Vietnam-sourcing

Top 4 ETFs for Investing in Vietnam In 2017

As Vietnam continues to shift from a controlled economy to a market economy, it is joining the world marketplace. Its agricultural products have become a significant export, and it is attracting foreign investments.

Investors wanting exposure to Vietnam can buy exchange-traded funds (ETFs) that either focus on Vietnam or have some exposure there.

We have selected four funds that offer opportunities in Vietnam for investors in the United States. Because this is an emerging market, we focused on ETFs that pay dividends, so investors can gain income while waiting for capital appreciation.

If any of the emerging market securities in these ETFs decline, investors should weigh the loss of share value against the value of the dividend. It is also important to emphasize that emerging market funds can default on dividend payments if the underlying markets fail.

Here are how the four ETFs break down. All figures are current as of July 17, 2017.

1. VanEck Vectors Vietnam ETF (VNM

VNM is the closest thing to a pure Vietnam play an investor will find. The fund tracks the performance of the MVISä Vietnam Index.

Companies that are incorporated in Vietnam, generate half their income in Vietnam, or have half their assets in Vietnam qualify for inclusion in the fund. Managers attempt to keep at least 80% of the fund’s assets in securities that are in the underlying index.

Expenses are fairly high for the fund, and it is considered high risk.

  • Avg. Volume: 175,653
  • Net Assets: $305.18 million
  • Yield: 2.14%
  • YTD Return: 14.49%
  • Expense Ratio (net): 0.63%

2. Guggenheim Frontier Markets ETF (FRN

FRN seeks to replicate the BNY Mellon New Frontier Index. This ETF has 9% of its assets in Vietnamese enterprises, and invests in the ETF above, VNM, along with other frontier markets. The fund seeks emerging market enterprises that trade on the London Stock Exchange, New York Stock Exchange, NYSE Amex and Nasdaq.

FRN is suitable for investors who are interested in putting money in Vietnamese companies but also want exposure to other emerging markets.

  • Avg. Volume: 25,247
  • Net Assets: $67.45 million
  • Yield: 3.44%
  • YTD Return: 18.26%
  • Expense Ratio (net): 0.70%

3. Columbia Beyond BRICs ETF (BBRC

Emerging markets funds typically focus on Brazil, Russia, India and China. BBRC includes other markets, such as Vietnam.

It has a nearly 6% exposure to Vietnam. It tracks the FTSE Beyond BRICs Index, keeping at least 80% of its assets in companies that are in that index.

  • Avg. Volume: 7,436
  • Net Assets: $72.58 million
  • Yield: 2.29%
  • YTD Return: 16.90%
  • Expense Ratio (net): 0.58%

4. iShares MSCI Frontier 100 (FM

FM follows the MSCI Frontier Markets 100 Index, and aims to invest a minimum of 90% of its assets in securities from that index. It may also choose other securities that are similar to those in the index.

The focus is on frontier markets, and it has a 3.63% exposure to Vietnam. The fund seeks securities that are liquid and ranks its component companies by market capitalization.

  • Avg. Volume: 129,325
  • Net Assets: $605.83 million
  • Yield: 1.04%
  • YTD Return: 16.10%
  • Expense Ratio (net): 0.79%

Bottom Line

Emerging markets carry much risk, and the Vietnamese market is no exception. However, its economy is gaining strength, and investors who want to take on more risk for the chance to have higher returns may consider ETFs that have exposure to Vietnam.

The ETFs listed above would be most appropriate for an investor who has a wise asset allocation strategy and is disciplined enough to stick to it. In that context, investing in Vietnam could be a calculated risk if it is offset by some safer investments.

Read more: Top 4 ETFs for Investing in Vietnam In 2017 | Investopedia http://www.investopedia.com/articles/etfs/top-vietnam-etfs/#ixzz4rQeXza6U
Source from internet: here 

 

invest-in-vietnam-2

How to Invest in Vietnam

Vietnam bears many traits of a prime investment candidate – strong organic growth, a middle class that is both surging in size and wealth, and attractive labor costs. With last year’s signing of the Trans Pacific Partnership (TPP) and the EU Free Trade Agreement, Vietnam will see a massive trade expansion that will further fuel its growth.

These dynamics have awarded Vietnam the largest FDI inflow within its peer group, and the Ho Chi Minh stock exchange has evolved into one of the most dynamic in Asia. While these traits make Vietnam indisputably attractive, American investorsare hindered by a major roadblock – no Vietnamese stocks are trading on U.S. stock exchanges. However, we believe investors should not be dissuaded from such an attractive market. We outline some viable investment options for Vietnam below.

Ways to Invest in Vietnam

 

Emerging market ETFs are great ways to invest in Vietnam.

Emerging Market Mutual Funds

One option is to buy shares in an emerging or frontier market funds. Based in the United States, these funds invest in growing companies in such markets as Vietnam, Thailand, Poland, Costa Rica and Colombia. In most emerging and frontier market funds, investment in Vietnam is very small, usually less than 3% of invested funds. The bulk of investment is in other more accessible countries.

Exchange Traded Fund

Investors can also invest in an exchange-traded fund (ETF), with shares bought and sold much like shares of stock. Currently there is only one ETF devoted to Vietnamese investments, and it is mainly targeted at traders. The ETF is not fully committed to investing in Vietnam with about 30 percent of the fund invested outside of the country. Furthermore, this fund utilizes passive investing which could be undesirable to many investors who believe an active approach is more effective in a new market like Vietnam.

Vietnam Mutual Fund & U.S Broker

Currently there is no Vietnam mutual fund in the US. This actively managed fund would allow investors easy access and liquidity in the Vietnamese stock market. Investing with a U.S. stock broker can be challenging for multiple reasons. Specifically, there are no U.S. retail brokers who have direct access to the Vietnamese stock exchanges.

U.S. and local brokers also provide great ways to invest in Vietnam.

Local Vietnamese Broker

The most direct access would be with a local Vietnamese broker. Investors must go through the approval process prior to buying shares directly from the Vietnamese stock exchanges. Foreign investors need to file a registration form, an applicant information sheet and a background check for criminal activity with Vietnamese regulators. There are drawbacks to investing through a local brokerage. For example, Vietnamese brokerages provide very little monthly reporting. There are numerous risks associated with investing in Vietnam. A U.S.-based financial advisor with knowledge of market conditions and experience in Vietnam should be consulted.

Source from internet:  here

3

Top 11 Reasons Why to Invest in Vietnam

Vietnam is the third largest market in Southeast Asia and one of the fastest-growing economies in the world. Low costs and regulations that encourage foreign investment are only some of the key elements that attract foreign entrepreneurs. In this article, we present you the top 11 reasons why you should invest in Vietnam.

#1 Strategic location

Located in the center of ASEAN, Vietnam has a strategic location. It is close to other major markets in Asia, the most notable neighbor of them being China.

Its long coastline, direct access to the South China Sea and proximity to the world’s main shipping routes give perfect conditions for trading.

Two major cities in Vietnam are Hanoi and Ho Chi Minh City. Hanoi, the capital, is located in the north and has extremely convenient trading opportunities. Ho Chi Minh City, the largest by population, is situated in the south and is the industrial mecca of Vietnam.

For more information about the advantages of different regions in the country, read our previous article on how to choose your business location in Vietnam.

#2 Doing business is getting easier every year

Vietnam has made numerous amendments to their regulations to make investing in Vietnam more transparent.

In terms of ease of doing business, Vietnam ranked 82 out of 190 countries in 2016. Compared to the previous year, the ranking improved by 9 positions.

This rise was the result of improvements in some processes of doing business. For example, the government made the procedures of getting electricity and paying taxes easier, according to the World Bank report.

Based on their economic models, Trading Economics predicts Vietnam to rank 60 by 2020. Hence, the future prospects of ease of doing business in Vietnam are very promising.

invest in vietnam

#3 Trade agreements

Another indication of openness to the global economy are the numerous trade agreements Vietnam has signed to make the market more liberal.

Some of the memberships and agreements:

  • Member of ASEAN and ASEAN Free Trade Area (AFTA)
  • Member of World Trade Organisation (WTO)
  • Bilateral Trade Agreement (BTA) with the US
  • Free Trade Agreement with the European Union (comes into effect in 2018)

All these treaties show that Vietnam is eager to promote the country’s economic growth and will continue its commitment towards trading with other countries.

#4 Stable GDP growth

Over the last few decades, Vietnam’s economic growth has been one of the fastest in the world. This rapid development started due to economic reforms launched in 1986 and the rise has been continuous ever since.

According to the World Bank, the GDP rate in Vietnam has experienced a stable growth, averaging 6.46 % a year since 2000.

#5 Openness to foreign investment

Geographical advantages and growing economy are not the only attractive features for investors. Vietnam has always been welcoming to foreign direct investment (FDI) and encourages it by constantly renewing regulations and providing FDI incentives.

The government of Vietnam offers several incentives to foreign investors who invest in certain geographical areas or sectors of special interest. For example, in high-tech or healthcare businesses. These tax benefits include:

  • Lower corporate income tax rate or exemption from the tax
  • Exemption from import duty, e.g on raw materials
  • Reduction of or exemption from land rental or land use tax

In July 2015, Vietnam also implemented Decree 60/2015 which allows foreign investors to invest in more areas than before.

Vietnam recorded $24.4 billion as foreign direct investment in 2016, according to the government. Giants like Samsung, Nestle, and LG are among the largest investors contributing to this number.

#6 Vietnam is the next China?

invest in Vietnam

Source: Economist.com

According to the World Bank, the economic growth of Vietnam has raised the country from one of the world’s poorest into a lower middle-income country over the past three decades. If the economic rise of nearly 7% a year will continue, Vietnam’s economic development could be compared to what Chinese economy experienced a decade ago, as predicted by economic analysts.

Rising labor costs in China increase the prices of products as well, giving Vietnam a good opportunity to become the next hub for producing labor-intensive goods. Industries that used to flourish in China are now moving to Vietnam.

For example, Vietnam is becoming the hotspot of manufacturing instead of China. In addition to top manufacturing sectors such as textile and clothing, Vietnam’s manufacturing is also taking a more high-tech direction.

#7 Growing population

With over 95 million residents, Vietnam ranks as the 14th largest population in the world. By 2030, the population will grow to 105 million, as forecasted by Worldometers.

Together with a growing population, the middle class of Vietnam is increasing faster than of any other Southeast Asian nation.

Steadily increasing economy means bigger income which, in turn, will result in growing middle class. A market research firm Nielsen estimates the middle class in Vietnam to grow to 44 million residents by 2020 and to 95 million by 2030. This will support consumerism making Vietnam a profitable target for foreign investors.

invest in Vietnam

Source: Vietnam Grocery Report 2013 – Nielsen

#8 Young demographics

Unlike in China where the population is aging rapidly, the demographics of Vietnam is young.

According to Worldometers, the median age in Vietnam is 30.8 years in contrast to 37.3 years in China. Nielsen has also estimated that 60% of Vietnamese are under the age of 35.

The workforce is young and large and shows no sign of decrease. In addition, the country also invests more money in education than other developing countries. Thus, besides being vigorous, the labor force in Vietnam is skilled as well.

invest in Vietnam

#9 Relatively low setup costs

In contrast to many other countries, there are no minimum capital requirements for most business lines in Vietnam. You can start a business without having a great amount of charter capital in your back pocket. Just make sure you have enough funds to cover the planned expenses of your company set up and you are good to go.

However, note that the amount of capital you stated must be fully paid in within 90 days of the date of your company registration.

If you would like to know more about capital stipulations, see our article about minimum capital requirements in Vietnam.

#10 Competitive labor costs

Despite the yearly increase of minimum wage, Vietnam is still a country with low labor costs. Wages in Vietnam remain less than half of what the wages are in China.

The rise of wages in China has forced manufacturers to look for a market with lower labor costs. Vietnam with its low minimum wage and growing economy is a great low-cost alternative to China.

invest in Vietnam

#11 Vietnam is much bigger than people realize

There are more people living in Vietnam than in most of the large countries in Europe. Vietnam’s population has already surpassed the following European countries:

Country Population
Vietnam 95,311,829
Germany 80,636,124
U.K 65,511,098
France 64,938,716
Italy 59,797,978


Source: Worldometers

Growing solvent population together with a booming economy hide bigger investment opportunities in Vietnam than most people would realize at first.

Conclusion

These were the 11 main reasons why to invest in Vietnam. In addition to the upsides, there can also be risks, as when investing in any other country. However, as you can see from this article, the tremendous growth potential of Vietnam certainly outweighs these risks.

 

Source from internet: here

05-25-foreign-investing-vietnam

It’s Time to Invest in Vietnam

Wouldn’t 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 – 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 low costs, and increasing flows of capital would also be nice.

Of course, we’ll never find the perfect market. There’s 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.

Let’s put the major negative to the Vietnam story out on the table first.

Like China, it has an authoritarian communist government and all the negatives that come with it. Fortunately, however, investors have the flexibility to sidestep the country’s state-owned enterprises and focus instead on smaller private companies that are on a high-growth trajectory.

The list of Vietnam’s positives is really quite impressive.

Here are just a few for starters:

  • A low level of capital stock so every dollar of investment yields big jumps in productivity.
  • Attractive demographics to fuel consumption.
  • A talented, well-educated, ambitious population with great faith in their future.
  • Low real wages for a decisive competitive advantage.
  • Tremendous opportunities for market reforms to unlock blocked potential.
  • Low valuations and rising, robust foreign investment to drive its industry and stock market forward.

Now, let’s take a closer look at some of these advantages and more…

Significant Catchup Potential With Neighboring Countries

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.

About 70% of Vietnamese still live in rural areas and remain involved in agriculture so, just like during China’s rise, urbanization will supercharge growth and incomes.

Improving Macro Fundamentals and Infrastructure

The country’s 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.

Vietnam’s 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.

Market Reforms in Banking and Finance

Significant issues for Vietnam include bank debt and non-performing loans. It’s 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.

In addition, Vietnam has to reign in government spending.

Low Stock Valuations Relative to Its Competitors

For some reason, many of Vietnam’s 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.

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.

Excellent Demographics Signal Long-Term Growth of Income and Wealth

In contrast to China’s premature graying society, Vietnam’s 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.

Wealth has risen at an annual compounded rate of 13.5% over the last decade, meaning Vietnam’s consumer and investor class is expanding every year.

The literacy rate is 94%, with primary education improving every year.

Geographic and Strategic Importance at the Heart of ASEAN

If the Trans-Pacific Partnership (TPP) passes muster, Vietnam will likely be the greatest beneficiary.

As the recently founded ASEAN Economic Community (AEC) moves forward, intra-ASEAN trade – already growing fast – will gain even more momentum. Vietnam’s long coastline, its position facing the South China Sea, and shipping lanes that account for 40% of global trade – all underline its strategic importance.

Vietnam’s cooperation with America is also deepening as it seeks a hedge on China’s growing weight in the region.

Low Cost Base for Manufacturing and Services

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.

One example is the Japanese government’s recently announced $1.7 billion aid package to Vietnam.

During the last three years, there has been more foreign direct investment flowing into Southeast Asia than into China – $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.

 

Source from internet: here

1

Investors should take a closer look at Vietnam – but beware these risks

Vietnam is an intriguing market undergoing significant change, and its stock market has been a strong performer. It is one of the largest positions within our T Rowe Price Frontier Markets strategy, and we have been overweight since mid-2014.

We recently attended Vietnam’s largest investor conference, which offered us the chance to meet a large number of companies, industry experts and also representatives from both the World Bank and the Asian Development Bank.

Three years ago, no one was interested internally or externally in Vietnam, but this time the conference was overwhelmed, with nearly 200 foreign investors and about 200 local investors. Vietnam is firmly back on the map and everyone was talking about it as the Asian play. However, to me, this does raise an amber flag.

Economy remains robust

We are now in the fifth year of broad economic stability and the future remains bright, with the government targeting 6.7 per cent growth for 2017. The levels of foreign direct investment also continue to rise year-on-year, with electronics attracting the lion’s share as Vietnam becomes a manufacturing hub. What is particularly interesting is that 70 per cent of exports are now from foreign-owned companies within Vietnam. Samsung Electronics on its own makes up 30 per cent of this total.

Inflation is ticking up, but is still below 5 per cent. Historically, the indicator of any potential bubble bursting has been inflation, so we will continue to keep a close eye on any surge higher. And there are also vulnerabilities. The fiscal deficit is 6 per cent of GDP, while debt-to-GDP stands at 65 per cent, which is the government’s stated maximum, so there is a concerted effort to rein it in.

The demise of the Trans-Pacific Partnership was unfortunate, but has had no real impact so far. It could have a longer-term impact as Vietnam’s growth model is more dependent on access to the US and other developed markets than most frontier markets. However, there are already talks of bilateral trade deals being organised with countries like the US, so we are not too concerned.

Keeping an eye on property

One of the reasons we went overweight in mid-2014 was that there were clear signs the property market bust had bottomed and there were signs of stabilisation. What is interesting now is that, almost three years later, the top end of the property market is now showing signs of oversupply.

However, there remains a very strong demographic tailwind, with urbanisation driving around 1m people to the cities each year. The median age of the population is under 31, with 45 per cent of the population below the age of 30. This is keeping very strong demand at the low to middle end of the property market.

The top end will be oversupplied, but investors appear relatively sanguine at the moment. However, with higher mortgage rates of between 7 and 10 per cent, combined with relatively low rental yields of around 6 per cent, it could at some point put a strain on the system.

A cleaner banking system

The banking system has been a worry, but on this trip I was reassured the problems of the past are being dealt with. We are now dealing with a much cleaner and more honest system. One of the banks we met with told us that non-performing loans (NPLs) were probably around 17 per cent at the peak. Three years ago they were telling us it was only 5 per cent.

The stock market has rewarded those banks that have been the most transparent by admitting NPLs early. Many of these now have NPLs around 2 per cent – a much improved situation. Some of the others are still ironing out problems, so we are staying clear.

Encouragingly for profits, loan growth accelerated to around 18 per cent last year and it is expected to be around the same level this year. Where there is a change is where the money is being directed. Historically, the vast majority had gone toward state-owned enterprises, but now more of the money is being directed to retail and SMEs to take advantage of an underpenetrated consumer.

A more buoyant consumer

The consumer is offering up more and more opportunities. The Vietnamese consumer is currently in quite a good spot – with rising GDP per capita, rising wages and greater access to credit. This is helping to boost the services sector, where we continue to see strong growth.

Up until now, we have played and benefited from the broad economy – banks, property, and construction. We intend to continue this, but we may tilt a little bit more toward the consumer. We have unearthed a few more companies in this space, which may be a little more small-cap but could offer great long-term opportunity.

Overall, it was a positive trip, but the risks are definitely rising – with respect to the economic cycle and to market positioning, particularly by foreign funds. Though, for now, there remains enough momentum in the economy and by certain individual companies for us to remain fully invested in Vietnam.

 

Source from Internet : here