The Quiet Rise Of The Vietnam ETF

On Wednesday, just two exchange traded funds hit 52-week highs. The VanEck Vectors Vietnam ETF VNM, the only ETF trading in the U.S. dedicated to Vietnamese stocks, was one of the two. 

With Wednesday's gain, VNM is up 14 percent this year. That is far better than the MSCI Emerging Markets Index. VNM's year-to-date gain is more than double that of the MSCI Frontier Markets 100 Index, the index in which Vietnam is the second-largest country weight at 18.12 percent.

VNM follows the MVIS Vietnam Index, “which is comprised of securities of publicly traded companies that are incorporated in Vietnam or that are incorporated outside of Vietnam but have at least 50 percent of their revenues/related assets in Vietnam,” according to VanEck.

Searching For Future Growth

Vietnam has been one of the faster-growing Southeast Asian economies, but the government is looking to turn economic growth toward the private sector.

“We will try to put in place the most favorable policies and create the most favorable environment so that by 2020, we will have in operation over 1 million businesses, accounting for 50 percent of Vietnam’s GDP, up from 43 percent at present,” Prime Minister Nguyen Xuan Phuc recently said.

VNM is already highly levered to the Vietnamese consumer. The ETF devotes 30 percent of its combined weight to the consumer staples and discretionary sectors.

“Vietnam’s export-driven economy grew 6.8 per cent last year, one of the strongest showings in Southeast Asia,” according to VN Express.

Small Companies

None of VNM's holdings have market values of over $5 billion and all are considered mid-caps or small-caps. The weighted average market value of VNM's holdings is $4 billion.

VNM's three-year standard deviation of 16.93 percent is more than 500 basis points above the comparable metric on the MSCI Frontier Markets 100 Index. That also means VNM is less volatile than the equivalent Indonesia ETFs, a market Vietnam is often measured against.

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