As Vietnam continues to shift from a controlled economy to a market economy, it is joining the world marketplace. Its agricultural products have become a significant export, and it is attracting foreign investments.
Investors wanting exposure to Vietnam can buy exchange-traded funds (ETFs) that either focus on Vietnam or have some exposure there.
We have selected four funds that offer opportunities in Vietnam for investors in the United States. Because this is an emerging market, we focused on ETFs that pay dividends, so investors can gain income while waiting for capital appreciation.
If any of the emerging market securities in these ETFs decline, investors should weigh the loss of share value against the value of the dividend. It is also important to emphasize that emerging market funds can default on dividend payments if the underlying markets fail.
Here are how the four ETFs break down. All have posted small declines year-to-date and investors will need to decide if current levels represent buying opportunities. All figures are current as of September 26, 2018.
VanEck Vectors Vietnam ETF (VNM)
VNM is the closest thing to a pure Vietnam play an investor will find. The fund tracks the performance of the MVIS Vietnam Index.
Companies that are incorporated in Vietnam, generate half their income in Vietnam, or have half their assets in Vietnam qualify for inclusion in the fund. Managers attempt to keep at least 80% of the fund’s assets in securities that are in the underlying index.
Expenses are fairly high for the fund, and it is considered high risk.
- Avg. Volume: 192,125
- Net Assets: $367.8 million
- Yield: 1.22%
- YTD Return: -7.38%
- Expense Ratio (net): 0.66%
Invesco Frontier Markets ETF (FRN)
FRN seeks to replicate the BNY Mellon New Frontier Index. This ETF has 9% of its assets in Vietnamese enterprises, and invests in the ETF above, VNM, along with other frontier markets. The fund seeks emerging market enterprises that trade on the London Stock Exchange, New York Stock Exchange, NYSE Amex and Nasdaq.
FRN is suitable for investors who are interested in putting money in Vietnamese companies but also want exposure to other emerging markets.
- Avg. Volume: 38,165
- Net Assets: $53.75 million
- Yield: 4.05%
- YTD Return: -11.18%
- Expense Ratio (net): 0.70%
Columbia Beyond BRICs ETF (BBRC)
Emerging markets funds typically focus on Brazil, Russia, India and China. BBRC includes other markets, such as Vietnam.
This ETF has a nearly 6% exposure to Vietnam. It tracks the FTSE Beyond BRICs Index, keeping at least 80% of its assets in companies that are in that index.
- Avg. Volume: 15,292
- Net Assets: $65.82 million
- Yield: 2.76%
- YTD Return: -3.26%
- Expense Ratio (net): 0.59%
iShares MSCI Frontier 100 (FM)
FM follows the MSCI Frontier Markets 100 Index, and aims to invest a minimum of 90% of its assets in securities from that index. It may also choose other securities that are similar to those in the index.
The focus is on frontier markets, and it has a 3.63% exposure to Vietnam. The fund seeks securities that are liquid and ranks its component companies by market capitalization.
- Avg. Volume: 179,245
- Net Assets: $524.12 million
- Yield: 4.26%
- YTD Return: -13.35%
- Expense Ratio (net): 0.80%
The Bottom Line
Emerging markets carry much risk, and the Vietnamese market is no exception. However, its economy is gaining strength, and investors who want to take on more risk for the chance to have higher returns may consider ETFs that have exposure to Vietnam.
The ETFs listed above would be most appropriate for an investor who has a wise asset allocation strategy and is disciplined enough to stick to it. In that context, investing in Vietnam could be a calculated risk if it is offset by some safer investments.
