The dream of an asset management to help Vietnamese banks deal
with mountains of bad debts is getting closer to becoming reality
and that news is helping the Market Vectors Vietnam ETF (NYSE:
) trade higher Monday.
The Market Vectors Vietnam ETF, the lone ETF devoted to the
Southeast Asian nation, is higher by about 0.6 percent in midday
trading on news the government there will approve the Vietnam
Asset Management Company, or VAMC. Putting the VAMC into context
U.S. investors are familiar with, perhaps the best way of
describing the program is as the Vietnamese equivalent of the
troubled asset relief program, or TARP, implemented during and
after the financial crisis.
VNM started 2013 on a strong note, extending gains that
started accruing in the fourth quarter of 2012, but the ETF has
recently struggled as the government and State Bank of Vietnam
struggled to cobble together a wide-ranging plan to help ailing
At the start of trading Monday, VNM had lost 5.6 percent in
the past month due in large part to an initial version of VAMC
not going far enough to help the country's
. Earlier this month, a version of VAMC was unveiled that would
help Vietnamese banks deal with sour loans, but not their bad
Policymakers there sent the architects of VAMC back to the
drawing board, urging for a more sweeping plan that would help
bolster liquidity in the fragile Vietnamese banking system. Put
simply, this is perhaps the biggest near-term issue facing VNM
because the ETF allocates 38.3 percent of its weight to financial
services stocks. Energy is the second-largest sector weight at 20
Vietnam's Minister and Chairman of the Government Office Vu
Duc Dam added that as part of the VAMC, banks will have to form
own hedge funds
under the supervision of the State Bank of Vietnam to deal with
the bad debts.
The emergence of a broader version of VAMC comes amid slowing
economic growth in Vietnam, but also at a time when the country
seems to finally have a grip on inflation. Vietnam's previous
losing battles with inflation prompted several devaluations of
its currency, the dong, and explains why VNM has slid 19.4
percent in the past two years.
Perhaps more importantly, VAMC is coming to reality at a time
when the central bank is
considering boosting foreign ownership limits
in Vietnamese banks, which currently cannot exceed 30 percent of
the bank's charter capital.
Foreign banks, including Japanese firms, have in recent months
shown an appetite for investments in their Vietnamese
counterparts. Should VAMC prove successful, that could stoke
further investment in Vietnamese banks, boosting VNM in the
For more on
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