jun-02 May-02 Apr-02 Mar-02 Feb-02 Jan-02 8000 Source: Bloomberg 5.3.6 The time is now! Be confident in Investing in Vietnam Market (a) Based on the above philosophy and our view of the market, Vinchi feels very confident now to prepare for investing into the Vietnam market when the indicators showing that the current situation will improve soon (b) This opportunity represents the second chance of the decade in Vietnam The first chance happened in early 2006 when the shares are understated with the companies’ assets not properly pricing in fair valuations (c) In our view, the current state of the capital markets represents a very attractive opportunity for every investor to buy up inexpensively priced assets (e.g the Vietnamese equity market is trading at PE11x) and short term bonds are trading above 20% pa In buying the market, investors can also take pride in promoting the efficient functioning of its capital markets If not now then When? Page 14 info@vinchicapital.com (d) When the capital markets improve, other currently sceptical retail and institutional participants who are all sitting on the sidelines now, will then jump in with “greed” as the driving force again Given how illiquid the markets are, it doesn’t take very large funds to move the prices and thus improve sentiment The other private participants will then carry on the momentum after the early investors have invested But someone needs to start the process decisively If not now, then when? VinChi Capital will be investing into the markets in the very near future If not now then When? Page 15 info@vinchicapital.com APPENDIX RUSSIA - MXRU INDEX MXRU INDEX Source: Bloomberg 1800 1600 1400 1164.52 1200 1000 169% 800 600 400 274.05 200 Jan-95 432.07 616% 38.25 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 CHINA - MGUACF INDEX MGUACF INDEX Jan-07 Source: Bloomberg 120 100 80 60 50.031 39.563 40 109% 20 Dec-96 23.944 20.282 Dec-98 Dec-00 Dec-02 Dec-04 BRAZIL - MGUEBZ INDEX MGUEBZ INDEX Dec-06 Source: Bloomberg 600 530.06 500 400 152% 300 200 210.22 113.507 154% 100 Dec-96 44.63 Dec-98 If not now then When? Dec-00 Dec-02 Dec-04 Dec-06 Page 16 info@vinchicapital.com INDIA - MSEUSIA INDEX MSEUSIA INDEX Source: Bloomberg 668.88 700 600 137% 500 400 300 281.47 194.48 200 162% 100 74.20 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 ARGENTINA - MSAR INDEX MSAR INDEX Source: Bloomberg 180 160 150.83 140 45% 120 100 103.87 80 60 46.59 40 227% 20 14.257 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 ASIA EMERGING MARKET - MXMS INDEX Source: Bloomberg MXMS Index 600 500 400 300 224.13 200 119% 76% 100 127.34 106.65 Dec-87 Jan-90 If not now then When? Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Page 17 info@vinchicapital.com APPENDIX – THE CORRELATION BETWEEN GDP GROWTH AND STOCK MARKET INDEX: KOREA, CHINA, PHILIPPINES, MALAYSIA AND INDONESIA KOREA KOREA - The correlation between GDP Growth and Stock Market Index Correlation: 0.186 12% 140% 8% 90% 4% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 40% -4% -10% -8% -12% -60% Nominal GDP Growth Real GDP Growth KOREACTU INDEX Source: Bloomberg CHINA - The correlation between GDP Growth and Stock Market Index CHINA Correlation: 0.477 40 100 35 80 30 60 25 40 20 20 15 10 -20 -40 1997 1998 1999 Nominal GDP Growth 2000 2001 2002 2003 Real GDP Growth 2004 2005 2006 2007 Change in Shenshen Index Source: Bloomberg If not now then When? Page 18 info@vinchicapital.com PHILIPPINES - The correlation between GDP Growth and Stock Market Index PHILIPPINES 20 80 Correlation: 0.222 60 15 40 10 20 -20 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -40 -5 -60 Nominal GDP Growth Real GDP Growth MSEUSPHF INDEX Source: Bloomberg MALAYSIA MALAYSIA - The correlation between GDP Growth and Stock Market Index Correlation: 0.426 25 120 100 20 80 15 60 10 40 20 0 -5 -20 -10 -40 1997 1998 1999 2000 Nominal GDP Growth 2001 2002 2003 Real GDP Growth 2004 2005 2006 2007 MSDUMAP INDEX Source: Bloomberg If not now then When? Page 19 info@vinchicapital.com INDONESIA INDONESIA - The correlation between GDP Growth and Stock Market Index 30 80 Correlation: 0.831 25 60 20 40 15 20 10 -20 -40 2001 2002 Nominal GDP Growth If not now then When? 2003 2004 2005 Real GDP Growth 2006 2007 MSDUMAP INDEX Page 20 ... potentially reap significant rewards for the government, if the investment is timed properly If not now then When? Page info@vinchicapital.com I PERCEPTIONS – THE THEN AND THE NOW (HOW THINGS DON’T... inflation) If not now then When? Page info@vinchicapital.com Indeed, if there is a 50% pa interest rate, there will probably be a run on the banks and all Vietnamese people will take money out and shift... especially when there is a loss of confidence In those times, long term investors who have a If not now then When? Page 11 info@vinchicapital.com steady hand and have vision and courage to act when