{"id":90289,"date":"2016-05-25T07:20:26","date_gmt":"2016-05-25T11:20:26","guid":{"rendered":"http:\/\/countingpips.com\/?p=90289"},"modified":"2016-05-25T07:20:26","modified_gmt":"2016-05-25T11:20:26","slug":"its-time-to-invest-in-vietnam","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/05\/its-time-to-invest-in-vietnam\/","title":{"rendered":"It\u2019s Time to Invest in Vietnam"},"content":{"rendered":"<div id=\"inves-2080516312\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">May 25, 2016<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"http:\/\/www.wallstreetdaily.com\/wp-content\/uploads\/2016\/05\/05-25-foreign-investing-vietnam.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"http:\/\/www.wallstreetdaily.com\/wp-content\/uploads\/2016\/05\/05-25-foreign-investing-vietnam-300x155.jpg 300w, http:\/\/www.wallstreetdaily.com\/wp-content\/uploads\/2016\/05\/05-25-foreign-investing-vietnam.jpg 580w\" alt=\"It\u2019s Time to Invest in Vietnam\" width=\"580\" height=\"300\" \/><\/p>\n<p>Wouldn\u2019t it be great if you could create an ideal market to invest in out of thin air?<\/p>\n<p>Right off the bat you would want growth \u2013 lots of growth potential.<\/p>\n<p>Perhaps add economic numbers like inflation and interest rates on a declining trend to that list.<\/p>\n<p>Political stability, low valuations coupled with low costs, and increasing flows of capital would also be nice.<\/p>\n<p>Of course, we\u2019ll never find the perfect market. There\u2019s always risk with any investment, and there are flaws to even the best story. But looking over the world right now, the best market I can find is Vietnam.<\/p><div id=\"inves-235972688\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>Let\u2019s put the major negative to the Vietnam story out on the table first.<\/p>\n<p>Like <a href=\"http:\/\/www.wallstreetdaily.com\/2016\/05\/23\/china-real-estate-housing-bubble\/\">China<\/a>, it has an authoritarian communist government and all the negatives that come with it. Fortunately, however, investors have the flexibility to sidestep the country\u2019s state-owned enterprises and focus instead on smaller private companies that are on a high-growth trajectory.<\/p>\n<p>The list of Vietnam\u2019s positives is really quite impressive.<\/p>\n<p>Here are just a few for starters:<\/p>\n<ul>\n<li>A low level of capital stock so every dollar of investment yields big jumps in productivity.<\/li>\n<li>Attractive demographics to fuel consumption.<\/li>\n<li>A talented, well-educated, ambitious population with great faith in their future.<\/li>\n<li>Low real wages for a decisive competitive advantage.<\/li>\n<li>Tremendous opportunities for market reforms to unlock blocked potential.<\/li>\n<li>Low valuations and rising, robust foreign investment to drive its industry and stock market forward.<\/li>\n<\/ul>\n<p>Now, let\u2019s take a closer look at some of these advantages and more\u2026<\/p>\n<h2>Significant Catchup Potential With Neighboring Countries<\/h2>\n<p>Vietnam has a long way to go before it catches up with neighbors such as Thailand in terms of urbanization, per capita income, and the size of its stock market and manufacturing base.<\/p>\n<p>About 70% of Vietnamese still live in rural areas and remain involved in agriculture so, just like during China\u2019s rise, urbanization will supercharge growth and incomes.<\/p>\n<h2>Improving Macro Fundamentals and Infrastructure<\/h2>\n<p>The country\u2019s macro picture is considerably better than five years ago. Foreign reserves have tripled to $34 billion. Interest rates have come down from 20% to 8%. Inflation has fallen from 18.7% to just 0.6%. Meanwhile, annual economic growth remains pretty stable in the 6% to 7% range.<\/p>\n<p>Vietnam\u2019s infrastructure is improving as well with 267,000 km of roads and 1.49 cell phones per person. The economy is well-diversified and the country is rich in resources and has become an energy exporter.<\/p>\n<h2>Market Reforms in Banking and Finance<\/h2>\n<p>Significant issues for Vietnam include bank debt and non-performing loans. It\u2019s making incremental progress, but much more needs to be done to open and modernize its financial system. It also needs to move forward on plans to privatize 289 state-owned companies.<\/p>\n<p>In addition, Vietnam has to reign in government spending.<\/p>\n<h2>Low Stock Valuations Relative to Its Competitors<\/h2>\n<p>For some reason, many of Vietnam\u2019s large state-owned companies are expensive, but medium-and small-sized companies are a terrific value. The trailing price-to-earnings (P\/E) ratio for this group is just 7.8 compared to 26.9 in Indonesia and 21.3 in the Philippines.<\/p>\n<p>The Vietnam market index trades at just 1.1 times book value with a dividend yield of 6.3% while Indonesia has a 2.4 times book value and the Philippines has a 2.6 times book value.<\/p>\n<h2>Excellent Demographics Signal Long-Term Growth of Income and Wealth<\/h2>\n<p>In contrast to China\u2019s premature graying society, Vietnam\u2019s population of 98 million is at a demographic sweet spot with an average age of just 27 years and 70% of the population under the age of 35.<\/p>\n<p>Wealth has risen at an annual compounded rate of 13.5% over the last decade, meaning Vietnam\u2019s consumer and investor class is expanding every year.<\/p>\n<p>The literacy rate is 94%, with primary education improving every year.<\/p>\n<h2>Geographic and Strategic Importance at the Heart of ASEAN<\/h2>\n<p>If the Trans-Pacific Partnership (TPP) passes muster, Vietnam will likely be the greatest beneficiary.<\/p>\n<p>As the recently founded ASEAN Economic Community (AEC) moves forward, intra-ASEAN trade \u2013 already growing fast \u2013 will gain even more momentum. Vietnam\u2019s long coastline, its position facing the South China Sea, and shipping lanes that account for 40% of global trade \u2013 all underline its strategic importance.<\/p>\n<p>Vietnam\u2019s cooperation with America is also deepening as it seeks a hedge on China\u2019s growing weight in the region.<\/p>\n<h2>Low Cost Base for Manufacturing and Services<\/h2>\n<p>A wave of capital is washing over Vietnam, driven by many factors including wage rates significantly lower than in China. Companies in South Korea, Japan, China, America, and Europe, and their governments, are falling over each other to establish manufacturing hubs and seek better relations with Vietnam.<\/p>\n<p>One example is the Japanese government\u2019s recently announced $1.7 billion aid package to Vietnam.<\/p>\n<p>During the last three years, there has been more foreign direct investment flowing into Southeast Asia than into China \u2013 $60 billion of direct investment has flowed to Vietnam over the last five years with $14.5 billion in 2015. In April this year, foreign direct investment surged 85% year over year.<\/p>\n<p>Below are just some of the foreign investment projects announced during March of 2016:<\/p>\n<ul>\n<li><strong>Samsung Electronics Company Ltd.\u2019s<\/strong> (<a href=\"http:\/\/finance.yahoo.com\/q?s=005930.KS&amp;ql=1\" target=\"_blank\">005930.KS<\/a>) R&amp;D Center \u2013 $300 million<\/li>\n<li><strong>Zincox Resources<\/strong> (<a href=\"http:\/\/finance.yahoo.com\/q?s=ZOX.L&amp;ql=1\" target=\"_blank\">ZOX.L<\/a>) steel plant \u2013 $115 million<\/li>\n<li><strong>Nestle\u2019s<\/strong> (<a href=\"http:\/\/finance.yahoo.com\/q?s=NESN.VX&amp;ql=1\" target=\"_blank\">NESN.VX<\/a>) sixth factory \u2013 $70 million ($520 million total)<\/li>\n<li><strong>LG Display Co. Ltd.<\/strong> (<a href=\"http:\/\/finance.yahoo.com\/q?s=034220.KS&amp;ql=1\" target=\"_blank\">034220.KS<\/a>) doubling manufacturing base \u2013 $1.5 billion<\/li>\n<\/ul>\n<p>Here are just some of the blue-chip companies increasing production in Vietnam.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"http:\/\/media.wallstreetdaily.com\/article\/Buzz\/BW-vietnam-auxillary-small-img.jpg\" alt=\"Blue-chip companies increasing production in Vietnam\" width=\"500\" height=\"313\" \/><\/p>\n<h2>Add Vietnam to Lower Portfolio Risk and Volatility<\/h2>\n<p>Putting some Vietnam into your global portfolio offers another surprising benefit \u2013 it will likely lower portfolio risk and volatility. This is because it marches to its own beat and moves in the same direction as world markets only about 40% of the time, while other emerging markets move in tandem 87% of the time.<\/p>\n<h2>The Best Way to Invest in Vietnam<\/h2>\n<p>I often refer to emerging frontier markets like Vietnam as \u201cmotorcycle markets.\u201d This is because there are so many more motorbikes on the road than cars. In Vietnam\u2019s case, there are six times more motorbikes than cars, in part due to an import tariff on automobiles that starts at 100%.<\/p>\n<p>The busy streets teeming with thousands of motorbikes zooming in and out of traffic reflects Vietnam\u2019s most powerful edge \u2013 a youthful, ambitious people embracing more open markets and competition. A population where 46% are in the 25- to 54-year-old age bracket is in an ideal position to take advantage of \u201ccatch up\u201d income and wealth opportunities.<\/p>\n<p>This is also your opportunity.<\/p>\n<p>With a literacy rate of 95%, energy independence, a new prime minister who\u2019s hard-pressed to reform and privatize the state-owned companies that still represent 40% of Vietnam\u2019s economy \u2013 the upside for investors certainly outweighs the risks.<\/p>\n<p>Unfortunately, most advisors and gurus send investors interested in Vietnam to the <strong>Market Vectors Vietnam ETF<\/strong> (<a href=\"http:\/\/finance.yahoo.com\/q?s=VNM&amp;ql=1\" target=\"_blank\">VNM<\/a>). This isn\u2019t the best choice, as the ETF includes sizable exposure to some of Vietnam\u2019s largest, inefficient state-owned companies that also happen to trade at pretty high multiples. This is reflected in VNM\u2019s dismal performance \u2013 down 5% so far this year and down 26.8% over the last two years.<\/p>\n<p>You definitely need to avoid this outcome by thinking bottom up rather than top down. This will help you avoid the big state-owned banks and conglomerates, and capture the vitality of Vietnam\u2019s private enterprises.<\/p>\n<p>The winning strategy is a diversified portfolio of small- and medium-sized private companies that are growing fast and trade at very attractive valuations. The <a href=\"http:\/\/www.asiafrontiercapital.com\/afc-vietnam-fund.html\" target=\"_blank\">Asia Frontier Capital\u2019s Vietnam Fund<\/a> uses this strategy. The fund is up 53% over the last 30 months for an annual gain of 19.2% since inception.<\/p>\n<p>Here are a few companies in this fund right now.<\/p>\n<p>Vinasun is a dominant taxi company with annual revenue just short of $200 million. The entrance of <a href=\"http:\/\/www.wallstreetdaily.com\/2016\/05\/11\/austin-texas-uber-lyft\/\">Uber<\/a> into the country has created a more competitive environment, but there\u2019s plenty of room for both to grow, and the stock is trading at just 6.9 times expected 2016 earnings. A major asset is that Singapore\u2019s government is one of Vinasun\u2019s largest shareholders.<\/p>\n<p>Dien Quang is a leading lighting company in Vietnam. A couple of years ago, it entered the LED lighting industry offering lower cost and more efficient lighting for residential and commercial users. The company\u2019s sales are growing at double-digit rates, it plans to double production by the end of 2017, and its stock is trading at just 9.8 times 2016 earning.<\/p>\n<p>The lesson here is to look beyond conventional wisdom. Look beyond China and country ETFs that don\u2019t capture the growth and vitality of countries like Vietnam.<\/p>\n<p>Good investing,<\/p>\n<p>Carl Delfeld<\/p>\n<p>The post <a href=\"http:\/\/www.wallstreetdaily.com\/2016\/05\/25\/foreign-investing-vietnam\/\" rel=\"nofollow\">It\u2019s Time to Invest in Vietnam<\/a> appeared first on <a href=\"http:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Wouldn\u2019t it be great if you could create an ideal market to invest in out of thin air? Right off the bat you would want growth \u2013 lots of growth potential. Perhaps add economic numbers like inflation and interest rates on a declining trend to that list. Political stability, low valuations coupled with [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-90289","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90289","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=90289"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90289\/revisions"}],"predecessor-version":[{"id":90304,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90289\/revisions\/90304"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=90289"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=90289"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=90289"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}