A DISCUSSION of one of the most interesting countries in Asean in terms of investment and economic growth would have to include Vietnam. Vietnam is not just a star on its flag, but also in terms of economy and investment.
The past decade saw rapid growth of Vietnamese economy, with the average annual increase in GDP of 5 – 7 per cent. Analysts believe the growth could move to around 6 – 7 per cent in the next few years (Bloomberg, December 31, 2017). Long-term growth was estimated to be around 5 – 6 per cent until 2030 (source: PWC, The long view: how will the global economic order change by 2050, as of February 2017). These estimates were based on three major drivers Vietnam has been positively experiencing: demographics, foreign investment and government policy.
Demographically, most Vietnamese are in the working age, whereas other AEC countries are burden with aging population. Estimates are also available that the working age population of Vietnam would be strong until 2039, when the Vietnamese workforce could reach 70.44 million (source: World Bank 2017).
This, coupled with relatively low labour costs, favour demographics for economic expansion, which explain why many major companies open their production facilities here. Since the employment rate is also increasing, which boosts the quality of life and income, the consumption rate would inevitably soar. The quality of the workforce is no slouch. Such can be seen from 2015 results of PISA test, issued and administered by OECD, that showed a high level of science knowledge, ranking eight from 72 countries that participated. In the long run, we can see this as a high quality education system that would generate high quality population primed for driving the economy forward.
Foreign investment has been showing constant growth since 2012, with Japan and Korea as the main investors. The future might see more European investment as a result of FTAs with European countries.
Moreover, political stability and government policies favour long term economic growth and investment. Relaxed monetary and fiscal policy and increasing reserves reflect more monetary strength and help stabilise the currency value where the ability to control inflation in the past five years shows the effectiveness of Vietnamese monetary policy. All these, along with FTAs with many countries and foreign investment promotion help move Vietnamese economy and its stock market forward.
The Vietnamese stock market is also interesting as we have seen Ho Chi Min Stock Exchange market capitalisation grew for more than six times from 2013 (Credit Suisse : Asia Pacific/Vietnam, Equity Research Strategy , Bloomberg, November 27, 2017) From 2013-2017 the VN 30 Index showed an average growth of 18 per cent per annum (Bloomberg, December 31, 2017), which can be deemed attractive. This, coupled with attempts from various sectors especially MSCI to upgrade Vietnamese stock market from frontier market to emerging market within 2020, will boost stock market expansion and equities investment from foreign investors.
However, the Vietnamese stock market still experience some volatility based on short-term investment of retail investors. So, it is suitable for those who can absorb the volatility of foreign stock market and are ready for long term investment that should yield beautifully from the country’s economic growth. One may choose the sell-offs timing to invest for high return in the long-term.
For those who are interested in equity investment, but do not have direct access nor time to monitor market conditions before taking the initial investment and making profits, it is recommended that they should take the opportunities offered by professionally-managed mutual funds .
Contributed by Asset Plus Fund Management Investment entails risk. The investors should thoroughly study prospectuses, product features, return conditions and risk before investing.