01/04/2019 - 17:08
Country Overview: Vietnam — A Tiger In The Making
A bright outlook for Asia’s next Tiger Economy. Vietnam is now emerging as Asia’s next macroeconomic growth story – and a compelling investment opportunity. A highly attractive demographic structure, increasingly strong trade ties, and booming investment from foreign manufacturers support our confidence in domestic consumption, export growth, and economic expansion for at least the next two decades.
Against this background, we think the equity and bond markets are set to grow exponentially in the years ahead. Frontier markets such as Vietnam can be volatile and illiquid. But sophisticated investors who choose their investments wisely now have an opportunity to enter the Vietnam market prior to its inclusion in the MSCI Emerging Markets Indices, which we think will substantially increase institutional capital flows and asset prices.
Themes and catalysts:
- Financial & political stability.
- Booming FDI & open trade.
- Demographic dividend for the next 25 years from a young, well-educated, and hard-working population.
- MSCI E/M Index inclusion likely in the next three to four years.
A strong top-down growth story, driven by four main themes: 1) Foreign direct investment is surging as manufacturers seek alternatives to China. 2) Highly attractive demographics – c. 60% of this hard-working and educated population is under 35 years of age. 3) The nascent middle class is growing at 10% annually and this will continue for at least a decade. 4) Vietnam is still classified as a “frontier” market, but we expect MSCI Emerging Markets inclusion within three years. This will further boost foreign institutional investment in the market here.
Capital markets are only just getting started. Vietnam’s financial markets have lagged the nation’s strong and steady growth in GDP up to now. But the funding needs of public and private investment are driving positive changes and the Vietnamese stock market is opening up. Sectors that should benefit from the four drivers of macro growth include banking and other financial services, consumer cyclical and discretionary stocks, logistics services, and property developers.
Stock selection is key to success. This report also provides a summary of our institutional coverage and more detailed introductions to eight key stock ideas across the financial services, consumer, and property sectors – all businesses that should benefit from the themes discussed above. We also provide an overview of some of the idiosyncratic rules and other considerations that foreign investors must understand to achieve investment success in Vietnam.
