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August 08, 2023

Exploring Vietnam’s economic potential and Vietnam investment fund

Vietnam possesses many potentials that would make the country an attractive destination for foreign investment with a stable first-quarter performance and promising outlook. As a form of investment, Vietnam also presents individual investors with Vietnam investment funds such as ETFs and open-ended funds.

Vietnam is a bustling investment destination

Vietnam is a potential market that foreign businesses are aiming for thanks to the following characteristics. The country’s political and monetary position is relatively stable. According to the General Statistics Office (GSO), Vietnam has a big population of over 97 million people of which 51.7 million people are of working age. This means that the country can offer more skilled workers at a competitive price. In addition, Vietnam resides in a strategic area that is near many Asian countries, especially China. This allowed Vietnam to become a center of trading among other countries within the Asia Pacific region. The government has also put numerous efforts into attracting foreign investment by providing favorable policies as well as building infrastructure such as bridges, ports.

According to data from SSI Research, Vietnam's total trade turnover (exports and imports) amounts to more than 200% of GDP, making it one of the biggest in the world in terms of GDP percentage. Over the last decade, Vietnam's exports have expanded at the fastest rate in the world, averaging 15% year on year. In 2021, Vietnam will be the sixth-largest supplier of US imports. Vietnam is the third-largest technology exporter to the United States, with an 8.7% market share, after only China and Mexico. Taiwan and South Korea are two more Asian countries.

Vietnam is also among the countries with the best online presence. Vietnam has seen rapid growth in Internet usage, technology use, and digital and mobile lifestyles. In Vietnam, Meta (Facebook) has 70.4 million users (out of a total population of 98.5 million people), ranking seventh in the world with 52 million online shoppers, as reported by SSI Research. Vietnamese people spend at least 3 hours using the Internet every day. 

Vietnam’s resilience throughout a turbulent period

On a global scale, the international economy had several difficult transitions in the first quarter of 2023; global inflation, while decreasing, remained high; global energy costs increased; and the Russian-Ukrainian war continued to undergo unforeseen occurrences. Therefore, the Vietnamese economy saw a decline in the first three months of this year, with the GSO reporting 3.32% GDP growth for the first quarter. This was regarded as substantially lower than the government's growth plan. Nonetheless, this decreasing tendency is not an exception; economic activity in the first few months of the year is often calmer and will become more strong later in the year.

Despite decreased GDP growth, the country's economy still has some bright spots. Commercial commerce, transportation, tourism, and retail sales all performed well. Specifically, overall revenue from retail sales and services has returned to pre-Covid-19 levels. Second, the number of visitors visiting Vietnam met ⅓ of the 2023 target. Third, although global inflation remains quite high, CPI was held at a tolerable level. These data along with upcoming governmental efforts to boost the economy (reduce operation interest rates, VAT tax, and inflation control) suggest that the economy is likely to improve in the second half of 2023.

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According to the latest estimation from the World Bank, it has recently adjusted the world GDP growth rate in response to the current macroeconomic status hence the prediction for Vietnam was changed accordingly. Despite being slightly lower than the previous prediction in January 2023, Vietnam is still predicted to have the highest GDP growth rate in the South East Asia region at 6%. This figure suggests an encouraging notion for potential investors to consider Vietnam.

Hence, Vietnam continues to prove to the world as a promising destination for foreign investors.

Aside from investment through FDI, individual investors who are not too savvy about Vietnamese stocks and bonds can also access these alternative Vietnam investment funds such as Exchange Traded Funds (ETFs) or open-ended mutual funds.

Getting to know Exchange Traded Fund in Vietnam

Exchange Traded Fund or better known as ETF is a pooled investment asset that functions similarly to a mutual fund. ETFs often follow a specific index, sector, commodity, or other asset, but unlike mutual funds, ETFs may be bought and sold on a stock market in the same way that a conventional stock can. An ETF can be designed to track anything from the price of a single commodity to a huge and diversified group of commodities. ETFs can even be designed to follow certain investing strategies.

According to SSI, ETFs possess a lot of advantages for small investors. Firstly, investors are not required to have a deep understanding of each stock. Secondly, the cost to operate this form of investment is considered quite reasonable since an ETF is made up of a stock portfolio that simulates a reference index's stock portfolio. Thirdly, ETFs are the most convenient option for overseas investors to gain access to the Vietnamese stock market. Because of the open-fund system, international investors are not restricted to owning a certain amount of ETF certificates. Foreign investors can indirectly hold shares that have met the maximum foreign ownership ratio by investing in an ETF. 

In Vietnam, there are currently 6 local ETF funds operating in Vietnam that are managed by these three securities firms: Vietfun Management (VFM), Vinacapital, and SSI. The ETF funds are broken down into 2 groups: 

  • One focuses on capturing the rate of return of the Vietnamese stock market such as ETFs VFMVN30, ETF SSIAM VNX50, ETF VINACAPITAL VN100, SSIAM VN30 ETF

  • The other one focuses on more specific categories such as the financial stock fund (ETF VFMVN DIAMOND) and the ETF SSIAM VNFIN LEAD.

Getting to know open-ended Vietnam investment fund

Another quite flexible form of investment is open-ended funds. Open-ended funds are managed by a company or organization. The money raised by the fund will be invested by experts, and after earning profits, it will be returned to the investors in the fund.

An open-ended mutual fund is similar to a typical exchange-traded fund in that each share represents a little slice of all of the funds' underlying investments, allowing you to diversify across a predetermined group of stocks or bonds by holding a single fund. Also, they are both quite flexible and have a high level of liquidity. However, they are different in the way that they are priced and the method that they are traded.

 3 types of reputable open-ended mutual funds in Vietnam, specifically as follows:

  • SSIBF fund: This fund is an open-ended fund that invests primarily in fixed-income securities such as Vietnamese government bonds, government-guaranteed bonds, municipal bonds, and precious papers, which account for at least 80% of the Fund's net asset value. 

  • TCEF fund: This fund was created to provide investors with a secure and effective investment area without the need to invest in specific stocks. The fund's assets will be invested entirely in a basket of VN30 equities, which are the 30 businesses with the biggest market capitalization and liquidity in Vietnam.

  • DCEF fund: This fund specializes in investing in government bonds, government-guaranteed bonds, and local bonds. The asset allocation ratio is mainly bonds, a small part is certificates of deposit and the rest is cash equivalents.

In conclusion, Vietnam shows to be a robust environment for major economic development with an active investment playing field for both big and small investors. The development of Vietnam investment funds such as ETFs and open-ended mutual funds provides a safe and effective channel for smaller investors to join in the watch of Vietnam’s economic growth.

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Exploring Vietnam’s economic potential and Vietnam investment fund

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