Vietnam bears many traits of a prime investment candidate – strong organic growth, a middle class that is both surging in size and wealth, and attractive labor costs. With last year’s signing of the Trans Pacific Partnership (TPP) and the EU Free Trade Agreement, Vietnam will see a massive trade expansion that will further fuel its growth.
These dynamics have awarded Vietnam the largest FDI inflow within its peer group, and the Ho Chi Minh stock exchange has evolved into one of the most dynamic in Asia. While these traits make Vietnam indisputably attractive, American investors are hindered by a major roadblock – no Vietnamese stocks are trading on U.S. stock exchanges. However, we believe investors should not be dissuaded from such an attractive market. We outline some viable investment options for Vietnam below.
Ways to Invest in Vietnam
Emerging Market Mutual Funds
One option is to buy shares in an emerging or frontier market funds. Based in the United States, these funds invest in growing companies in such markets as Vietnam, Thailand, Poland, Costa Rica and Colombia. In most emerging and frontier market funds, investment in Vietnam is very small, usually less than 3% of invested funds. The bulk of investment is in other more accessible countries.
Exchange Traded Fund
Investors can also invest in an exchange-traded fund (ETF), with shares bought and sold much like shares of stock. Currently there is only one ETF devoted to Vietnamese investments, and it is mainly targeted at traders. The ETF is not fully committed to investing in Vietnam with about 30 percent of the fund invested outside of the country. Furthermore, this fund utilizes passive investing which could be undesirable to many investors who believe an active approach is more effective in a new market like Vietnam.
Vietnam Mutual Fund & U.S Broker
Currently there is no Vietnam mutual fund in the US. This actively managed fund would allow investors easy access and liquidity in the Vietnamese stock market. Investing with a U.S. stock broker can be challenging for multiple reasons. Specifically, there are no U.S. retail brokers who have direct access to the Vietnamese stock exchanges.
Local Vietnamese Broker
The most direct access would be with a local Vietnamese broker. Investors must go through the approval process prior to buying shares directly from the Vietnamese stock exchanges. Foreign investors need to file a registration form, an applicant information sheet and a background check for criminal activity with Vietnamese regulators. There are drawbacks to investing through a local brokerage. For example, Vietnamese brokerages provide very little monthly reporting. There are numerous risks associated with investing in Vietnam. A U.S.-based financial advisor with knowledge of market conditions and experience in Vietnam should be consulted.