On a day that has turned into a sea of red for emerging
, the Market Vectors Vietnam ETF (NYSE:
) is higher by 2.3 percent on volume that is already approaching
twice the daily average.
An array of bullish headlines pertaining to Vietnam is the
reason VNM, already one of 2013's best-performing ETFs of any
type, is continuing its bull run on a day when scores of
international funds are languishing.
Over the weekend, VietNamNet Bridge reported that the
State Securities Commission is moving forward
with plans to merge Vietnam's two stock exchanges. While the
process is expected to take several years (2015 looks like the
expected completion date), the combination of bourses in Hanoi
and Ho Chi Minh City could bring a much-needed increase in
liquidity to Vietnamese stocks. Regulators there have recently
been working to boost liquidity on both Vietnamese exchanges.
Last month, it was revealed that the trading band limits for
stocks listed in Hanoi and Ho Chi Minh City
were lifted to 10 percent and seven percent,
from seven percent and five percent.
Experts have pointed out that combing the two exchanges would
lead to one going away. However, having one central exchange
could lead to lower operating and transaction costs while
bolstering liquidity and allowing Vietnam to be more on par with
other exchanges in Southeast Asia.
Lower costs and improved liquidity could lead to increased
investor demand for Vietnamese shares while boosting profits for
the country's banks and brokerage houses. That would be critical
for VNM because
allocates almost 43 percent of its weight to financial services
names. In addition to the exchange merger news, VNM may also be
getting a lift on news that Global Sphere, a Dubai-based
development company, will launch a $30 billion project
being hailed as "Hanoi Wall Street"
Located near the Hanoi Airport, the project represents the
largest investment ever in Vietnam by a firm from UAE and the
first phase could mean $10 billion will be spent by 2020.
That news can be viewed as particularly important because
Vietnam's foreign direct investment number
slumped in 2012
. The trend may be reversing course.
In late December, Japan's Mitsubishi UFJ, that country's
largest bank, announced a $743 million deal to acquire 20 percent
of Vietnam Joint Stock Commercial Bank for Industry and Trade, or
VietinBank. That deal represents one of the largest transactions
ever in a Vietnamese bank by a foreign institution.
Perhaps adding to the good cheer is a
Bloomberg piece quoting a money manager who
expects the VN Index to surge 33 percent this year
. Valuations on Vietnamese stocks are arguably compelling.
The VN Index trades at 11.2 times estimated earnings, 7.4
percent below the average valuation on the MSCI Frontier Markets
Index, according to Bloomberg data.
At the ETF level, VNM had a P/E ratio of just over 10 with a
price-to-book ratio of 1.26 at the end of last year. That
compares to a P/E ratio of over 15 and a price-to-book ratio of
for the iShares MSCI Frontier 100 Index Fund
). Vietnam is the tenth-largest country weight in FM with an
allocation of almost 2.6 percent.
For more on ETFs, click
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