October 28, 2015.
As the costs in China rise, investors are taking advantage of the low cost manufacturing boom in Vietnam. Although China’s exports have dropped almost 6% in the third quarter, Vietnam’s exports have shot to almost 11%. This has caused stocks in Ho Chi Minh City to rise 10% in 2015, which makes Vietnam the third best-performing index after Tokyo and Shanghai this year. Dollar-based investors have received a 5% return this year. With a strengthening economy, Vietnam isn’t as vulnerable as Indonesia and Malaysia to a retreat from global investors, because it owes relatively less to foreign owners. Along with that, it currently holds an account surplus that has helped protect its currency, the dong, from the surrounding economic turmoil. As the country continues to develop, the banking sector will continue to grow as well. According to Dragon Capital, Vietnam’s banks have finally come to the end of a long period of non-performing loans, which allows them to start financing new investments. These things all allow Vietnam to be one of the few Asian countries where its economic growth is still improving.
Louie Nguyen, CFA is the CIO of San Diego-based Soledad Investment Management. Soledad invests qualified clients’ assets in markets around the world, including Vietnam.