The VanEck Vectors Vietnam ETF (NYSEArca: VNM), the lone US-listed exchange traded fund dedicated to Vietnamese stocks, has recently been ensnared in international headline risk, but some analysts see reasons to be excited about the fast-growing Southeast Asian economy.
VNM, which debuted in August 2009, follows the MVIS Vietnam Index. That index “is comprised of securities of publicly traded companies that are incorporated in Vietnam or that are incorporated outside of Vietnam but have at least 50% of their revenues/related assets in Vietnam,” according to VanEck.
Fitch Ratings recently boosted its outlook on Vietnam’s credit rating to Positive from Stable while reiterating a BB rating.
“The revision of Vietnam’s Outlook to Positive from Stable reflects an improving track record of economic management, which is evident in strengthening external buffers from persistent current account surpluses, falling government debt levels, high economic growth rates and stable inflation,” said the ratings agency in a note.
What’s Next for Vietnam Investing
Vietnam is angling for a promotion to emerging markets status. The country is currently classified as a frontier market by the major index providers. Vietnam has some issues to address before gaining that coveted promotion, including low per capita income and the need to recapitalize some banks.
“The authorities are maintaining their policy focus on macroeconomic stability. GDP growth improved to 7.1% in 2018 from 6.8% in 2017 while inflation remained stable at 3.5%, within the National Assembly’s target of below 4%,” according to Fitch. “Growth remained supported by strong foreign direct investment (FDI) into the manufacturing sector as well as expansion in the services and agriculture sectors.”
VNM allocates a combined 42.50% of its weight to real estate and financial services stocks. The ETF also features robust exposure to the Vietnamese consumer as the consumer staples and discretionary sectors combine for 26.60% of the fund’s weight.
“We expect growth to slow in 2019 to around 6.7%, still within the National Assembly’s target of between 6.6% and 6.8%,” said Fitch. “Growth in Vietnam, which has a high degree of trade openness, is likely to be affected by slowing global growth and US-China trade tensions, which will weigh on regional trade flows and sentiment. Vietnam would nevertheless remain among the fastest-growing economies in the Asia-Pacific and in the ‘BB’ rating category globally.”
For more information on Vietnam ETFs, visit our Vietnam category.
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.