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Vietnam Attracting Investment Attention

|Includes:Vinacapital Vietnam Opportnty Fd Ltd (VCVOF)


There definitely are more familiar, less risky places than Vietnam in which to put your hard-earned savings to work. But a number of respected emerging-market fund managers say the Southeast Asian maritime nation's prospects are compelling enough for them to buy Vietnamese stocks.

It's not hard to see why. The dynamic, resource-rich country is the world's second-largest exporter of coffee, after Brazil, and of rice, after Thailand, and it's a net crude-oil exporter, too. Taking a page from China's consumer playbook, its middle class is rising rapidly from a young and well-educated population of 88 million. But they're willing to work for lower wages than the Chinese, so manufacturing accounts for about half of an economy that's growing 6% a year.

Vietnamese stocks also are cheap, underscoring the country's many attractions. Fast-growing food, pharmaceutical, and rubber-plantation companies trade at five to seven times earnings, which makes them 30% to 50% cheaper than their peers in other developing countries, estimates Mark Mobius, executive chairman of Templeton Emerging Markets. They also offer 4% to 6% dividend yields. "The key word for Vietnam at this stage of the game would be valuation," says Mobius. "Generally speaking, it's quite attractive."

I am definitely pretty high on Vietnam. It has quite a few tailwinds and has learned some lessons from a few years ago especially on inflation. With the economy bouncing back and the market beginning to attract foreign money again I still see the play as Vietnam Opportunity Fund which still trades at a significant discount to net asset value. The management of the fund is shareholder friendly and is buying back shares to lower the discount. It is refreshing to see that we were positioned in Vietnam well before the mainstream figured out it was cheap and attractive. I am up almost 20% in this one and would buy it here if I did not have a position.

Disclosure: I am long OTCPK:VCVOF.

Stocks: VCVOF