Why Vietnam Deserves Your Next Investment Dollar

By Casey Murphy | August 08, 2014 AAA

When it comes to emerging markets, most investors turn their attention to nations such as Brazil, Russia, India and China and other fast-growing economies. One nation that may not hit the radar of active traders often enough is Vietnam. This dynamic nation has a population of over 90 million — a good portion of whom are under the age of 30 — and has a GDP in the global top forty. From a trading and investing perspective, Vietnam offers exposure to efficient manufacturing, energy, agriculture, mining, finance, tourism and more. According to a forecast by Pricewaterhouse Coopers In 2008, Vietnam could be the fastest-growing emerging economy by 2025.

For North American traders, it's often not easy to gain exposure to Vietnam because of exchange rules, account permissions and many other factors. Luckily, traders have access to a popular exchange traded fund known as the Market Vectors Vietnam ETF (VNM), which seeks to replicate the performance of the Market Vectors Vietnam Index. The underlying components of the ETF consist of 28 holdings of publicly traded companies that primarily conduct business, are domiciled and primarily listed in Vietnam. (For further reading, see: Asia's Other Tigers.)

Taking a look at the chart of VNM, you’ll see that it is trading within a strong uptrend. The price is currently testing the support of its nearby 50-day moving average and the upward divergence between this average and the long-term 200-moving average suggests that the upward momentum is set to increase. Notice how the price bounced of the 50-day moving average in June and how it recently moved higher off this level again. This strong price action suggests that traders will watch for a move higher and they will likely protect their positions by placing a stop-loss order below the key averages ($20.96 and $20.29). (For more on this topic, see: Vietnam A Frontier For Oil And Gas Exploration.)

Fundamentals of the Market Vectors Vietnam ETF

For traders who are unaware of this ETF, you’ll be interested to know that it has total net assets of $580.9 million and carries a relatively low management fee of 0.50%. When all other expenses are accounted for it carries a gross expense ratio of 0.72%, which again is quite respectable given the fact that Pricewaterhouse Coopers believes the nation could post a potential growth rate of almost 10% per annum in real dollar terms, which means the country's economy will be about 70% the size of the United Kingdom's by 2050. (For further reading, see: Make A Play For Asia's Frontier.)

We’ve included a table of the top 10 holdings of VNM for those interested in doing more research or would like to analyze the most influential companies.

Holding

Weighting (Percentage of Net Assets)

Vincom Jsc

7.48%

Saigon Thuong Tin Commercial

7.25%

Masan Group Corp

6.95%

Jsc Bank For Foreign Trade

6.92%

Petrovietnam Tec

6.34%

Baoviet Holdings

5.89%

Petrovietnam Fer

5.18%

Minor Inter-Nvdr

5.04%

Gamuda Bhd

4.51%

Petrovietnam Drilling & We

4.40%

Source: Van Eck Global, as of June 30, 2014

 

The Bottom Line

When it comes to investing in emerging markets, most investors or traders do not immediately think of Vietnam. However, from a financial perspective shown on the chart above and from forecasts from firms such as Pricewaterhouse Coopers, this may be the nation that deserves to be at the top of the list. Luckily for traders, the Market Vectors Vietnam ETF was created specifically for increasing ones exposure to Vietnam and the diverse sector weighting and respectable fees make this ETF a top pick for any serious trader. (For further reading, see: Investing In Emerging Markets.)

 

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