Economic & Financial community

Vietnam as a Potential Emerging Market for Investment

Certainly, the Vietnamese stock market is full of potential, and that is what draws investors to consider investing in the Asian country, especially since Vietnam is about to shift from a frontier to an emerging market. The stock market has been launched in 2000 and is still pretty new which many investors see as an opportunity to participate.

But nevertheless, there are some obstacles and issues that make investors think twice. For example, the market has already crashed two times since its launch, and the number of domestic market participants remains scarce. One of the reasons is certainly the Communist regime which keeps investors away, as it is a well-known fact that the Party leaders often interfere in the affairs of public companies.

Regarding the shift from frontier to an emerging market, Vietnam is in the rank with Ukraine, Bangladesh, and Ghana according to the MSCI Frontiers Index. Despite internal issues, Vietnam has the potential to grow as a fertile investment ground for foreign investment. Moreover, amendments to the law on foreign ownership would provide for an open window to international investors. As a matter of fact, restrictions on foreign ownership will be removed including the rule that prevented foreigners from owning more than 49% of a company on the stock market. But, yet, the amendments exclude some sectors like the banking sector of course.

International Investors

As for the big players in the stock market, they seem to have a desire to invest in Vietnam but are still reserved. For example, the Pacific Horizon Investment Trust has investments all over the continent, excluding Japan, but only around 1% accounts for Vietnam. But there is hope as the Fund wants to extend its investments in the country which could be a good sign for other market participants.

UK Funds remain reserved finding it difficult to invest in Vietnamese companies directly. They want to seek out direct investments and not track the market, and they would welcome the law amendments.

Why many hold on to Vietnam is that there are strong indicators of economic growth like a bigger percentage of educated people, the use of smartphones, etc. According to some sources, China is also looking to extend their manufacturing business to Vietnam which would further drive the employment rate up.