Vietnam Is the Dark Horse Frontier
Good Morning, Vietnam (and the Invstr community)! Here’s another emerging market frontier to add to your watch list, an escapee of the coronavirus mayhem that’s just starting to surprise fund managers.
Investors are turning to countries coming out the other side of this pandemic with their currencies still in-tact. The Eurozone, United States, United Kingdom, Japan, and Australia all put big stop-losses on their economies with interest rate cuts, unlimited digital money printing, and an alphabet-soup of acronym-titled stimulus programs.
This support has saved the day, but it’s borrowed from the future. Federal Reserve Chair Jerome Powell openly admits to the artificially and instantaneously created new dollars in the system. It could mean hyperinflation, coming soon to a country near you!
Vietnam did not implement such extreme measures; it didn’t have to. Vietnam (like many third-worlds) has faced viruses before, and it knows the playbook. President Trọng rolled out mass-testing and quarantining from the start, and his country was actually first to beat local transmission of the virus, according to the World Health Organization (WHO).
The Vietnamese stock markets should now get their just deserts. This month, its two small indexes were the top-performing markets in Asia (+13%). It’s an especially impressive feat considering this was achieved locally; foreign fund managers were selling, and daily gains and losses on these exchanges are capped at 7%.
The nation will dodge a recession, according to the International Monetary Fund (IMF). The big challenge for investors is liquidity, but a long-term investment doesn’t care for that, and now the MSCI looks set to upgrade the country to ‘frontier,’ which will trigger force-buying from certain market-moving funds. Is this Vietnam’s moment?