Sunday, November 12

Congrats to Vietnam!


Vietnam has officially become a member of the WTO this week. Congratulations!

Besides the good news, I've got information on two newly-launched Vietnam Funds last week alone, and also heard from a few friends in the investment community studying the country's real estate market.

Guess it's time to look at Vietnam more closely.

The country is such a, well, sentimental country (especially to the US) that everyone should've had a basic knowledge on its history. But in terms of investment opportunities, it may give you some surprises:

PROs

  • Strong economic growth: Since the country's gradual change from centrally-planned to market economy, GDP zooming at 7.4% in the last 10 years (2nd only to China in Asia) and Government has a 7.5-8% target until 2011.
  • Successful reform: the "Doi Moi" (modernization) program has been successfully privatizing ~2,500 state owned enterprises (SOEs) and encouraging numerous business start-ups.
  • WTO in 2007: the entry is expected to pave way for strong, healthy long-term growth.
  • Excellent demographics: literacy rate at a very impressive 90+% and half of the 84M population is under the age of 25. The local culture also encourages strong work ethics.

As a result, Vietnam has been attracting lots of foreign investments, propelling the growth of both exports and domestic consumptions.

CONs

  • Still a baby: The Vietnamese market is still at the early development stage and the illiquidity (low trade volume) may lead to high volatility. This is not a market for people with short-term investment horizon.
  • Single-country risk: Investing in one single (and emerging) country pose a significant risks, e.g. from possible political turmoil, sudden changes in economic policies and a large withdrawal of foreign investment.

Investment Products available

As far as I know:

My thoughts:

  • JF and DWS Funds need time to build track record: In short, they are brand new. On the other hand, VOF delivered a 54% return in the last 12 months and has been around for a number of years.
  • All are expensive: they command a 1.7-2% management fee plus a hedge-fund like performance fee (20% of every dollar earned when the investment return is over 8% for the year). While the higher fee is somewhat understandable due to the higher trading cost in Vietnam, emerging market funds/ETF in other regions are more affordable.

Conclusion: be careful but be open-minded! Take a close look at the performance, and why not book a ticket to Vietnam and have a first-hand observation before making a decision? The tourism industry there is booming!

* note: these two funds may not be available to investors in certain countries


3 Comments:

Anonymous Anonymous said...

Vietnam is still a brutal police state.

Monday, November 13, 2006  
Blogger The banker said...

True. Thanks for reminding I should have included 2 more risk factors:

1. political uncertainty -- it's still a "planned" and rather closed economy, and changes in economic policies, foreign stock ownership or other restrictions could all be nasty surprises to investors.

2. Currency risk -- the currency is theoretically freely exchangable but practically not, as it is controlled by the Government. Also, at this stage no derivative instrument is available for currency hedging. In a way, investors are fully exposed to currency risk.

Again, this is a high risk high reward part of the world!

Wednesday, November 15, 2006  
Anonymous Anonymous said...

Hello, I started accumulating VOF in 1H07. There's a foreign exchange control in place right now. VOF has gone no where for the last couple of months.

Anyhow, I'll keep holding VOF as I believe it's gonna be rewarding medium to long term.

After reading your blog, I bought David Swensen's book. It's currently out of stock in PageOne.

Fibonacci

Thursday, June 07, 2007  

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