dominating the rest


Hanoi skyline. Vietnam has recorded strong economic growth this year, according to One Asset Management.

Vietnam, an emerging market with one of the highest growth rates in the world, has attracted significant foreign investment.

The country’s stock market often offers a high rate of return on investment, while the country is unlikely to suffer from the high inflation and rising interest rates that plague developed countries, raising the possibility that these countries are soon going into recession.

In August, as stock markets in developed markets fell, Vietnamese stock markets rebounded more than 4% on continued capital inflows and economic stimulus measures launched by the government. Vietnam’s monetary policy is relatively moderate, especially compared to developed countries.

GROWTH FACTORS

According to the investment company One Asset Management (ONEAM), four key factors contribute to strong economic growth and attract investors to Vietnam, making it one of the few countries offering high returns.

For starters, Vietnam’s economy has continued its strong expansion despite the pandemic. Most recently, second-quarter GDP grew 7.7% year-over-year, compared to 5% in the previous quarter.

A recovery in consumption and the service sector following the country’s reopening late last year contributed to this growth. ONEAM analysts estimate GDP growth for 2022 could be 6.1-6.5%.

Second, data from Vietnam’s Ministry of Planning and Investment indicates that foreign direct investment (FDI) has bolstered the country’s reserves.

Third, land reform policies, such as land valuation using market prices and agro-industrial zone limits of no more than 20 hectares per plant, were applauded, the brokerage said. The policies are seen as ensuring that the land benefits the vast majority of the population, not just the wealthy.

Various infrastructure projects have also been introduced by the government to ensure greater efficiency in tax collection.

Finally, the Vietnamese stock exchange has revised its securities trading regulations by reducing the settlement date from two to 1.5 days, which should facilitate the launch of more sophisticated products in the future, according to ONEAM.

INVESTMENT STRATEGIES

ONEAM recognizes that short-term investors still need to be cautious when investing in Vietnam, especially since the local stock market can be negatively affected by regional volatility.

Long-term investors, meanwhile, are being urged to “build up or use a DCA investment strategy” as market analysts adjust their views.

DCA, or dollar-cost average, is the practice of allocating a fixed amount of money at regular intervals, usually less than a year (monthly or quarterly), for investment. DCA is typically used for more volatile investments such as stocks or mutual funds rather than bonds or certificates of deposit.

ONEAM believes that the Vietnamese stock exchange has a chance to develop at the same level as other Asian stock exchanges in the future.

WealthMagik, an online private wealth management service, has compiled a list of five outstanding Vietnamese equity funds:

Principal Vietnam Equity Fund A (PRINCIPAL VNEQ-A), with returns over the past year of 75.8%. The minimum initial purchase value is 1,000 baht.

One Vietnam Equity Fund (ONE-VIETNAM-RA), with returns of 65.4% over the past year. The minimum first-time purchase value is 5,000 baht.

United Vietnam Opportunities Fund (UVO), with returns of 61.6% over the past year. No minimum initial purchase is required.

K-Vietnam Equity Fund (K-VIETNAM), with returns over the past year of 58.3%. The minimum initial purchase value is 500 baht.

Krungsri Vietnam Equity Fund-A (KFVIET-A), with returns over the past year of 54.7%. The minimum purchase value for new investors is 2,000 baht.

above Workers sort fresh fish on the Vietnamese island of Ly Son, located northeast of the central province of Quang Ngai. AFP

VOLATILE PERIOD

Chaiyaporn Nompitakcharoen, Executive Vice President of Bualuang Securities (BLS), advises investors during this tumultuous time for global stock markets amid concerns over rapid increases in US interest rates, high inflation and fears of a global recession.

BLS recommends novice investors take this opportunity to start accumulating “safe stocks” for long-term returns. This includes investments in “mutual funds ETFs (exchange-traded funds) with investment policies based on domestic indices” and certificates of deposit (DR), as well as foreign stocks based on foreign ETFs .

“Investing in these assets is suitable for long-term oriented beginners,” Chaiyaporn said.

BLS recommends investing in DR “E1VFVN3001”, whose underlying securities are ETFs based on the VN30 index. It invests in the country’s top 30 stocks and high-liquidity companies on the Ho Chi Minh Stock Exchange.

He said that at the end of 2018, BLS was among the first to predict that Vietnam’s economy would continue to grow strongly. The country’s GDP is estimated to grow by an average of 6-7% per year over the next 3-5 years based on export growth and strong FDI inflows into the country, Chaiyaporn said. .

BLS recommends DR “DIAMOND”, with trading abbreviation “FUEVFVND01”, whose underlying securities are DCVFMVN DIAMOND ETF (FUEVFVND). It invests in the VN DIAMOND index on the Ho Chi Minh Stock Exchange.

OPPORTUNITIES AND RISKS

Earlier this month, South Korean conglomerate Lotte unveiled plans to build a 60-story shopping mall, offices and other facilities on 50,000 square meters of land in Ho Chi Minh City. The US$900 million complex marks a new overseas start for the company after it was forced out of the Chinese market five years ago due to geopolitical tensions.

Speaking at the project’s inauguration on September 7, Lotte Chairman Shin Dong-bin said the group would expand its investments in Vietnam, noting that the country’s population of around 100 million is young, with an average age of 33.

Lotte considers Vietnam “the country with the highest growth potential in Asia”, he said. The group operates 15 large supermarkets and 270 fast food restaurants in Vietnam, as well as department stores and hotels. A total of 19 Vietnam-based subsidiaries employ more than 10,000 people.

After South Korea and Japan, Vietnam will become Lotte’s No. 3 market where the group’s companies will concentrate their resources, according to the firm.

Despite Lotte’s optimism, the World Bank cited heightened risks threatening Vietnam’s recovery prospects, including slowing growth or stagflation in key export markets, further shocks to commodity prices , continued disruptions to global supply chains and the emergence of new variants of Covid-19.

National challenges include persistent labor shortages, the risk of higher inflation and heightened financial sector risks.

“In the short term, on the fiscal front, the focus should be on implementing the recovery and development package and expanding targeted social safety nets to help protect the poor and vulnerable. from the effects of the fuel price shock and rising inflation,” the bank said in its August 8 economic update for Vietnam.

In the financial sector, close monitoring and strengthening of the reporting and provisioning of non-performing loans, as well as the adoption of an insolvency framework, would be recommended, the bank said.

“If the upside risks to inflation materialize, with core inflation accelerating and the consumer price index rising above the government’s 4% target, the central bank should be prepared to switch to monetary tightening to ease inflationary pressures through interest rate hikes and tighter liquidity provision,” the report states.

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