Eleven years after the fall of Saigon, the victorious communists introduced their “Doi Moi” economic reforms. This set in motion of chain of events that has since seen the former Tiger Cub quietly grow into one of Asia’s most dynamic economies – and smart investors are taking notice.
“This is the most exciting investment opportunity of my 30-year career,” says Tim Price, director of fund managers Price Value Partners says. Enticingly, the country is still classified as a “frontier” market, not an “emerging” market, by benchmark provider MSCI. “Tens of billions of dollars will cascade into this market when MSCI upgrades it to ‘emerging’.”
Look under the hood and you can see why Vietnam is so strong. It has a minimum wage of $180 per month, attractive demographics, 95 million people, a strategic location, cheap energy, political stability and a spread of foreign direct investment. The country is also reaping dividends from Donald Trump’s trade war with China, as global manufacturers shift production from the People’s Republic Of China to Vietnam, as US tariffs start to bite. As Roddy Snell, the manager of Pacific Horizon at Baillie Gifford, puts it, “You have a fantastic structural growth story, really attractive valuations, a market that’s opening up and a rock solid economy.”
So how can Western investors get a piece of the action? One way is by investing in the London-listed Vietnam Enterprise Investments Limited (VEIL). Founded in 1995, this is managed by Dragon Capital and invests exclusively in the southeast Asian country. Another is through VinaCapital Vietnam Opportunity Fund (VOF, also London-listed), which unlike the more established VEIL can also steer investors’ cash into unlisted companies. There is also one index-tracker fund focused on Vietnam – DWS’s Xtrackers FTSE Vietnam Swap.
The danger with anything that becomes suddenly hot is you can get burnt. Paul Gambles of Thailand-based MBMG Investment Advisory warns that “any credit crunch would be painful for Vietnam”. So, if you’re more interested in spreading your risk across a range of frontier and emerging markets, several funds have ten to 15 per cent of their portfolios invested in Vietnam. These include Aberdeen Frontier Markets, T Rowe Price Frontier Markets, and Baillie Gifford Pacific Horizon. Your move.