US Edition VinaCapital Vietnam Opportunities IT
1.425p +0.075
Questor says BUY
Growth in the UK over the next few years will be sluggish at best – that's why you need to look abroad for better opportunities.
However, many of these high-growth foreign markets are in fledgling economies, so the rise is likely to be bumpy.
Questor is a fan of Vietnam as one of these opportunities, but its market has fallen sharply over the course of the last month.
Shares in VinaCapital Vietnam Investment trust have fallen 17pc since their recommendation on September 13, as the country was forced to devalue its currency. However, the long-term investment case still stands.
Last week, Vietnamese shares fell to a three-month low after the government moved to devalue the dong against the dollar by 5.4pc.
The central bank also upped its benchmark interest rate to 8pc from 7pc as it moved to curb inflation and help cut its rising deficit. The country's trade deficit widened to $1.75bn (£1.05bn) in November, compared with a revised $1.6bn in October.
Worries about Dubai over the past week have also hit most emerging markets as investor concern about risky assets grew.
While these moves by Vietnamese authorities have had a negative effect on valuations, particularly for foreign investors, ultimately it is a good long-term move. The currency valuation means that the country's exports are cheaper and this should help with the balance of trade.
The currencies of many of its Asian neighbours have been strengthening against the dollar recently. China has – to much criticism – implemented a policy of keeping its currency low to boost its export sector. This is the route that Vietnam has now taken in an attempt give it an edge over its Asian neighbours when it comes to export business.
Vietnam's export turnover reached $4.8bn in October, up 4.5pc from September, bringing the year-to-date total to $46bn. This is down 13.8pc compared with last year.
There has been a very sharp fall-off in foreign direct investment (FDI) in the country this year. Between January and November FDI was about $19.7bn, about a quarter of the level seen in 2008. But FDI is increasing. In November foreign investors were net buyers of 990.4bn dong (£32.6m) of Vietnamese shares, compared with a net buy of 342.4bn dong in October.
The long-term fundamentals of an investment in Vietnam are compelling, although the kind of fluctuations we have seen over the past month are par for the course with frontier markets. However, the arguments for a strategic investment in Vietnam are strong. The country has one of the highest literacy rates in Asia, at 90pc, and the workforce is young.
Almost two thirds of Vietnam's 85m people are under the age of 35 – and this should support economic growth over the medium term. A young population implies significant population growth and growing demand for goods and services over the medium term. Significantly, labour in the country is even cheaper than in China.
For the 10 years before the credit crunch hit, Vietnam was Asia's second-fastest growing economy after China. The country tabled an average growth in GDP of 7.5pc a year. The World Bank expects Vietnam's GDP to climb 5.5pc this year, compared with 6.2pc in 2008 and its government is targeting GDP growth of 6.5pc to 7pc in 2010.
As the global economy rises and exports increase, the Vietnamese economy should bounce back. Although pressures on the dong remain, the long-term Vietnam story is intact. Shares in VinaCapital Vietnam Opportunities Investment Trust remain a strategic buy.
May Gurney
259p +19p
Questor says BUY
Ooutsourcing contractor May Gurney offers many essential services such as waste collection and recycling, sewage and water treatment services and flood-prevention measures.
If you are a commuter in London you will see its staff currently repairing the leaky roof in Victoria Station.
The group's interim numbers, released yesterday, were reassuring. In the six months to September 30, pre-tax profits rose 21pc to £8.5m on revenues that were 3pc ahead at £239.1m. The dividend was hiked by 4pc to 1.8p a share, although this is lower than some analysts had hoped. However, there is still room for improvement in the pay-out in the future. The yield is now 2.2pc and the interim payment will be made on January 8. The shares go ex-dividend on December 9.
The group's balance sheet remains strong with no long-term debt and £24.8m in cash. The order book has risen to £1.4bn from £1.25bn, with a potential to add £900m of new revenue from contract extensions.
The group secured a number of substantial contracts in the first half of the year including a five-year highways maintenance contract for Lincolnshire County Council worth up to £350m. It also won a new environmental services contract for North Somerset Council, worth up to £85m over seven years. The group is likely to use its cash balance to make bolt-on acquisitions, providing it can find suitable businesses.
The shares are trading on a March 2010 earnings multiple of 11.2, falling to 10.5 next year. The company is confident on the UK market for outsourcing of essential services and the stance remains buy. The shares were recommended at 218p on October 4 and they are now up 18pc.