Vietnam’s economy shows a lot of the promise that has become a hallmark of any self-respecting emerging market. In the last month, however, its exchange traded fund (ETF) has dipped sharply as the country’s debt gets socked with a downgrade.
Market Vectors Vietnam ETF (NYSEArca: VNM) is up for the year, but over the last several weeks it has taken some big hits. High inflation, a fast-falling currency, a debt crisis at a state-owned company and a ratings downgrade by Moody’s have taken their toll, according to ABC Radio Australia. [Vietnam ETF: An Alternative to China.]
James Hookway for The Wall Street Journal reports that Moody’s downgrade came as a result of the fact that the dong is facing huge downward pressure. Since 2008, the dong has lost roughly one-fifth of its value against the U.S. dollar [Vietnam ETF: Growth With Caution.]
The issues facing Vietnam underscore the point that not all emerging markets are created equal. Many of these countries lie along different points in the growth spectrum. When you’re on the market to own one of these funds, consider this when assessing your risk tolerance and proceed accordingly.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.