CHICAGO, June 4, 2012 /PRNewswire/ -- Stocks and funds in this article include Market Vectors Vietnam ETFhttp://www.zacks.com/etf/?t=VNM, Market Vectors Egypt ETF http://www.zacks.com/etf/?t=EGPT and Market Vectors India SmallCap ETF http://www.zacks.com/etf/?t=SCIF
Neena Mishraanalyzes the performance of Vietnam's economy and the ETF that provides exposure to Vietnam.
Can the Vietnam ETF Continue Its Run? written by Neena Mishra, CFA of Zacks Investment Research:
Vietnam ETF was the third best performer among all equity ETFs during the first quarter of 2012, behind only Market Vectors Egypt ETF (EGPT) and Market Vectors India SmallCap ETF (SCIF). That was in sharp contrast to its extremely dismal performance in 2011, when it sank by almost 47%, much worse than other emerging markets, as the investors were concerned about the future prospects for the economy. However as the economic situation improved, the investors have poured money into the fund, which is now up 24.7% year-to-date, while the broader MSCI Emerging market index is down 1.1%.
Political and economic reforms (Doi Moi)) launched in 1986 transformed Vietnam from one of the poorest countries in the world, with per capita income below US$100, to a lower middle-income country with per capita income of about US$1300 in 2011. Poverty ratio has fallen from 58% in 1993 to about 12% in 2009. (Read: http://www.zacks.com/commentary/21284/invest-in-indonesia-the-new-rising-star-of-asia
Late last year, the Government announced a three pillar economic reform program aimed at restructuring public and state-owned enterprises and the financial sector, as the top priorities for the next five years.
Further in March, the government approved and published a broad plan for banking sector reform. The plan includes merger of weak banks and recapitalization of the banking system though it lacked details on how the government will arrange funds for recapitalizations.
The economy seems to have turned the corner and the inflation now seems to be coming under control as it reached a 21- month low of 8.34% in May.
Earlier this month, Fitch Ratings affirmed Vietnam's Foreign- and Local-Currency Issuer Default Ratings at 'B+', with a 'Stable' outlook. According to the rating agency, "the ratings and Stable Outlook reflect the success so far of efforts by Vietnam's authorities to tackle the macro-financial imbalances that arose in 2010 and 2011."
With the inflation under control, the central bank has more flexibility to lower rates in order to support growth. As expected by the market the bank announced 100 basis points cut in the key rates earlier this week (third rate cut this year). (Read: http://www.zacks.com/stock/news/74153/why-colombia-etfs-may-continue-to-rise
Persistent current account deficit also appears to be on the correction path now. After contracting in 2011, foreign investment in Vietnam is accelerating again.
Market Vectors Vietnam ETF (VNM)
VNM tracks the Market Vectors Vietnam Index, which provides exposure to the publicly listed companies that are domiciled and listed in Vietnam or derive at least 50% of their revenues from Vietnam.
The ETF currently holds $312.6 million in AUM and charges 76 basis points to the investors annually for expenses. The fund holds 35 securities, with an average weighted market cap of 4.1 billion. The focus is on mid-cap (50%) and small-cap (37%) stocks while large-caps make up just 13% of the total assets. In terms of sector exposure, financials occupy the top spot with almost 50% weight. Energy (22%) and industrials (11%) hold the next two spots. About 70% of the shares in the ETF have direct Vietnam listings, while the rest are for companies in other jurisdictions that have substantial operations in the country.
For the rest of this ETF article, please visit Zacks.com at: http://www.zacks.com/stock/news/76233/can-the-vietnam-etf-continue-its-run
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