Asia's best-performing stockmarket last year "wasn't China and had little to do with tech", says Assif Shameen in Barron's. It was Vietnam, where consumer and manufacturing firms were the key drivers of a 48% increase in the Ho Chi Minh Stock index.
So far this year, the market has gained another 13%. Foreign investors have been piling into the market, propelling daily turnover to $300m from just $50m four years ago. "On a good day," there is more activity than on some of the region's more established bourses, such as Manila in the Philippines.
The young go shopping
No wonder: the Vietnam story is compelling. The Communist government introduced market reforms in 1986, transforming the country into one of Asia's fastest growers, notes Bloomberg. The economy, which expanded by 6.8% last year, has now been growing at this sort of pace for almost two decades.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
After an extended bout of turbulence earlier this decade, inflation is back under the government's 4% target. The country now boasts a current-account surplus, not least because the robust global economy has boosted exports to record levels.
At first, Vietnam was seen as a cheap version of China with well-educated workers, and thus primarily suitable as a manufacturing base. But as foreign investment has soared (it rose by 50% year-on-year in the first seven months of 2016, for instance), and expertise spread, industry has moved up the value chain. In 2015, 30% of all exports were electronics items. In 2010 the figure was 5%.
Opening new opportunities
The government is now accelerating its privatisation programme to entice further foreign investment, as well as reduce the budget deficit of around 4% of GDP. Stakes in 245 state companies are available, with six times more shares on offer than last year. Rules governing foreign ownership have been gradually liberalised over the past few years. The young, 90 million-strong population of which around 70% are between 15 and 64 will provide a large workforce and a source of consumption for years to come. Vietnam's middle class is expected to grow from 12 million in 2012 to 33 million by 2020. Retail sales grew by 10.9% to a record $130bn last year.
It's no wonder, then, that stocks are close to an 11-year high. The market isn't cheap any more, but the Vietnam Opportunity Fund (LSE: VOF), which invests in property and private equity as well as listed companies, still trades on a 16% discount to its net asset value.
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
Who is the richest person in the world?
The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
By Vaishali Varu Published
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
By Ruth Emery Published