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.
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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.
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