The Vietnamese stock market presents striking similarities to the earlier development of the Chinese market and has a large potential to grow from a small base, says Ivan Martchev, editorial director of InvestorPlace Media, in his article "Is Vietnam the next China?".
HA NOI —
The Market Vectors Viet Nam Exchange Traded Fund (NYSE: VNM), the only listed Vietnamese investment fund on the US market, has begun to move in the right direction, Martchev said. Over the long haul, VNM should track the VN-Index, which remained over 50 per cent below the highs it reached in 2007, leaving Viet Nam with a very low market capitalisation-to-GDP ratio despite positive demographics and an economy that escaped recession in 2009.
"It does have a heavy reliance on foreign direct investment, but that is similar to China in the early years of its development," said Martchev.
However, Martchev noted, inflation and a weak currency were the risks in Viet Nam, as well as the low level of foreign exhchange reserves.
"There is a competent prime minister who has made commitments to address external imbalances such as the trade deficit, a lack of liquidity in the country's currency market and the relatively low level of foreign investment inflows," he said, noting that the nation's stock market rallied even after Moody's had downgraded its sovereign debt rating.
"But, the stock market rallied after a sovereign debt downgrade. This should tell you something about the timeliness and credibility of Moody's." — VNS