Vietnam: The Next Big Thing in Emerging Markets?
By Ben Kumar
The world of investing is always on the lookout for the next big thing, and in recent years, Vietnam has emerged as a country that's capturing the attention of investors worldwide. But is Vietnam the next South Korea, or is it just a fleeting trend? In my opinion, the answer lies somewhere in between, and it's worth taking a closer look at why.
One thing that immediately stands out is the country's economic growth. With an average GDP growth rate of around 7% per year, Vietnam is certainly on the rise. But what makes this particularly fascinating is the fact that this growth is not just a result of traditional industries like farming. Instead, Vietnam is experiencing a manufacturing boom, with big companies looking to diversify production away from China. This shift is creating a new wave of economic activity, and it's something that investors should be paying attention to.
From my perspective, Vietnam's story is not just about economic growth, but also about the country's potential to become a major player in the global economy. With a GDP per capita that is similar to South Korea's in the early 1990s, Vietnam has the potential to follow a similar path of development. However, it's important to note that Vietnam is about 30 years behind South Korea, and there are challenges to this rapid growth, such as electricity demand rising faster than supply and the need to stay neutral in disputes between the US and China.
One thing that many people don't realize is that Vietnam's economy is still relatively small compared to other major players. The market is dominated by a few big players, with a huge number of tiny companies. This means that most investors should focus on the big, established businesses, rather than trying to pick individual stocks. The Xtrackers Vietnam Swap ETF, for example, gives investors exposure to 28 of the largest companies in the country.
In terms of specific companies, one of the biggest is Vingroup, a conglomerate that does everything from housing developments to healthcare and education. Another big business is the steelmaker Hoa Phat Group, which is benefiting from the country's frantic pace of construction. And then there are the banks, such as Saigon–Hanoi Commercial Joint Stock Bank and Sacombank, which are benefiting from the growing number of households entering the banking system.
What this really suggests is that Vietnam is a country with a lot of potential, but it's also a country that is still in the early stages of development. The economy is new and changing quickly, and the market is dominated by local investors who can swing from panic to elation quickly. This means that investing in Vietnam can be a wild ride, and it's important to be prepared for the ups and downs.
In conclusion, Vietnam is a country that is certainly worth considering for investors looking for the next big thing in emerging markets. With its strong economic growth, potential for diversification, and the opportunity to become a major player in the global economy, Vietnam has the potential to be a major success story in the years to come. But it's also a country that requires careful consideration and a long-term perspective, and it's important to be prepared for the challenges that come with investing in a rapidly developing economy.
