The VanEck Vectors Vietnam ETF (NYSEArca: VNM) has tumbled over the past month, trimming its year-to-date gain to about 1%, but some market observers remain bullish on 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.

“Vietnam’s track record of policy-making focused on strong macroeconomic performance has been improving,” said Fitch Ratings in a recent note. “GDP growth accelerated to 6.8% in 2017 from 6.2% in 2016 supported by the export-oriented manufacturing sector and continued growth in services. Vietnam’s five-year average real GDP growth at end-2017 was 6.2%, far above the ‘BB’ median of 3.4%. We expect growth of 6.7% in 2018 in line with the growth target set by the National Assembly, supported by strong inflows of foreign direct investment (FDI), continued expansion in manufacturing and an increase in private consumption expenditure.”

The ratings agency recently upgraded Vietnam’s sovereign debt rating to BB from BB-.

More About VNM ETF 

VNM, the only US-listed ETF dedicated to Vietnamese equities, holds 37 stocks. Home to nearly $421 million in assets under management, the fund devotes over 21% of its weight to real estate stocks and 16.7% to financial services names.

“Strong capital inflows and unsterilised reserve accumulation have led to a build-up in liquidity in the banking system. As evidence, five-year domestic government bond yields have declined by about 150bp since the end of 2017 to around 2.6% at present. The abundant liquidity could exacerbate volatility in Vietnam’s financial markets, especially against the backdrop of tighter global monetary conditions and rapid domestic credit growth,” according to Fitch.

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 previously lifted foreign ownership limits on other sectors, including consumer groups, which combine for over a third of VNM’s roster.

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