Struggling Vietnam’s World Class ROI

Vietnam’s economy  is concluding its worst year in a generation, yet its stock markets turned out to be one of the world’s best investments for 2012.  A late December rally helped Vietnam’s primary index gain nearly 18% for the year.

And considering the avalanche of dismal economic news that accompanied the boost, investors are likely to be rewarded with at least as attractive returns in 2013.  The worst of Vietnam’s corporate scandals, banking crises, inflation, currency fluctuation, bankruptcies, astronomic interest rates and political disarray may now be history.

Economic growth slowed to 5% after more than a decade in the 7% range.  Foreign investment pledges fell 14%.  Moody’s cut Vietnam’s credit rating as mounting bad debt weakened state-owned enterprises.  The banking system experienced a year of chaos and scandal.  The real-estate market was stagnant throughout 2012 and showed no sign of recovery.  And 58,000 companies (71%) in Hanoi alone posted losses in 2012.

So why is Vietnam’s stock market rallying?  Probably because of positive signals like these:

  • Vietnam posted a trade surplus for the first time since 1992.
  • Inflation dropped into single digits.
  • The economy was forecast to grow a slightly faster 5.5% next year.
  • Investors were encouraged by retail growth of 18% in the first 10 months (although the pace was slower at the end of the year).
  • The State Bank is starting to respond to demands to improve credit availability.

A new survey shows many Vietnamese businesses remain pessimistic, and unemployment is high by Vietnamese standards.  But the positive signs seem sufficient to suggest 2013 will be a bit kinder to Vietnam’s economy than 2012 was.

At this time last year, this blog forecast Vietnam’s favorable investment returns for 2012.  Our posting Dec. 28, 2011 cited four positives for the Vietnam economy — a surge in exports, rising foreign currency reserves, declining budget deficit, and declining foreign debt.

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