Vietnam: the buzz is back

Asia’s Communist dynamo caused great excitement in the 2000s, before suffering a sharp downturn. Now Vietnam is shaking off the hangover.

Asia's Communist dynamo caused great excitement among investors in the 2000s before suffering a sharp downturn after a China-style lending binge. But it is gradually shaking off the hangover. Economic growth reached a five-year high of 6.7% last year, and both "foreign firms and investors are cheerful once more about Vietnam's prospects", says The Economist.

Foreign direct investment has risen to 25% of GDP, as Vietnam establishes itself as a low-cost manufacturing centre with wages around a quarter of China's. Global companies are also drawn to the obvious potential in its consumer sector: the country has a population of 93 million with a median age of 30. Dairy firm Vinamilk's sales are expanding at an annual rate of over 20%, while per-capita beer consumption is the third-highest in Asia after China and Japan.

Economic liberalisation continues: the government negotiated free-trade deals last year with Europe, Japan and South Korea, and is finally making progress on cutting red tape, says The Economist.The government has just unveiled its new leadership team, with the incumbent secretary-general, Nguyen Phu Trong, viewed as more conservative, retaining the top job.

The prime minister, Nguyen Tan Dung, will stand down, a potential blow for reformists, says Capital Economics. However, the trend towards liberalisation is not expected to reverse. There's plenty to do, notably shaking up poor-quality, state-owned enterprises and improving foreigners' access to listed firms. But the long-term outlook remains encouraging, especially in view of the market's reasonable valuations. Investors could consider Vinacapital Vietnam Opportunity Fund (Aim: VOF), on a 31% discount to its net asset value.

Recommended

Four of the best investment trusts for investing in emerging markets
Investment trusts

Four of the best investment trusts for investing in emerging markets

Investors need to tread very carefully in this risky sector. Here are the best ways to approach it
22 Mar 2021
Storm brews in emerging markets as investors pull cash out
Emerging markets

Storm brews in emerging markets as investors pull cash out

Foreign investors have begun to pull cash out of emerging markets as they begin to look less attractive when compared to the rising return from holdin…
12 Mar 2021
I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
What China’s new red dawn means for Hong Kong
Chinese economy

What China’s new red dawn means for Hong Kong

China has once again moved to tighten its control over the former British territory and global financial centre. What will remain of the old Hong Kong…
10 Apr 2021

Most Popular

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021