An emerging market is a country that doesn’t have all the characters of a developed market. Examples of developed markets would be the US, Australia, England, Canada, etc. Years ago, when it came to emerging markets, it was all about the big four, BRICS – Brazil, Russia, India, and China.
Since then, India, Mexico, South Africa, Thailand and several other countries are now considered emerging markets. Countries wanting to join the club, known as frontier markets include include Egypt, Indonesia, Nigeria, Philippines, Vietnam, among others. As these frontier markets develop, they could perhaps offer investors with handsome returns.
The VanEck Vectors® Vietnam ETF (VNM®) seeks to replicate the performance of the MVIS® Vietnam Index (MVVNMTR®), which includes securities of publicly traded companies that are incorporated in Vietnam or that are incorporated outside of Vietnam but have at least 50% of their revenues/related assets in Vietnam.
“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,” said VanEck in a recent note.
The equity market there is small as highlighted by VNM’s roster of just 27 stocks. However, the nation is growing rapidly and its demographics are more favorable than larger Asian economies such as China and Japan.
“Vietnam is taking gradual steps to liberalize its markets, while seeking to avoid the negative impacts of capital flight,” according to VanEck. “Hot money is a real issue for frontier and emerging market economies, and the negative repercussions, including volatility, may have long lasting effects on the local economy.
Now I see why they call it frontier markets, as these markets are still underdeveloped like the chart below. At some point, VNM will breakout…maybe by this time Vietnam joins the emerging market club.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.