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Ambitious Vietnam

Boosted by foreign capital and taking market share from China, this frontier country has been growing its wealth
Ambitious Vietnam

Vietnam is a country investors should be watching for a number of reasons. Despite being a relatively poor Asian country, it has managed to contain coronavirus through timeliness, strict quarantine rules, widespread testing and intensive contact tracing. By 18 June it had 335 confirmed cases and no recorded deaths.

In terms of economic growth, Vietnam has been Asia’s success story over the past five years. While the economy will be severely affected by a drop in manufacturing and exports this year because of the pandemic, coming into the crisis the country’s real gross domestic product (GDP) growth rate was 7 per cent. This has been fuelled by a boost in foreign capital. According to the World Bank, foreign direct investment (FDI) was $15.5bn in 2018, up from $7.5bn in 2011. 

Vietnam has benefited from taking market share from China in low-cost manufacturing amid Sino-US tensions, and it is also starting to move up the value chain. South Korean company Samsung, for example, announced earlier this year that it has started building a $220m research and development centre in Vietnam.

The European Union and Vietnam finalised an EU-Vietnam trade agreement in February this year, which will help open up its markets and has also forced it to improve labour rights, environmental and consumer protection standards. It is the most comprehensive agreement between the EU and a developing country.

The difficulty for investors is that there aren’t many companies listed in Vietnam that are liquid and open to foreign investors. There are also two tranches of shares for trading and foreign shares can trade at quite a big premium.

In contrast with other countries in Southeast Asia, Vietnam has two significant stock exchanges: the main Ho Chi Minh Stock Exchange (HOSE) – market cap US $114bn – along with the smaller Hanoi Stock Exchange (HSX). 

Ewan Markson-Brown, manager of Pacific Horizon Investment Trust, thinks Vietnam is a country that is going to “get rich very quickly” and currently holds just under 10 per cent of his trust in the frontier market.  

Mike Kerley, manager of Henderson Far East Income Trust, says Vietnam is “almost like China was 20 years ago”. He says Vietnam has a “low cost, diligent, ambitious working population and the result is that they are taking market share against other Asian countries.”

 

Read all nine elements of our Investing in Asia guide here: 

Asia's mega potential

The outlook for Asian economies

Bull in a China shop

India: still a favourite?

Ambitious Vietnam

Thailand: home to oustanding buinesses

Accessing growth and income

Titans of the East

Tech, tariffs and political turbulence