Vietnam Rising: The Key to Diversifying Your Portfolio with Emerging Markets – Is the VNM ETF Worth the Investment?

Ho Chi Minh City, Vietnam – Investors looking to diversify should consider the potential of emerging markets, especially with the current geopolitical tensions between China and the United States. Amidst this backdrop, Vietnam emerges as a key player in the region, positioned to become a significant manufacturing hub as it offers more attractive valuations than the U.S.

With a youthful population of nearly 100 million people, Vietnam has the potential to overtake China in becoming a regional manufacturing powerhouse. Investors seeking exposure to Vietnam can explore opportunities through the VanEck Vietnam ETF (VNM), which is the largest and most liquid fund targeting this Asian country.

However, a closer look at the VNM ETF reveals some concerns. The fund is heavily reliant on Vingroup, a prominent conglomerate in Vietnam, which may not offer a well-balanced investment option. Additionally, the fund’s heavy exposure to real estate companies could pose challenges, especially in a global environment where interest rates remain high.

The VanEck Vietnam ETF aims to provide investors with exposure to Vietnamese equities, tracking the MarketVector Vietnam Local Index. With a management fee of 0.50% and a net expense ratio of 0.70%, the fund manages over $500 million in assets. Sector-wise, the fund is heavily weighted towards Financials, Real Estate, and Consumer Staples.

Despite the promising economic growth in Vietnam, reflected in a 5.8% expected GDP growth rate in 2024, the performance of the VNM ETF has been lackluster. Over the past 3, 5, and 10 years, the fund has delivered average annual returns of -11.4%, -2.9%, and -2.8%, respectively, indicating underperformance compared to other funds like the iShares MSCI India ETF (INDA).

The relative weakness of the VNM ETF could be attributed to various factors, including its heavy reliance on Vingroup and its subsidiaries, as well as the fund’s sector allocations. Additionally, concerns about Vietnam’s government structure, compared to India’s democratic system, may also impact investor sentiment towards the country.

Looking ahead, technical indicators suggest that more time may be needed for the VNM ETF to show improved performance. Investors interested in Vietnam as an investment opportunity should carefully analyze the fund’s current standing and consider alternative options for exposure to the country.