Among emerging markets stocks and exchange traded funds, Mexico and the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) got plenty of pre-election attention as being vulnerable to the notion of Republican Donald Trump winning.
Obviously, that scenario came to pass and some market participants are now assessing how Trump’s presidency could affect other emerging and frontier markets.
Given Trump’s harsh campaign rhetoric aimed at various free trade agreements he believes have cost Americans jobs, there is some concern countries in Emerging Asia could feel Trump’s free trade wrath.
SEE MORE: ETF Picks for a Clinton or Trump Presidency
Vietnam, accessible via the VanEck Vectors Vietnam ETF (NYSEArca: VNM), is one frontier market that will be closely watching the early stages of Trump’s presidency. While Vietnam is a communist country, the government has steered toward a quasi-free market economy that is strictly controlled by the state.
“The most worrying to the Vietnamese people will be Trump’s hard line stance with where America allocates military resources. He is very protectionist. The U.S. military have had a presence in the South China Sea, and if that is reduced, that could allow China to build up its military presence. China has been exerting muscle for awhile in the South China Sea. That could cause political unrest,” said Steve Mantle of VietFund Management in an interview with Dimitra DeFotis of Barron’s.
[related_stories]Vietnam is trying to juice its domestic economy with a Trump-esque idea: Increased 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%.
SEE MORE: Frontier Market ETFs Diverge from the Pack
In 2014, Vietnam formed a commission to explore taking the necessary steps for the country to shed its frontier status and gain entry into the widely followed MSCI Emerging Markets Index.MSCI does not have Vietnam on its list of markets that could potentially be upgraded to emerging markets status. When the index provider recently revealed its annual market classification, Pakistan was the only frontier market highlighted as being a potential candidate for promotion to the MSCI Emerging Markets Index.
The Trans Pacific Partnership (TPP) is another issue VNM investors should be mindful of.
“Delay or cancellation will affect Vietnam’s export market. I’m sure exports will still grow, but not at the accelerated rate we had hoped for, without TPP. Free trade agreements take a decade to get negotiated, and it could happen under Trump, watered down. But more likely it will get picked up after Trump,” Mantle told Barron’s.
VanEck Vectors Vietnam ETF
