If the focus is on markets such as Indonesia and Thailand, it is accurate to say Southeast Asian equities disappointed last year.
Vietnamese shares were not part of that disappointment. The benchmark VN Index posted a second straight annual gain, rising almost 22%. The Market Vectors Vietnam ETF (NYSEArca: VNM) finished 2013 slightly lower, but its modest loss (less than 1%) meant the fund outperformed its Indonesia and Thailand counterparts. Bigger things could be awaiting VNM, the lone Vietnam ETF, in 2014.
Vietnam has reigned in inflation and observers of the market believe bankers and policymakers there have successfully installed stable fiscal and monetary policies. “Stable law and order, a high savings rate and other cultural factors make Vietnam a good place for companies to do business. With approximately 75% of the population still working in agriculture, there is plenty of room for further growth,” reports Jon Springer for Forbes.
Additionally, policymakers have been working on initiatives to encourage foreign investment by raising the cap on foreign ownership in local companies to more than 49%. If not for restrictive, government-imposed limits on foreign ownership of Vietnamese stocks, there is a chance 2013 could have been even better for VNM. [Vietnam ETF Restrained by Foreign Ownership Limits]
Vietnam is a frontier market, but as is the case with several marquee emerging markets, stocks in the Southeast Asian nation are inexpensive. Stocks there trade at less than 13 times profits with a third trading below book value.
The promise of increased foreign ownership limits and compelling valuations have already prompted increased foreign direct investment and Forbes reports that the Vietnamese government could lift the foreign ownership limits this month or by February with the new laws taking effect in the second quarter.