Vietnam Enterprise Investments Limited: Investing in the ascending dragon

Vietnam is often known as the ascending dragon – partly because of its shape on the world map. When you look at its growth trajectory over the past four decades, it is easy to understand why investors like the phrase too.

The country has become a manufacturing powerhouse, particularly when it comes to electrical components. Around 60% of the 220 million phones Samsung sells each year are made in Vietnam, according to figures cited by Reuters. Around 20% of iPad production also happens in the country, according to figures cited by CNBC.

These are just two examples but they help illustrate the important role this frontier economy plays in the global trade ecosystem. Vietnam was the United States’ eighth-largest trading partner in 2024. It was China’s fourth largest.

A sleeping dragon wakes

The country has undergone huge changes since its economy opened up in 1986 – around a decade after the end of the Vietnam War. Inflation was running at around 700% that year, according to figures cited in an IMF paper. Families were suffering from food shortages and the country was reliant on aid of around $4 million per day from the Soviet Union.

Today, things couldn’t look more different. Vietnam has gone through a rapid process of urbanisation, digitalisation and infrastructure development over the past 40 years. A stark example is that almost 100% of the population now uses electricity as its main source of lighting, up from just 14% in 1993, according to figures from the World Bank.

People are getting richer too. The country has a young population with a high proportion of workers under the age of 30, many of whom are well educated. The middle class is growing rapidly as a result, and there is the potential for Vietnam to transform into a thriving consumer economy.

The key driving force of Vietnam’s transformation in the 1980s was a string of reforms known as Doi Moi, which translates to ‘restoration’ or ‘renovation’. These turned the country – formerly a centrally-planned economy – into a market-oriented one. By 2007, Vietnam had become a member of the World Trade Organisation.

The success of the reforms is apparent in Vietnam’s impressive growth rate. It has averaged annual growth of 6.5% for the past couple of decades, according to data from investment firm Dragon Capital.

Sweeping reforms could drive further growth

Today, the Vietnamese government is embarking on Doi Moi 2.0 – a programme to cut bureaucracy, streamline local government and position the private sector as a driving force for Vietnam’s economy. It is also looking to promote areas like science, technology and innovation.

These reforms have the potential to propel Vietnam further forward, helping it avoid the middle-income trap – a situation where countries with rapidly-growing economies stagnate after reaching middle-income status.

Donald Trump’s tariffs pose a risk to the economy, but investors’ worst fears were assuaged when a trade deal was agreed in July. The US originally threatened Vietnam with a 46% tariff on exports, but this has since been reduced to 20% for products manufactured in the country.

Vietnam’s government certainly has big ambitions when it comes to the outlook going forward. Having delivered growth of 7.1% last year (putting it ahead of both India and China), Vietnam is looking to achieve 8% in 2025 and double-digit growth thereafter. It hopes to become a high-income country by 2045.

Vietnam’s growth will come from a wide range of areas – from international trade to continued technological development. One example is the semiconductor sector, which is expected to grow by £1.3 billion between 2022 and 2027, achieving a compound annual growth rate of more than 6%, according to Dragon Capital.

The government has launched initiatives to train 50,000 semiconductor engineers to help facilitate this. It is an example of how Vietnam hopes to participate in global economic and investment trends, like the meteoric rise of AI.

How to invest in Vietnam

For UK investors, one of the simplest ways to gain diversified exposure to the market is through an investment trust like Vietnam Enterprise Investments Limited (LSE: VEIL) – the London Stock Exchange’s best-performing Vietnam-focused investment trust this year.¹

The trust is managed by Dragon Capital, one of the largest and longest-serving asset managers in Vietnam.

Established in 1995, the trust is a constituent of the FTSE 250, managing assets worth £1.5 billion.² It has delivered annualised returns of 12% since it was first listed on the London Stock Exchange in July 2016.³

The trust aims to deliver long-term growth by investing in companies with attractive growth and value metrics and good corporate governance. Portfolio companies also need to align with Vietnam’s underlying growth drivers.

The trust’s largest sector exposures are currently banks (40%), real estate (22%) and consumer discretionary stocks (11%).

The trust is currently trading at a discount of almost 15%, creating a potential opportunity for valuation-focused investors. The discount reflects a broader trend among London-listed investment companies, with several trading below their net asset value.

Emerging and frontier markets have also been out of favour in recent years, contributing to the discount as investors adopted more of a “risk-off” approach. However, this could work to investors’ advantage if sentiment shifts.

There are several factors that have the potential to boost the outlook, for example, emerging and frontier markets could benefit from a weaker dollar. They could also see inflows if investors continue to diversify away from the US in light of Trump’s unpredictable policymaking.

More significantly for Vietnam, investors are increasingly hopeful that the country could receive an upgrade when FTSE Russell carries out its next index review. The country is currently classified as a frontier market, but has been on the index compiler’s watchlist since 2018.

Many believe an upgrade to emerging-market status could be announced in September this year. Vietnam’s stocks could draw up to $6 billion in capital inflows if they are upgraded by FTSE, according to figures cited by Bloomberg.

If MSCI ultimately followed suit, the effect could be even more significant. Some estimates suggest an upgrade from both index providers could theoretically bring net inflows of $25 billion by 2030.

Footnotes

¹Source: Dragon Capital as of 31 August 2025.

²Source: Dragon Capital as of 28 August 2025.

³Source: Dragon Capital as of 28 August 2025.