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Post-bubble Vietnam faces a maturity test

The liquidation of a prominent equity fund capped a tough year as the country’s stock index slid from one of the decade’s top performers in Asia to one of its worst. Lawrence White examines the market’s lack of depth and breadth, and how to fix it.

BEAT SCHURCH OFFERS a wry explanation about why he is running Indochina Capital Advisers’ equities division despite a background as a chief financial officer. "I’m the only one left," he says. The office seems busy enough but Schurch is referring to the fact that the firm’s two senior equities investment officers departed after shareholders voted in September to liquidate Indochina’s equities fund.

The decision followed a 12-month battle among shareholders of the London-listed fund over whether it should be saved – possibly in partnership with rival Dragon Capital – or liquidated, having suffered heavily as the country’s Ho Chi Minh stock index continued a plunge from its peak of 1,106 in October 2007 to as low as 242 in February this year.

The bubble bursts

Performance of Ho Chi Minh stock index vs MSCI Asia (ex-Japan), ‘04-’09

Source: Bloomberg/VinaSecurities

At the time of the interview in early October the index had recovered to about 580 and Schurch was quick to stress that Indochina’s real estate funds are still very much in business and performing well.

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