This will go down as another rough year for international equities, and that slump extends to developed, emerging, and frontier markets. However, there are pockets of opportunity, and with 2023 right around the corner, tactical investors may want to take this opportunity to evaluate specific countries that could be homes to thriving equity markets next year. Vietnam could be part of that group, and that frontier market is accessible via the VanEck Vietnam ETF (VNM).
VNM is the oldest and largest dedicated Vietnam exchange traded fund on the market today. More importantly, while concerns abound about global growth, particularly in large developed and emerging economies, the outlook for Vietnam is attractive.
“The macroeconomic outlook of Vietnam is bright as the country has witnessed strong domestic consumption, received foreign direct investments (FDI) and maintained a surplus in trade balance with other countries. Vietnam’s real GDP growth is forecasted to exceed 8% in 2022,” noted Sunny Bokhari, VanEck associated product manager.
There are multiple reasons why VNM could be a 2023 winner among country-specific ETFs. First, its inflation readings are relatively tame, indicating that if necessary, the central bank there can take steps to bolster economic growth.
As a result, the country’s currency and interest rates are steady and its fiscal position solid, confirming there’s room for monetary policy assistance if needed, but it might not be needed due to a strong domestic consumer.
“A sharp recovery in personal consumption along with strong export growth contributed to the country’s impressive Q3 GDP growth of 13.67%.4 Vietnam’s strong macroeconomic position is expected to lift its population out of poverty as more than half of the Vietnamese population is projected to join the global middle class by 2035,” added Bokhari.
VNM, which follows the MVIS Vietnam Index, could also benefit from increasing liquidity in Vietnamese capital markets as well as the possibility that the country could finally earn the long-coveted promotion to emerging markets status. Add to that, Vietnamese stocks trade at compelling multiples heading into 2023.
“The country’s capital markets appear to be trading at attractive valuations given its strong macroeconomic outlook. Some asset managers expect growth in earnings per share (EPS) of around 20% in 2022 year over year and yet the Ho-Chi Minh stock index is down about 40% YTD. Valuations may be attractive at this level, trading at only about 10x 2022 earnings forecasts,” concluded Bokhari.
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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.