Vietnam is the New India

China and India are old news. But there is one place that is proving to be a sound choice for investors this year. If you invested in Vietnam early this year, you are up 60%. Here are some facts about Vietnam that make it a promising investment over the next couple of years.

* Intel (INTC) is planning a $300 million dollar chip plant there.
* Vietnam is home to the 2nd largest Nike (NKE) production facility after China.
* Over 50% of Vietnam's population is under 25 years of age.
* A recent leadership change is dedicated to reforming various government owned sectors through privatization.
* 70% of products manufactured are exported - 2/3 of which is exported to the US.
* There is a good chance that Vietnam will become a member of the World Trade Organization this October. Once this happens, it will open up Vietnam to many more financial markets worldwide.
* GDP growth is currently between 7%-8%, second only to China among all Asian nations.
* Labor and production costs in Vietnam are one-third the cost of that in China, giving Vietnam a competitive advantage over China.

There are a few things that investors should keep in mind though. Vietnam's stock market only consists of a little over 40 companies, although privatization should increase this number. Additionally, Vietnam's market is only about 6 years old, which means there is not much history to learn from. Lastly, Vietnam's economy is mostly consumer driven. For an economy to sustain itself long-term, it needs to be driven by businesses.

Nevertheless, I believe Vietnam is a worth a look for investors vary of China, Brazil and India. Look for investments in the infrastructure, banking and consumer related stocks. If you find any, share them with me.

Comments

[Bjarni Magn...:]

Sounds like a very potential growth market in the next few years. Do you know if it is possible to invest in an ETF which is traded in the US or somehting similar?
Bjarni

2006 Sep 04 09:09 AM

[Faisal Laljee:]

No ETF's yet. Merill Lynch has a fund that is available to their clients.

2006 Sep 05 01:51 AM

[Hari V:]

Bjarni, I am not aware of an ETF for Vietnam, but from Faisal's article, you can expect one soon enough.

Faisal, on the downside, Vietnam has very few stocks trading in its stock exchange. There are not a lot of ooptions to look at as it is an 'emerging market'. But the country holds a lot of potential as it has people who can speak English and French. This has benefits for certain roles that can be outsourced. I am also looking forward to see if you can throw light on how far Vietnam would be able to compete with Brazil, Russia, China, India and other east European countries and how technically competetive the labor force is. Right now, Vietnam sounds interesting.

2006 Sep 04 08:41 PM

[Faisal Laljee:]

Hari - Yes as I alluded to, Vietnam has just over 40 companies in their stock market. As for competing with BRIC, Vietnam's production and labor costs are one-third that of China.

2006 Sep 05 01:58 AM