The VanEck Vectors Vietnam ETF (NYSEArca: VNM), the lone US-listed exchange traded fund dedicated to Vietnamese stocks, is higher by nearly 16% this year. Patient, long-term investors may be able to realize even larger gains in the Vietnam ETF.
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 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 has surged to become Southeast Asia’s best-performing stock market this year, posting a 12% gain for the benchmark VN index on the Ho Chi Minh Stock Exchange. According to Bloomberg data, Vietnam was the third-best performing market globally over the past five years,” reports Forbes.
A Compelling Story
Over the long-term, the $425.1 million 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.
“Vietnam appears to be Asia’s most interesting macro story and investment case this year. The country’s ongoing economic reforms combined with recent geopolitical developments have certainly bolstered the country’s outlook,” reports Forbes. “The World Bank expects Vietnam to be among Asia’s fastest-growing economies this year, with the country’s GDP growth rate forecast to reach 6.6%.”
The Vietnamese government has also implemented reforms to attract investments. For instance, the country has cut corporate tax rate to 22% from 25%.
VNM allocates a combined 43% 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 26.70% of the fund’s weight.
“Vietnam’s wealth grew by 210% between 2007 and 2017, according to the real estate consultancy Knight Frank, and more than 200 Vietnamese citizens now have investable assets of at least $30 million,” according to Forbes.
For more information on Vietnam ETFs, visit our Vietnam category.