Vietnam’s growth story could be an appealing investment

Vietnam could be an appealing investment for investors seeking growth exposure outside of traditional emerging markets, says VanEck. The American investment management firm, in a recent market insight, analyses the country’s transition from a frontier to an emerging market and points to the reforms that have led to its remarkable growth.

“Vietnam’s economic reforms have created a virtuous cycle: reforms spurred exports, which in turn drove economic growth, leading to increased domestic demand. This trajectory has positioned Vietnam as a dynamic and integral part of the global economy, with a domestic market that continues to show robust growth potential,” says John Patrick Lee, Product Manager at VanEck.

Lee further points out that Vietnam’s economic growth is buoyed by its young and growing population. With over 60% of the population under 30 and a literacy rate above 90%, this dynamic is fostering a strong domestic demand driven by a burgeoning middle class with rising disposable income. Compared to other emerging markets, Vietnam’s private consumption ratio to GDP ranks it mid-range, higher than Saudi Arabia and China but lower than Brazil and the Philippines. This robust domestic demand offers Vietnam resilience against external challenges, including protectionist policies from major trade partners like the US and economic slowdowns from others like China.

When it comes to the equity market, VanEck believes that Vietnam is an emerging opportunity investors should look closely at. “Despite macro shocks including the Covid pandemic and economic problems in China, local Vietnamese stocks have outperformed broad emerging markets benchmarks since 2018,” highlights Lee. He sees the biggest equity opportunities in Financials, Real Estate and Consumer Staples.