As Vietnam's Economy Strengthens, Check Out 'VNM'

Vietnam’s economy is skewing back toward the upside, which should put assets like the VanEck Vectors Vietnam ETF (VNM) in focus.

“A surging U.S. economy on the back of massive stimulus and pent-up demand will benefit exporters in Asia, with Vietnam receiving the biggest windfall,” a Bloomberg article said.

“If the U.S. growth rate accelerates to 7.7% in 2021 as forecast by Bloomberg Economics, up from the 3.5% seen late last year, that would add more than 1 percentage point to Vietnam’s expansion, research by Chief Asia Economist Chang Shu showed Tuesday,” the article added. “China will also see a significant gain of around 0.6 percentage points.”

As for the fund, VNM seeks to replicate as closely as possible the price and yield performance of the MVIS® Vietnam Index.

VNM offers investors:

  1. The Nation’s First ETF Focused Exclusively on Vietnam: The country is one of the world’s most populous nations; roughly 40% of the population is under the age of 25.
  2. One-Trade Access to Local Markets: Approximately 70% of Index market cap currently represents locally-listed Vietnamese companies.
  3. A Convenient Way to Customize International Exposure: A company is generally considered to be a Vietnamese company if it is incorporated in Vietnam or is incorporated outside of Vietnam but has at least 50% of its revenues/related assets in Vietnam.

VNM Chart

U.S. Strength Translates to Strong Asian Exporters

The Bloomberg article noted a strengthening U.S. economy will in turn buoy Asian exporters.

“U.S. growth upgrades are good news for Asian exporters,” Shu said.

Shu noted that the U.S. is responsible for purchasing more than 10% of Asia’s exports. There’s also a spillover effect for Asian firms involved in supply chains tied to the U.S.

“The projection from Bloomberg Economics factors in an estimated $1.7 trillion of extra savings by American consumers and wealth effects from higher asset prices,” the Bloomberg article added. “As a result, it is significantly higher than the consensus forecast of 5.8% as of April 8, which compares with 3.8% in November.”

“Furthermore, Shu’s research revealed that a showed that even that more modest upgrade would give a bump to growth in Asian economies ranging from 0.14 to 0.52 percentage points, with China’s growth expected to be lifted by around 0.3 percentage points,” the article said further.

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