Since last September, when MoneyWeek highlighted its long-term potential, Vietnam's market has soared. A bullish report in February, from Merrill Lynch's chief regional strategist, Spencer White, cited rocketing growth (over 8% last year), a reformist government, burgeoning consumption and forthcoming privatisations as grounds for optimism, concluding Vietnam was a ten-year buy. The Vietnam stock index is currently 95% up on last autumn. With interest mounting, but foreign institutional investors still facing formidable administrative barriers to entry, local investors have been anticipating "a wall of foreign money" pouring into stocks, says Amy Kazmin says in the FT.
But the market now seems set for a rocky ride: valuations look stretched, with p/es around 20, a level generally deemed expensive even for a developed market, and the government is likely to clamp down on margin lending to curb speculation; indeed, the market has fallen fast in the past two weeks. Given all this, White suggests gaining exposure to Vietnam's "dramatic" growth through foreign firms that look well placed to benefit from its long-term development.
Merrill Lynch has pin-pointed firms that have established production facilities in Vietnam, or can expect at least 20% of incremental revenue or earnings growth to stem from Vietnam over the next five years. Singapore's Olam (OLAM.SI, SGD1.7) has built a dominant market share exporting soft commodities. Thailand's real-estate developer Amata (AMAT.BK, THB20.50) has a range of commercial and residential developments. Singapore's Fraser & Neave (FRNM.SI, $21.70) deals in property development and breweries and Vietnam will represent 10% of its profits over the next two years. Vietnam will also be Japanese sewing machine-maker Juki Corp's (6440, 768) main offshore production base after China.
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