11 trusts saw their share prices trade at year-high discounts last week, but which one may well not feature in the next Discount Watch after a strong share price bounce? More importantly, what seems to have triggered the share price recovery?

By Frank Buhagiar•23 Sep, 2024

We estimate 11 investment companies saw their share prices trade at 52-week high discounts over the course of the week ended Friday 20 September 2024 – one less than the previous week’s 12.

No less than eight of the eleven 52-week high discounters featured in the previous week’s list. Among the eight is Vietnam Enterprise (VEIL). Chances are though the £1billion market cap won’t be in next week’s Discount Watch. That’s because the share price has since bounced strongly off the year-high discount that had been set on 18 September. The next day, the shares added 10p to close at 578p and, by the end of the week, had tacked on a further 6p to close at 584p. That was enough to narrow the discount to -20.93% from 22.93% two days prior.

The reason behind the share price bounce, well the 50-basis point cut in US interest rates, is the obvious choice – lower US rates reduce the cost of borrowing in US dollars, thereby easing liquidity conditions, while lower yields on US assets make those of other assets more attractive. The US interest rate cut may be the obvious choice but, in this case, it might not be the correct one. For the Federal Reserve cut rates on 18 September, but that was the day VEIL’s share price discount to net assets hit its 52-week high. Compare that to peer VinaCapital Vietnam Opportunity’s (VOF) share price – the discount narrowed on the day of the cut to -22.62% compared to -23.79% the day before. So, VOF saw a bounce on the day of the US cut, whereas VEIL’s discount actually widened, and that was despite the trust buying back its own shares that very day.

Another explanation is required. And there is one easy to hand. 19 September, the day the shares started their bounce, VEIL published its Half-year Report. The numbers make decent reading: +6% NAV per share return for the first half of 2024 bang in line with the Vietnam Index’s (VNI) +6.0% (both in US$ terms). In GBP terms, VEIL’s NAV per share was up +6.9%. Good old-fashioned news flows in the form of positive NAV performance, the difference it seems. As VEIL’s Chair Sarah Arkle wrote in her half-year statement “We believe that the key to narrowing the discount will be stronger NAV performance and an improvement in investor sentiment towards Vietnam.” Based on the share price reaction, looks like the Chair is spot on – in the end, it all boils down to performance.

Fund Discount Sector

Ceiba Investments CBA

-69.64%

Property

HydrogenOne Capital Growth HGEN

-64.09%

Renewables

Life Science REIT LABS

-61.37%

Property

Schroders Capital Global Innovation INOV

-55.07%

Growth Capital

JPEL Private Equity JPEL

-50.34%

Private Equity

The full list

Fund Discount Sector

JPMorgan Asian Growth & Income JAGI

-11.07%

Asia

Riverstone Credit Opportunities RCOI

-26.56%

Debt

Schroders Capital Global Innovation INOV

-55.07%

Growth Capital

JPEL Private Equity JPEL

-50.34%

Private Equity

Life Science REIT LABS

-61.37%

Property

Ceiba Investments CBA

-69.64%

Property

Atrato Onsite Energy ROOF

-30.60%

Renewables

Ecofin US Renewables RNEW

-49.64%

Renewables

HydrogenOne Capital Growth HGEN

-64.09%

Renewables

BlackRock Throgmorton THRG

-11.74%

UK Smallers

Vietnam Enterprise VEIL

-22.93%

Vietnam