Vietnam ETF Tries to Breakout of Another Slump

The Market Vectors Vietnam ETF (NYSEArca: VNM) is down 7.7% this year, a decline that is more than 500 basis points worse than the iShares MSCI Frontier 100 ETF (NYSEArca: FM), a fund in which Vietnam is the ninth-largest country weight.

To its credit, VNM has recently perked up. Even with Tuesday’s small loss, the lone Vietnam ETF is up 4.4% since May 18, a rally owed in large part to resurgent Vietnamese oil stocks.

VNM “has been performing better than it previously was due to good news out of two of its oil-related holdings: Premier Oil and Soco International. Since these companies’ fortunes are tied to the price of oil, I can only guess that their positive performance has been driven by oil’s price improvement over the past three weeks, due to the weakening in the dollar,” according to Market Vectors.

Premier Oil and Soco International had weights of in VNM of 5.86% and 3.84%, respectively, as of May 22, according to Market Vectors data.

Although Vietnam is not an OPEC member like several other countries with the frontier markets designation, oil has factored prominently in the ETF’s performance. For example, VNM was unable to escape 2014’s oil-induced slide for frontier markets. Although both ETFs managed 2014 gains, those gains were accrued in the early part of the year, but over the past 12 months VNM and FM are each down nearly 9%. [Oil Drains Frontier ETFs]

Only recently did VNM close above its 50-day moving average and the ETF has 10.3% to run to get back to its 200-day line, a level the fund has not closed above since November. Global investors are waiting on Hanoi to further increase foreign ownership limits, which could be another catalyst for VNM.