Foreign investors have been piling into the quickly growing Vietnamese economy. Retail investors can also track the southeast Asian market through an exchange traded fund.
The Market Vectors Vietnam ETF (NYSEArca: VNM) has increased 10.0% over the past three months. The ETF tracks a large group of locally listed Vietnamese companies, with a heavy emphasis on financial firms at 43.1% of the fund’s portfolio, followed by energy 17.5%, consumer staples 14.5% and consumer discretionary 9.6%.
Many foreign investors are targeting this frontier market to capture the country’s growth potential. The southeast Asian country is the place for greenfield foreign direct investments, leading other emerging markets by a wide margin, reports Glenn Barklie for the Financial Times. Greenfield investments refer to a form of foreign direct investment where a parent company starts a new business in a foreign country from the ground up.
According to FT analysts, Vietnam is currently attracting over eight times the amount of greenfield FDI than might be expected given GDP.
Vietnam has enjoyed robust growth as investments and exports help support the economy. The country has brought in over 2,000 greenfield FDI projects between 2003 and 2014 as companies capitalized on the abundant and relatively cheap labor.
The Vietnamese government has also implemented reforms to attract investments. For instance, the country has cut corporate tax rate to 22% from 25%.
Additionally, changes Vietnam’s foreign ownership regulations have also helped bolster the Vietnamese equities market over the past month as local investors jump in ahead of rising foreign buying, according to the Wall Street Journal.
The State Securities Commission said it would remove limits on foreign ownership of Vietnamese companies. The changes to foreign ownership limits are expected to take effect in September. Consequently, many expect overseas investors to jump into local markets. [ETF Stands Tall as Vietnam Eyes EM Promotion]
The reforms could “potentially unlock billions of dollars of room for overseas investors and start to open the floodgates for those looking for exposure to Vietnam,” Louis Nguyen, chief executive and chairman of Cayman Islands-domiciled Saigon Asset Management, said in the WSJ article.
Market Vectors Vietnam ETF
For more information Vietnam, visit our Vietnam category.
Max Chen 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.