Favorable Fundamentals For The Vietnam ETF | ETF Trends

The VanEck Vectors Vietnam ETF (NYSEArca: VNM), the lone US-listed exchange traded fund dedicated to Vietnamese stocks, is the prime avenue for accessing one of Southeast Asia’s fastest growing economies and data indicate the Vietnamese economy is indeed growing.

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.

“Vietnam’s economy could be bigger than Singapore’s by 2029, says DBS Bank Ltd.,” reports Bloomberg. “The Southeast Asian nation has the potential to grow at a pace of about 6%-6.5% over the next decade, DBS forecasts, citing strong foreign investment inflow and productivity growth in the coming years.”

Lofty Comparison for Vietnam

Currently, Vietnam is classified as a frontier market by index providers while Singapore is a developed economy.

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.

“Vietnam’s government expects gross domestic product to expand at least 6.8% this year. Future growth will be boosted as the nation’s favorable demographic dynamic, productive labor force, much-improved infrastructure and stable politics encourage international inflows,” according to Bloomberg.

VNM could be one of the more interesting stories among single-country ETFs, particularly as Vietnam extends its push to shed its frontier market status to become an emerging market in the eyes of index providers, such as MSCI.

Fitch Ratings recently boosted its outlook on Vietnam’s credit rating to Positive from Stable while reiterating a BB rating.

The Vietnamese government has also implemented reforms to attract investments. For instance, the country has cut corporate tax rate to 22% from 25%.

“Global investors have been lining up to be a part of the Vietnam narrative,” economist Irvin Seah said in a research note Tuesday, according to Bloomberg. “Strong FDI from China and Hong Kong in the first four months of this year may well mark the beginning of a new trend.”

For more information on Vietnam ETFs, visit our Vietnam category.