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Vietnam: A Frontier Market on the Cusp?

This article was originally published on ETFTrends.com.

By VanEck via Iris.xyz.

Could Vietnam be the next exciting growth story to unfold in the frontier market space? Recently, Vietnam has attracted global investor interest as a potential beneficiary of the ongoing trade war between the U.S. and China, but investors have also taken notice of the country’s attractive long-term fundamental characteristics. As the government seeks to boost foreign investment by relaxing foreign ownership limits on local companies, Vietnam’s status as a frontier market may change in the future. Additionally, Vietnam is leveraging its international trade relationships to maximize the benefits of an export-driven local economy, against the backdrop of a changing global economic landscape.

Making the Case for Investing in Vietnam

We believe the investment case for Vietnam is supported by several long-term dynamics. First, Vietnam’s growth rate has increased since the 2008 global financial crisis. For the last 10 years, Vietnam’s annual GDP growth rate has exceeded 6%, compared to an average of 5% for emerging market countries. In 2018, Vietnam’s GDP growth is estimated to have exceeded China’s by around 50 basis points (7.08% in Vietnam vs. 6.57% in China). 1  Vietnam’s economic growth may be linked to the country’s abundant natural resources and a strong manufacturing base, which has led to a robust export-based economy that is also supported by healthy domestic demand.

Vietnam’s GDP Growth Surpasses China’s

Source: International Monetary Fund. Data as of April 2019.

In 2008, inflationary pressures led to a significant decrease in foreign direct investment. Since then, the government has been relatively successful in managing inflation despite a fast-growing economy and heavy foreign investment. In 2018, Vietnam’s annual inflation rate was estimated to be 3.5%, compared to an average 4.8% for emerging market countries. 2

Read the full article at Iris.xyz.

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