Vietnam ETFs: Growing Higher Than Planned

By Dmitriy Gurkovsky, Chief Analyst at RoboMarkets

Quite recently, we’ve been speaking about TUR (NYSE: TUR), a Turkish ETF that declined severely because of US customs duties. This, in fact, allowed investors to enter the market a lower price, while TUR now is up and 15% away from its lows.

Still, investing opportunities appear not only after serious falls (in fact, this is risky, as such assets are quite volatile), but also in steadier instruments. As such, those who invested in the Chinese economy in the 1990s earned good profits, although the market was hardly ‘developing’ any longer.

Even now, there are ETF’s that have great earning potential. As always, you can choose a more simple and less risky path. Take a look at APAC: the growth potential is good, while some ETF’s corrected after the trade wars and are now available at attractive prices.

One of the options is the VanEck Vectors Vietnam (NYSE: VNM). This ETF follows the MVIS Vietnam index and consists of the publicly traded companies that are either based in Vietnam or have over 50% of their assets there. Since May 2018, VNM has added 13% to its value. As it is not 100% Vietnamese (only 73% belong to Vietnam), other shares belong to the following countries: South Korea (12%), Japan (5%), Taiwan (4%), UK (3%), Hong Kong (2%). This enables good diversification and makes this ETF quite conservative.

As for the sectors, 16% are represented by consumer and finance, while real estate and technology account for 11% and 8%, respectively. Over the last week, the capital inflow was $3.30M, bringing the yearly total to $44.40M. The major ETF’s shares are such Vietnamese companies as Vietnam Dairy Products JSC (HSX: VNM), which account for 8.15%, Vinhomes JSC (HSX: VHM), 8.01%, and Vingroup JSC (HSX: VIC), which accounts for 6.67%.

Since 1990, Vietnam has been implementing reforms, thus improving its investment climate year by year. After the the Vietnam war and the realization that the Communism regime wasn’t working, the Vietnamese Government enabled a privatization campaign; in 4 years, there were 50% less public companies in the country. Modernization played a very important role, while direct investments were attracted from abroad, and new industry techs were being implemented. In 1991-1995, there were $1.2B as overseas investments in Vietnam, while in 2017 there were over $35B.

The Vietnamese Ministry of Planning and Investments is working with the World Bank to improve the business climate further and create a new direct investment strategy that will focus on the ‘quality’ of the incoming money rather than the amount. Currently, high tech companies are in focus, as the government is doing everything to switch from a cheap work force economy to the one based on technologies and qualified specialists. Most investments into Vietnam are coming from Japan, Singapore, and South Korea. The country is now striving to expand the portfolio and conquer regions other than APAC, such as the US, the EU, and others.

As Vietnam joined various multilateral free trade agreements, such as the WTO, both import and export rose. By 2017, the turnover reached $400B, which is 4 times higher than 10 years ago.

The government is now planning to create free economic zones where the companies will get tax support. This influenced the overseas capital flow in other countries, which made the Vietnamese economists leverage this experience, also taking into account the negative sides other countries faced. As such, the company opening process will be much more simple, while the investment terms will be tighter, and the tax privileges, better.

Over the 9 months of 2018, Vietnamese GDP rose by 6.98%, which is the highest figure since 2011. The GDP change was mostly influenced by construction, and services, which strengthened as more tourists have been coming to Vietnam.

Technically, the price of the ETF in question is not at its highs on W1, which means it’s not overbought. When the price went below $16, the volume grew, which led to the support forming at $12, which has not been broken out by the price yet.

 

On D1, there is a clear support at 5$16. There are two possible scenarios: either the price will break out $17 and head towards $18, or it will correct to $16, but then find support there and, again, go further up.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Having majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.