Market Vectors Vietnam (NYSEArca: VNM) was one of the market’s top-performing exchange traded funds (ETFs) last week. But will government reshuffling derail it?
Vietnam’s 11th National Party Congress met starting last week, and its age is starting to show as it becomes apparent that communism may not jibe so well with its younger, more upwardly mobile population, says Time magazine.
At the annual meeting this year, already some reshuffling has taken place, but some wonder if it’s enough to jump-start the struggling economy.
One huge issue is that of inflation – it rose by another set of double digits just before the Lunar New Year. That puts more pressure on the government to raise interest rates in order to slow growth, says The Wall Street Journal.
If the government doesn’t keep its inflation around 7%, its target, the costs could be great: banks won’t be able to lower lending rates, which would in turn curtail corporate growth and production.
Despite the country’s struggles, VNM has largely ignored it of late and it’s now 11.8% above its long-term trend line. If Vietnam’s fiscal and government struggles continue, it could ultimately mean pain for this ETF, so don’t get caught without an exit strategy.
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.