Investing in Vietnam: why the country could be the next Asian tiger

Frontier markets, hosting 16 of the world’s

20 fastest-growing economies in the past decade, generally exhibit robust fundamentals, often characterized by young populations, low labor costs, and modest debt burdens. However, despite frontier economies representing 36% of the world’s population and 15% of the total GDP, they remain decidedly off investors’ radars. In fact, only 0.3% of the total global stock market resides in frontier markets.

Although the long-term performance of frontier markets has been strong, with returns comparable to more established stock markets, many investors mistakenly believe that this market behaves similarly to the commonly tracked emerging markets index. In reality, the performance of frontier markets shows a low correlation with both emerging and developed markets, primarily due to reduced foreign investor activity.

Another misconception about frontier markets concerns liquidity. While they tend to be less liquid than developed and emerging markets, liquidity conditions are continuously improving in many frontier markets and are by no means problematic.

Vietnam: a diverse and dynamic market

Vietnam emerges as the next frontier tiger poised to roar in the years to come. It is a deep and liquid market, with around 1,700 listed companies. Moreover, Vietnam trades an average of over $1 billion per day, on par with more developed markets like Mexico. In the past decade, Vietnam has seen a significant increase in exports, surpassing the productivity growth of regional neighbors. With a young population, ongoing urbanization, and rising disposable income, Vietnam is rapidly becoming a classic consumer-driven economy. By 2030, it is expected that over 75 million people in the country will be classified as middle or upper class, compared to just six million at the beginning of the millennium.