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An Emerging Market with a Promising 5-10 Year Outlook

An exciting investment opportunity with a long runway for growth

Vietnam's economy has been gaining significant attention from international investors due to its robust growth and numerous catalysts that could propel it even further in the coming years.

With favorable government deregulation of equity markets, opening them up more to foreign investors and a number of other catalysts, we feel that it is time to consider Vietnam as a long-term investment for the MacroVisor Portfolio. To do that we would be looking at the VanEck VNM ETF.

Let’s talk about what has us interested in investing in this emerging market.

Catalysts for Investing in Vietnam

  1. Foreign Direct Investment (FDI) Surge: FDI in Vietnam reached $36.6 billion in 2023, a substantial 32.1% increase from 2022. This surge reflects the growing confidence of foreign investors in the Vietnamese economy and its potential for future growth.

    Foreign Direct Investment via Trading Economics

  2. US Investment Interest Growing: Fifteen US firms have expressed interest in investing up to $8 billion in Vietnam, including chipmakers. This development highlights the country's attractiveness as a manufacturing hub, particularly for industries looking to diversify their supply chains away from China.

  3. Beneficiary of Trade Tensions: As companies reconsider their reliance on Chinese manufacturing, Vietnam stands to benefit from this reshoring trend, with increased foreign investment and demand for its exports.

    Manufacturing has seen a strong rebound of late, per Trading Economics

  4. Growing Domestic Consumption: Increased consumption of goods in Vietnam could benefit key industries such as electronics, textiles, mining, footwear, chemicals, furniture, plastics, and paper. This growth is driven by a burgeoning middle class, which is expected to reach 30% of the population by 2026.

  5. Robust Tourism: Despite some pandemic-related setbacks, Vietnam's tourism sector has shown resilience and could see further growth as global travel restrictions ease.

    Tourism has been picking up again after COVID, via Trading Economics

  6. Export Demand: As emerging economies cut interest rates, demand for Vietnam's exports is likely to increase, providing a tailwind for the country's manufacturers.

  7. Attractive Valuations: Current valuations of Vietnamese stocks present an opportunity for investors seeking growth at reasonable prices.

  8. Regulatory Reforms: The Vietnamese government is relaxing stock market settlement procedures for foreign investors and allowing brokers to endorse foreign investors during purchases, making the country more attractive to overseas investors.

  9. Vietnam’s economy controls to grow at a rapid pace, expanding by 6.72% year-over-year to end 2023.

Vietnam GDP growth rate year-over-year from Trading Economics

Risks to Consider

No discussion of an investment would be complete without highlighting the risks, and there are always going to be risks to consider. Here we identified four key risks for Vietnam.

  1. China's Economic Slowdown: A material slowdown in China's economy could negatively impact Vietnam as it would affect most of Asia.

  2. Global Inflation: If global inflation picks up significantly, it could cause challenges for the Vietnamese economy, potentially leading to headwinds for investors.

  3. Geopolitical Tensions: Increased regional geopolitical tensions could have a negative impact on investment in Vietnam.

  4. Global Market Downturn: A broader global market downturn could harm Vietnamese stocks and dampen investor sentiment, despite the country's strong fundamentals.

In closing, investing in Vietnam presents an exciting opportunity for those willing to accept some level of risk. With a growing middle class, expanding manufacturing sector, and numerous catalysts for continued growth, Vietnam is an emerging market with significant upside potential.

By staying informed about both the opportunities and risks associated with this dynamic economy, investors can make well-informed decisions that capitalize on its promising future. We will be continuing to cover Vietnam here at MacroVisor in our Dashboard and in updates on the economy and investment opportunities in the country as they develop.

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