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What Wealth Managers say about Vietnam’s investment promise?

by Inside Out

Here is a collection of views from a raft of UK-based asset management figures who focus on, or who have significant exposures to, Vietnam. The Southeast Asian country has become one of the darlings of the emerging markets investment space.

With half of its population under the age of 35 and a rapidly expanding middle class, Vietnam is one of the most dynamic frontier economies, and has not suffered as dramatically from COVID-19 as other nations, at least in terms of publicly-disclosed data. This news service knows from past experience that a number of wealth managers are interested, and doing business there, such as Swiss private bank Bordier & Cie (see an interview here).

Related: Webinar: Vietnam’s property market trends & economic conditions

When it comes to investing in Vietnam, where are the best opportunities and how do they differ from those of other Asian countries? What’s the attraction of accessing them in a single-country fund versus a broader frontier markets strategy? And how could Vietnam’s relationship with China affect the outlook for the region? The Association of Investment Companies in the UK has gathered comments from investment company managers investing in Vietnam.

Why Vietnam?

Khanh Vu, Co-Manager of VinaCapital Vietnam Opportunity Fund

The main attraction of investing in Vietnam is that the country is following in the footsteps of other “Asian Tiger” economies that came before it such as Japan, Korea and Taiwan. So the future trajectory of Vietnam’s per capita income, consumer spending, and of the general wealth of its citizens is fairly clear. Furthermore, Vietnam is essentially the only Asian Tiger country left to invest in – given how far economic development of other Asian Tigers has already progressed.

Emily Fletcher, Portfolio Manager of BlackRock Frontiers

Vietnam has been a poster child for frontier markets, having experienced strong economic and social development over the past two decades. The country has seen the benefits of more than $149 billion in foreign direct investment inflows over the past 20 years, supported by accelerating supply chain migration from China – a trend that was established well before trade tensions between China and the US emerged. This has driven huge increases in manufacturing production, such that exports have grown at a compound annual growth rate of 15.8 per cent over this period. Domestically, demographics are in favour of sustainable growth.

Craig Martin, Manager of Vietnam Holding

Vietnam’s GDP per capita is expected to reach $5,000 by 2025, and by 2035 there could be a further 35 million middle-income consumers in the country. We think this provides exciting prospects for investors. Vietnam is a very open economy from a trade perspective, with more than 200 per cent of its GDP in exports and imports. Over the last three decades it has transformed from an exporter of raw materials, to a producer of finished and semi-finished goods, as well as exporting services – such as information technology.

Handling COVID-19

Ewan Markson-Brown, Manager of Pacific Horizon

“So far Vietnam can be considered one of the more successful countries at dealing with COVID-19. It has registered just over 1,000 cases and 35 deaths. The country initially strictly controlled movement internally and externally and reduced cases to zero, however after 99 days of no cases, an outbreak did occur in Da Nang. Given the country’s relatively low level of income it stands out as one of the world’s success cases.

Craig Martin, manager of Vietnam Holding

Vietnam’s handling of COVID-19 has rightly won praise and admiration from many other nations. Books will be written on how Asia as a whole dealt with the pandemic versus “the West” and “the rest”. It is too early to attribute any one factor as the key success factor, but certainly the cohesiveness of society and the single-mindedness of the people in taking on a threat has been a key part of the resilient response. Let’s not forget that Vietnam was an early victim of SARS in 2003, and regularly faces disease risk from Avian Flu and Swine Flu, so arguably has developed better responses, protocols and communications to deal with emerging infections, and indeed pandemics.

Dien Vu Huu, Portfolio Manager of Vietnam Enterprise Investments Limited

Having dealt with SARS in 2003, Vietnam responded quickly to COVID-19. From early March air, land and sea borders were all but sealed to human traffic though not to trade. Formal lockdowns have been few, brief and localized, which has limited the economic impact while monetary and fiscal easing have been aggressive, with local government bonds now bearing negative real yields. Hospitality and tourism have been affected of course, but domestic consumption has rebounded and stabilised and exports continue to grow. The unfreezing of infrastructure spending has added another driver of growth which is being reflected in the local market.

Opportunities in Vietnam

Gabriel Sachs, Manager on Aberdeen Standard Asia Focus, said: “We are bottom-up investors of course but from a macro perspective we are very positive on Vietnam and have been building positions in a couple of companies over the past two years or so. At the moment we have almost 4 per cent of the portfolio in Vietnam. The two companies operate in very different sectors – Nam Long is an affordable housing developer primarily based in Ho Chi Minh City and the other, FPT Corp, is a conglomerate which operates primarily in the IT services industry but has fast-growing telecommunications and education businesses. It is by far the leading tech company in Vietnam hiring a third or more of all computer science graduates in the country, many of whom study in FPT’s own campuses.

Khanh Vu, Co-Manager of VinaCapital Vietnam Opportunity Fund

Currently the manufacturing sector accounts for less than 20 per cent of Vietnam’s economy, but manufacturing contributed over 30 per cent of GDP in each Asian Tiger economy at the peak. This is an indication of the extent to which Vietnam’s future economic growth will be driven by the further development of the manufacturing sector – and the COVID-prompted relocation of factories from China to Vietnam will accelerate this development.

Emily Fletcher, Portfolio Manager of BlackRock Frontiers

The young, relatively well educated, and increasingly connected population has helped steer change in how businesses interact with consumers. With over 51 million smartphone users, representing 80 per cent of the population aged 15 years and older, awareness of mobile internet and usage has increased, sparking further evolution of retail services. Similarly, the global trend of improving health and wellness has not been lost on Vietnam, leading to shifts in nutritional preferences and the way people shop for food. Seen through this lens, consumer related industries remain preferred areas for investment.

Dien Vu Huu, portfolio manager of Vietnam Enterprise Investments Limited

“An innovator worth mentioning is Mobiworld Group. It is Vietnam’s top retailer, with 3,600 stores nationwide, selling mobile phones and consumer electronics, and is now moving into small supermarkets. Management has proven adept at deploying technology and systems to roil up fragmented industries, leading Vietnam into the modern trade era.

By Editorial Staff @ Wealth Briefing Asia

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