On a day when many riskier assets were punished by lingering
uncertainty over the U.S. fiscal cliff, it was not surprising to
see Market Vectors Vietnam ETF (NYSE:
), itself a risky asset, gave back some of its recent gains on
Despite a 0.81 percent drop for VNM on Thursday, the ETF is up
13.3 percent in the past month. However, some good news regarding
Vietnam's banking sector was overlooked amid all the fiscal cliff
The decline in U.S. equities meant news of Vietnam's largest
ever banking sector acquisition went unnoticed. Unbeknownst to many
American traders, 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
The State Bank of Vietnam will still be the majority shareholder
in Vietnam JSC, but news of foreign interest in its banking sector
comes at a pivotal time for Vietnam and investors with an interest
in the Southeast Asian nation. Investors should note that VNM does
not hold shares of Vietnam JSC, but its largest holding is JSC
Bank. These are two separate entities.
VNM allocates 19.3 percent of its weight to bank stocks. Add in
real estate firms, diversified financials and insurance providers,
and VNM's weight to the financial services sector jumps to almost
to Market Vectors data
. It was that sector exposure that punished VNM earlier this
Following news of the arrest of two noteworthy Vietnamese
banking scions, investor confidence in Vietnamese banks suffered.
As if that was not bad enough, the
World Bank would later voice concern about
Vietnam's problem with bad loans
In September, Moody's lowered Vietnam's credit rating to B1 from
B2, citing weaknesses in the banking system,
The Australian reported
. It has been those type of headlines that weighed on VNM and
rattled investor confidence even though
Vietnamese banks are well-funded and sitting on
While the Mitsubishi UFJ deal with Vietnam JSC is just one
transaction, and not even an outright takeover at that, it does
bolster the case for near-term upside for VNM. The ETF had already
been putting in a fine performance over the past month, but a
foreign buyer stepping into the Vietnamese banking market at a time
when risk appears high could be construed as a positive sign for
the country, the sector and the ETF.
Additionally, the Mitsubishi/Vietnam JSC deal shows foreign
investors that Hanoi is open for business. Foreign direct
investment in Vietnam fell 15.3 percent this year
to just over $13 billion
, prompting Prime Minister Nguyen Tan Dung to push for more
progressive policies aimed at enticing foreign investors to
The development of a debt asset management company to resolve
bad bank debt coupled with even a tinge of banking sector mergers
and acquisition activity could be the tonic VNM needs to stage
another first-quarter rally in 2013.
For more on Vietnam, click
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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