Vietnam is outpacing other high growth markets globally
In Part 2, we’ve discussed how Vietnamese equity (VNM) is in the spotlight with the country vying for the emerging market classification. The Ho Chi Minh equities market is already doing well, and authorities in Vietnam are taking appropriate steps to increase the market’s liquidity.
On the valuations front, Vietnamese equities appear dearer than the broader frontier and emerging markets (as charted below).
However, valuations favor Vietnam
Nonetheless, earnings are on the rise, while the price is on a declining trend currently, making the Vietnamese stock market attractive on an absolute basis (see chart below).
Moreover, stock markets of emerging economies such as Russia and Brazil have already rebounded significantly. The Market Vector Russia ETF (RSX) is up over 60%, while the iShares MSCI Brazil ETF (EWZ) has soared over 100% over the past one year (as of February 14). The surge and outperformance in these markets are leading many fund managers to look beyond the emerging (EEM) (VWO) markets in search of cheaper alternatives. This is where frontier markets (FRN) (FM) such as Vietnam, gain importance. The country’s favorable demographics, economic growth, and its attempt to create a more open investment environment should lure investors to grab their share in the growth of this soon-to-be emerging market.
Companies such as Vietnam Dairy Products Corp. aka Vinamilk, and Saigon Beer Alcohol Beverage Corp. aka Sabeco ($6 billion) have already added significantly to the market capitalization of the Vietnamese stock market. With an emerging market status, we should see other larger companies lending liquidity to the Ho Chi Minh exchange.
