Vietnam: winning Trump’s trade war

There’s been one clear winner in the US-China trade war so far – Vietnam. Many investors see it as the developing world’s next big thing.

Lan Ha bay, Vietnam © iStockphotos
Vietnam is one of the world's most promising emerging markets

There's been one clear winner in the US-China trade war so far, says Chris Matthews on MarketWatch Vietnam. The Southeast Asian country has become "a popular destination for new manufacturing investments as multinational firms seek to reorganise their supply chains to avoid US tariffs on Chinese exports".

Labour costs in Vietnam are still low compared with China, while business is considerably easier compared with other low-cost locations, such as India. This meant that the country was already attracting manufacturers, but the trade dispute has accelerated the process. And even if China and the US come to an accord, the trend is unlikely to reverse.

"A lot of US companies will be thinking very hard about their supply chain and they want to reduce their dependence on China," Laurent Saltiel of AllianceBernstein, a fund manager, tells MarketWatch. "It's too risky to be exposed to just one country."

The results are already showing up in the trade data, adds the Financial Times. "Export growth has collapsed across Asia this year," but "Vietnam is an exception." Shipments of goods such as phones, computers and electronics have all continued to record strong increases. Exports to the US Vietnam's number-one trading partner have outperformed: its trade surplus with America is on track to reach $50bn this year not a trivial amount for a $240bn economy.

These figures have already caught the eye of Donald Trump: back in June, he berated the country for treating the US "even worse' than China on trade" and imposed huge tariffs on steel imports. But Vietnam quickly responded by pledging to buy more from the US in the hope of tempering Trump's wrath.

Officials reiterated that commitment again last month, including a plan for a $5bn liquefied natural gas terminal and power plant that would increase imports from America while helping to meet Vietnam's rising demand for energy.

The next big thing

It remains to be seen how much Vietnam will really benefit from US-China tensions but many investors see it as the developing world's next big thing anyway, says Tom Stevenson in The Daily Telegraph. Growth is solid, debt and inflation are under control and the currency is stable. The population of 95 million people is young (half are working age, two-thirds under 35), educated and ambitious. Infrastructure is poor, but improving fast.

"The country has more going for it than any emerging market in Asia or anywhere else," says Stevenson. MoneyWeek agrees. We suggest looking at Vietnam Enterprise Investments (LSE: VEIL), currently on a discount to net asset value of 11%.

Recommended

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
If you think now is a good time to buy, look at these investment trusts
Investment trusts

If you think now is a good time to buy, look at these investment trusts

With the latest market slides, an awful lot of assets are beginning to look very cheap indeed. If you are thinking of buying, Merryn Somerset Webb has…
10 Mar 2020
How to build a properly diversified investment trust portfolio
Sponsored

How to build a properly diversified investment trust portfolio

Max King explains how to build a well diversified portfolio using one of our favourite tools – investment trusts.
25 Feb 2020
Why investment trusts are the best vehicle for your money
Sponsored

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020

Most Popular

Here’s why you really should own at least some bitcoin
Bitcoin

Here’s why you really should own at least some bitcoin

While bitcoin is having a quiet year – at least in relative terms – its potential to become the default cash system for the internet is undiminished, …
16 Sep 2020
Will a second wave of Covid lead to another stockmarket crash?
Stockmarkets

Will a second wave of Covid lead to another stockmarket crash?

Can we expect to see another lockdown like in March, and what will that mean for your money? John Stepek explains.
18 Sep 2020
Central banks want politicians to take charge – but what will they do?
US Economy

Central banks want politicians to take charge – but what will they do?

The US Federal Reserve has come to the end of the road in terms of what it can do to accelerate any recovery, says John Stepek. It's over to the polit…
17 Sep 2020