Whether it is prosaic wisdom such as “sell in May and go away” or more tactical advice such as buying consumer discretionary stocks early in the first quarter or energy names in February, there are a plenty of seasonal trends investors can study.
One that does not get much attention is the tendency of the Market Vectors Vietnam ETF (NYSEArca: VNM) to slide in the second quarter. After falling almost 3% on heavy volume Monday, the lone Vietnam ETF is lower by nearly 6% this month. That could prove to be an ominous sign for an ETF that has never posted a second-quarter gain.
VNM debuted in August 2009 and its best second-quarter performance was a 3.1% loss in 2010. The ETF’s average second-quarter loss over the past four years is 7.6%, according to ETF Replay data.
Different factors have afflicted in VNM in various second quarters. In years past, the ETF has been hit by Vietnam’s inability to contain inflation, dong devaluations and banking scandals involving the country’s equivalent of Russian oligarchs. [Vietnam ETF Rallies on Impressive Data]
To be fair, those issues appear to be in the past and that explains why even with Monday’s loss, VNM is still up 8.6%. That is well ahead of the returns offered by broader emerging markets ETFs, but Vietnam is classified as a frontier market, making the more relevant barometer the iShares MSCI Frontier 100 ETF (NYSEArca: FM), an ETF that VNM is trailing this year. [Other Frontier ETFs Gain Supporters]
This year, Vietnamese equities are dealing with a new set of second-quarter blues, namely tepid appetite by foreign investors for initial public offerings of state-run companies. Vietnam’s plans to loosen foreign ownership limits on state-controlled companies were seen as a major catalyst in VNM’s stellar performances late last year and early this year. [Bad Debt Effort Good for Vietnam ETF]
However, slack demand for the first batch of government IPOs is raising concerns about the appetite for hundreds of other offerings still to come, the Wall Street Journal reports. “Only a quarter of the 304.5 million shares offered by 13 companies in the first quarter of this year were sold. Foreign funds participated in just one listing,” according to the Journal.
The benchmark Ho Chi Minh VN Index is Asia’s best performer this year, but currently resides at 10-week lows. Worsening the situation are increased margin calls by local Vietnamese brokerages.
Market Vectors Vietnam ETF
