EQUITY OVERVIEW
The equity market in Vietnam has been on a tear over the last decade, with several major indices reaching record highs. Market gains have been driven by both domestic and international factors, including the supportive macroeconomic backdrop, corporate earnings, global trade dynamics, and investor sentiment.
The Vietnamese government’s efforts to attract foreign investment and economic reforms have also played an important role in increasing investor interest in its stock market while ongoing structural market reforms are underway to help boost market visibility and broaden its appeal to international investors looking for diversification.
VIETNAM AS A COUNTRY
Vietnam’s economy is being driven by three core factors; industrialisation, urbanisation and consumerism. While functioning as a prosperous “flywheel effect”, these three have also converged to produce one of the most underrated growth stories of the 21st century.
Indeed, since 2000, Vietnam’s economy has averaged annual GDP growth of 6.2% – the second-fastest rate of growth in Asia (behind only China).
The industrialisation of the country is a testament to its skilled workforce and one of the best schooling systems in the world, which data from the World Bank shows outperforms countries like Britain and Canada – places that are six times richer. While the country started out catering to more low-skilled manufacturing in the 2000s and 2010s – such as apparel for the likes of Nike and Adidas – Vietnam is now moving up the manufacturing value chain as Apple, Dell, HP, and Microsoft shift production of electronic goods there. That plays right into the urbanisation theme as well as the overall percentage of the Vietnam population that is now urban reached 39% in 2022, up from just 26% in 2002.
Remember that the global average is 50% so Vietnam has some way to go in terms of urbanising and the government is targeting its urbanisation rate to reach 45% by 2025 and 50% by 2030. In turn, Vietnamese consumers have become richer and are spending more, in many cases, on local brands. For example, Vinpearl is a leading local hospitality brand that has established itself as an innovative player in the tourism industry that caters to both locals and international visitors. More broadly, the consumer class in Vietnam is just beginning to experience many of the things that most consumers would typically take for granted. Take McDonald’s, the classic “Golden Arches” fast food chain. The first ever McDonald’s in Vietnam only opened up in 2014.
Tied to this burgeoning consumer growth is the fact that Vietnam is a demographically-blessed country. Those aged between 10-24 years old make up over one-fifth of the 100 million or so Vietnamese. As they come of age, earn more and spend more, Vietnam’s consumer economy is likely to see its consistent economic growth only accelerate. Finally, Vietnam should be catching the attention of investors now because of the changing geopolitical landscape that is benefitting the country.
With Vietnam attracting investment from both the US and China, its economy will benefit from continued expansion given its well-educated workforce, skilled manufacturing base and growing consumer class.
HEADWINDS
Despite current economic headwinds including monetary tightening of global markets, inflation and sluggish export demand along with the associated risk of short-term market fluctuations, the case for Vietnam’s long-term investment potential remains strong. That’s because of the ample fiscal space Vietnam has to implement measures to boost growth above baseline projections, both in the short term and in the long run.
ETFs: AN INVESTMENT TOOL
- Diversification: ETFs provide instant exposure to a wide range of assets, such as stocks, bonds, commodities, or sectors. This diversification can help reduce risk by spreading investments across multiple securities.
- Low Expense Ratios: ETFs are known for their cost efficiency. They typically have much lower expense ratios compared to traditional mutual funds, which means investors pay less in management fees over time.
- Liquidity: ETFs trade like individual stocks, making them highly liquid investments. Investors can buy or sell shares throughout the trading day, providing flexibility and ease of access, unlike traditional mutual funds that are priced at the end of the day.
- Transparency: ETFs usually disclose their holdings on a daily basis, allowing investors to know exactly what assets they own within the fund. This transparency helps investors make informed decisions.
- Cost Averaging: Investors can use dollar-cost averaging (DCA) strategies with ETFs, buying a fixed dollar amount at regular intervals. This approach can help mitigate the impact of market volatility and eliminate the danger of market timing.
- Performance Tracking: Many ETFs are designed to track specific indices or sectors, making it easier for investors to assess their performance against a benchmark.
- Accessibility: ETFs can be purchased through brokerage accounts, making them accessible to a wide range of investors. There’s usually no minimum investment requirement, allowing for easy entry into the market.
CGS FULLGOAL VIETNAM 30 SECTOR CAP ETF
The key to success is, therefore, leveraging on ETFs to find opportunities in sectors that benefit from ongoing reforms.
With over 2,600 institutional clients and 500,000 retail clients, CGS-CIMB provides a truly Asian perspective.
In late August, CGS-CIMB launched its CGS Fullgoal Vietnam 30 Sector Cap ETF that listed on the SGX, utilising its insights, knowledge of the local market and on-the-ground resources in the country. Well-positioned as Asia’s leading financial gateway, CGS-CIMB is the first company to launch a Vietnam-focused physical replication ETF to capitalise on the upward trajectory of Vietnam as an exciting market in Asia.
Providing investors with enhanced access and comprehensive market insights, thanks in large part to an active presence in over 15 countries and territories, CGS-CIMB aims to invest in Vietnamese stocks that closely replicate the performance of the SGX iEdge Vietnam 30 Sector Cap Index.
A strategic effort capitalising on Vietnam’s growth potential therefore, the CGS Fullgoal Vietnam 30 Sector Cap ETF is a suitable tool for investors who wish to gain exposure in a restrictive market with a diversified portfolio that can potentially reduce downside risks.
Given the favourable investment climate, global chain shifts, and Vietnam’s active participation in regional trade agreements, CGS Fullgoal Vietnam 30 Sector Cap ETF represents a timely opportunity for investors interested in having a combination of proactive strategies aimed at preserving capital and optimising investment outcomes.