{"id":61269,"date":"2023-09-15T06:20:04","date_gmt":"2023-09-15T10:20:04","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/vietnams-economy-is-on-fire-why-its-stocks-arent\/"},"modified":"2023-09-15T06:20:08","modified_gmt":"2023-09-15T10:20:08","slug":"vietnams-economy-is-on-fire-why-its-stocks-arent","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=61269","title":{"rendered":"Vietnam\u2019s Economy Is on Fire. Why Its Stocks Aren\u2019t."},"content":{"rendered":"
\n

Vietnam is a rapidly emerging economic power. So, why isn\u2019t it an emerging market? <\/p>\n

The index gatekeepers at MSCI are sticking with the country\u2019s \u201cfrontier market\u201d status for the foreseeable future, preventing many emerging markets funds from investing there\u2014and for good reason. <\/p>\n

\n

President Joe Biden singled out Hanoi for an Asian state visit this week, mostly to cement a 100-million-strong strategic counterweight to neighboring China. A brace of tech executives accompanied the president to explore further investment.<\/p>\n

No wonder. Vietnam is visibly moving up the electronics value ladder as manufacturers seek alternatives to China.
\n Apple\u2019s<\/span>
\n (ticker: AAPL) suppliers are reportedly upgrading local production from simpler accessories to OLED screens. Rival
\n Samsung Electronics
\n (005930.Korea), which already produces half of its smartphones in Vietnam, recently rolled out a $220 million research-and-development center in Hanoi. <\/p>\n

Vietnam is nibbling at China\u2019s supremacy in the semiconductor supply chain with new investments by packaging\/testing specialist
\n Amkor Technology
\n (AMKR) and data infrastructure provider
\n Marvell Technology
\n (MRVL), says Dylan Patel, chief analyst at SemiAnalysis. <\/p>\n

Vietnam\u2019s economy will grow nearly 5% this year even as export markets contract, then rebound to 6% by 2025, according to the World Bank. The case for Vietnamese stocks is a lot shakier. There still aren\u2019t many to choose from, 35 years after Communist leaders launched market reform: About 50 companies have a $1 billion-plus market cap, says John Paul Lech, a portfolio manager at Matthews Asia. <\/p>\n

\u201cThe very exciting top-down story suffers from market breadth and access in the bottom-up perspective,\u201d he says. <\/p>\n

Multinationals dominate the burgeoning export sector, accounting for three-quarters of Vietnam\u2019s foreign sales. That leaves a domestic bourse overly exposed to banks and real estate developers (half of the market cap), which in turn are exposed to financial and administrative growing pains. <\/p>\n

The
\n VanEck Vietnam
\n exchange-traded fund (VNM) crashed by nearly half last year as domestic uproar compounded the global markets slump. The government clamped down clumsily on a frothy real estate bond market and threw a number of tycoons in jail on vague corruption charges. Both moves spooked the key financial sector. <\/p>\n

The market has regained a third of its lost ground this year as Hanoi slowed down the purge and bolstered banks with liquidity. \u201cVietnam\u2019s Communist Party has shown it isn\u2019t marching down the same road as China\u2019s,\u201d says Jonathan Binder, chief investment officer at frontier markets specialist Consilium Investment Management. \u201cThey handled the property sector situation deftly.\u201d Neither is Hanoi marching toward emerging market status, however. The main roadblock is limits on foreign ownership, set at 30% for banks and 49% for other listed companies. That\u2019s a deal killer for MSCI. <\/p>\n

Thailand offers precedent for a workaround with nonvoting depositary receipts that don\u2019t count toward the foreign ownership cap, says Bill Stoops, chief investment officer at Hanoi-based
\n Dragon Capital.<\/span>
\n Vietnam\u2019s leaders are still thinking about it. \u201cRerating of the market to much higher Southeast Asian valuations seems unlikely until we go into the MSCI-EM index,\u201d he says.<\/p>\n

But a few stocks stand out. Information-technology outsourcer
\n FPT
\n (FPT.Vietnam), the country\u2019s leading tech name, is an investor favorite. \u201cFPT\u2019s engineers are just as good as India\u2019s or China\u2019s at half the price,\u201d Stoops says. He\u2019s also bullish on steel maker
\n Hoa Phat Group
\n (HPG.Vietnam), given the likely acceleration of infrastructure development, and diversified retailer
\n Mobile World Investment
\n (MWG.Vietnam).<\/p>\n

China\u2019s mix of Communism and capitalism worked brilliantly, until (maybe) it didn\u2019t. We\u2019ll see if Vietnam can do better. <\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Vietnam is a rapidly emerging economic power. So, why isn\u2019t it an emerging market? The index gatekeepers at MSCI are sticking with the country\u2019s \u201cfrontier market\u201d status for the foreseeable future, preventing many emerging markets funds from investing there\u2014and for good reason. President Joe Biden singled out Hanoi for an Asian state visit this week, […]<\/p>\n","protected":false},"author":1,"featured_media":61270,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-61269","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nVietnam\u2019s Economy Is on Fire. Why Its Stocks Aren\u2019t. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Vietnam is a rapidly emerging economic power. So, why isn\u2019t it an emerging market? 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