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Unlocking Vietnam: Investing in a Modernizing Economy

21 February 2024

Watch Time 3:14 MIN

Vietnam's transformation to a middle-income economy includes dynamic population growth, significant foreign investment and a thriving, modernizing domestic market.

JP Lee: My name is JP Lee, I'm a product manager at VanEck. Very happy to have Steven Schoenfeld from MarketVector Indexes with me today. And we're going to be talking about Vietnam, what the opportunity is there and how to invest. Stay tuned.

Vietnam’s Powerful Economic Story

Steven Schoenfeld: Vietnam is one of the most dramatic transformations of a very impoverished country that survived a war, heading rapidly into a middle income economy. It's got a young and dynamic population rapidly moving into the middle class. It has signed a number of trade deals and it has a significant amount of foreign direct investment coming into the country.

What many investors don't realize is Vietnam is more of a domestic demand story than even export. So while the export and internationally facing part of the economy keeps growing, this country of 100 million plus has a huge domestic market and that market is modernizing. The population is moving up the education curve, the consumption curve. And if you look at the leading stocks in the country, the majority of them are heavily domestic exposure.

Vietnam is still a communist country by governance, but it has increasingly developed a capitalist economy, an equity and fixed income market that operates on international standards, attracts foreign investment as well as local investment. You have IPOs of both state-owned companies and family-owned companies, and increasing interest both by foreign investors and local investors.

Currently, Vietnam is considered one of the more advanced frontier markets by most global index providers, including ourselves, MarketVector. It has many characteristics of an emerging market, including number of companies and size, but it still has some operational constraints, legal constraints that it needs to get through in order to be formally graduated.

A number of index providers, including FTSE, are considering it for 2024 or 2025. But certainly by the end of the decade, it will become an emerging market, in my opinion. And when that happens, it will attract significant foreign investor flows. As investors have shied away from allocation to China, many are looking for a robust and dynamic allocation and Vietnam could very much serve that role.

JP Lee: The VanEck Vietnam ETF, ticker VNM, provides access to local, domestically-focused Vietnamese companies. As we've gone over, Vietnam is a compelling investment story with a number of different tailwinds supporting economic growth. And what's important here is that the top holdings in VNM generate the majority of the revenue from Vietnam, meaning that VNM investors are getting actual exposure to the local economy.


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