The Perfect Frontier Market:
A Look at Vietnam's ETF VNM
June 12, 2011 | about: VNM
Vietnam is a perfect example of a frontier market economy. It’s still a communist country, but is making steady progress in implementing a market-based economy.
“Frontier” markets are fast-growth markets that are too small and too under-developed to be grouped with markets like China, Brazil and India. These are places with huge growth potential – as well as high volatility – but remain under most investors’ radars.
Vietnam is one of the world’s cheapest markets right now, with a market price-to-earnings (P/E) ratio of about 10. That’s pretty cheap when you compare it with India at a P/E of 22 or another pre-emerging market like Peru which is on a P/E of 55.
Here’s why Vietnam is an interesting (albeit speculative) investment option:
- Fast Growing Economy. HSBC forecasts Vietnam’s economy will grow by 7.1% in 1022. That’s 15% higher than the growth forecast for the rest of Asia (ex-Japan) – and more than double the stimulus driven growth expected in the U.S. for 2011.
- Wealth of Resources. Vietnam is Asia’s third largest producer of oil. It’s also the 2nd largest producer of rice in the world, just behind Thailand. And it’s a major producer and exporter of coffee, tea and rubber – all commodities that are predicted to rise in price this year.
- Strong Demographics. Vietnam is the 13th most populated country with over 86 million, just behind Japan and Mexico. So Vietnam has huge economic growth potential as more Vietnamese enter the rapidly expanding S.E. Asian middle class.
Tahoe here: final statement from the article is a disclosure that the author is long VNM. With the weakness in the recent attempts at advances of the last days where it could stay green and the plentiful tails, I would likely still be cautious until a more definitive direction is demonstrated.(DISCLOSURE - no position)
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