Following a savage beating in 2011 that saw the fund tumble
more than 43%, the Market Vectors Vietnam ETF (NYSE:
) has come roaring back in 2012. Among equity-based ETFs, VNM was
the third-best performer in the first quarter, trailing only two
other Market Vectors funds: The Market Vectors India Small-Cap
) and fellow frontier market fund, the Market Vectors Egypt ETF
VNM followed up that impressive first-quarter run with an
April pop of over 9%, meaning the lone ETF
devoted to this Southeast Asia frontier market has come close to
erasing all of 2011's losses
Four months and over 40% later might have some thinking the
easy money in VNM has already been made. Here are some reasons
why that might not be the case.
One of the favorite past times of the chattering class is to say
a security is overbought when it has experienced a substantial
upside move in a condensed period of time. Looking at
daily chart including RSI and full stochastics
it's clear this ETF has spent little time this year in what can
be considered overbought territory.
Remember this: Plenty of people thought Apple (Nasdaq:
) was overbought at $300 and $400. Funny, we haven't heard much
from those folks lately.
Government: Not As Bad As One Thinks
Vietnam is a communist country, but this isn't Russia in the
1960s. This is more a benevolent brand of communism akin to what
is found in China. Under Doi Moi, Vietnam opened its arms to
foreign investors and adopted policies that are somewhat free
market in nature. And that was back in the mid-1980s, so it's
fair to say Vietnam has been more open economically speaking than
some of its Southeast Asia rivals for a longer period of
Foreign Direct Investment
Today, the U.S. is the biggest investor in Vietnam, but the level
of foreign direct investment in the economy fell last year and
was a mixed bag from 2007-2009 because of the global credit
crisis. The FDI numbers for this year are mixed as well, but
Taiwan, South Korea, Singapore, Japan and Malaysia have been
voracious investors in the Vietnam growth story. As an example,
Samsung has promised to invest $1.5 billion in the country.
The Ho Chi Minh City Department of Planning and Investment
been seeking technology, biotechnology, and health care-related
investments from the U.S. and developed European nations.
Regarding VNM, the ETF had less than $200 million in AUM at
the end of the first quarter of 2011. Today it has almost $339
Since inflation is very much a four-letter word in Vietnam,
leading to concern among some regarding VNM's 49% weight to
finanicals, looking at the health of the country's banks is
critical before making a bet on this ETF.
Investors are embracing Vienam's five-year sovereign bonds and
had $575 million in excess cash as of mid-April,
. That's a lot of dongs and it's a good thing for VNM's largest
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