In what has been a mostly solid year for emerging markets equities, the VanEck Vectors Vietnam ETF (NYSEArca: VNM) is up just half a percent, but this year’s lethargy could belie long-term opportunity with the lone exchange traded fund dedicated to Vietnamese stocks.
There is at least one potential catalyst that could help VNM reverse course for the better: Infrastructure spending. 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%.
VNM “is trading at 12 times forward earnings, with close to a 4% dividend yield in a zero-rate world. The ETF reached a five-year low in January, and is up less than 1% this year. It looks pretty attractive, with a valuation that is low for a frontier market, and on a technical basis you could see upward appreciation,” said Louie Nguyen, chief investment officer of Soledad Investment Management, in an interview with Dimitra DeFotis of Barron’s.