How Sorry Will You Be if You Pass on Vietnam?

After Vietnam’s huge quarter for public equity investors, recommendations are piling up to buy Vietnam stocks before it’s too late.   Is that a good idea after a 34% gain in the VN index so far this year (as of April 18)?  That depends on your confidence in Vietnam’s government and corporations — which are largely one and the same.

One drum-beater has been Wall St. Daily, which published a column on March 1 entitled “Last Call for Vietnam: Buy Now or Be Sorry” — pointing to Vietnam as a top frontier market after three grim years.  At that time the VN index was up (only) 20% for the year.

So is it too late NOW?  Obviously, time will tell, but the column’s fundamental points remain valid:

  • Overall, frontier markets have a low correlation with developed markets, and thus diversity and, therefore reduce risk in, an investment portfolio.
  • Because it is now one of the lowest-cost centers for Asian manufacturing, with salaries about half of those in China, Vietnam is positioned to take manufacturing jobs from elsewhere.
  • Vietnam has a young workforce.
  • Inflation is moderating and may get down into the single digits later this year, which will allow for a loosening of credit.

For casual investors, the column touts the only Vietnam-specific ETF on the NYSE, Market Vectors Vietnam, which tries to mimic the VN Index by owning shares in 34 of the largest publicly traded Vietnamese companies.  But some would advise against that approach unless you really like banks and relatively high P/E ratios.

More from the “last call for Vietnam”

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One response to “How Sorry Will You Be if You Pass on Vietnam?

  1. I think it depends on your time frame … if one expects to buy now and make money next month or indeed with holding period of less than 3 years then I think it will be a bad idea. After 34% gains, your cost basis will be quite high.

    However, if you’re willing to wait 3 years or more, then I think it is alright.

    Better yet, if you pick stocks directly, then I think your odds will improve!

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