Vietnam’s shift from a centrally planned to a market economy, over the last 30 years, has remarkably transformed the country from one of the poorest in the world into a lower-middle income country. After decades of neglect, the international audience has noticed Vietnam’s achievements and its ongoing global integration and the country is now seen as one of the most dynamic emerging countries in Asia and the World.
In 2016, the World Bank already classified Vietnam as a middle-income economy and PwC, on a long-term horizon, expects Vietnam to be the top fastest growing economy until 2050 with an average growth of 5%.
The historical and estimated future growth prospects, prudent government reforms, beneficial trade agreements with major trade partners around the world and increasingly internationalized foreign investment laws has led to an influx of both direct and indirect foreign investments.
Vietnam, after all, has emerged as production hub for high-tech products, where Intel produces 80% of its personal-computer processing units. Also noteworthy is that 1 out of 10 smartphones are nowadays produced in Vietnam.
Our optimism to invest in Vietnam is built in 4 key pillars
Market liberalization is laying the ground for a solid investment landscape
Three decades after “Doi Moi”, which started to recognize private entrepreneurship and international trade in the economy, Vietnam has continued its reform efforts. Besides trade liberalization, which we discussed above, market liberalization follows and includes:
Open capital markets and gradually remove or ease obstacles to trading. A notable example is the lifting of the foreign ownership limit (FOL). The FOL is now being removed on a case by case basis by General Shareholders’ decisions if the operating sectors are not on the restricted list. One of the latest notable FOL abortion cases is Vinamilk JSC, the country’s largest dairy producer and the largest stock by market capitalization.
More sectors are being removed from the restricted list and many imported tariffs are being gradually removed according to the WTO roadmap, creating a fairer competitive business environment.
Privatization of state-owned-enterprises (SOEs) continues. Recent cases include Vietnam Airlines, Vietnam Textile, Vissan.
Foreign ownership of property (apartments) was legalized in 2015.
Prudent reforms have well support the development of Vietnam’s stock market
Market capitalization of Vietnam’s stock market vs. the Vietnam Index in 2018
Sources: HSX, HNX, 29 June 2018
The increased of market size and liquidity has made Vietnam an attractive investment for foreign institutional investors
Thanks to these rigid liberalization steps, an equity market has developed over the last 16 years since its opening in Jul 2000. The market cap for all stocks as a percentage of GDP has jumped to 74% in 2018 from 35% in 2015.
Worth to mention is also the the 30 day average daily trading volume of all stocks in Vietnam increased from mere USD 0.7 mn in 2000 to USD 256 mn in 2018.
Market Cap as % of GDP, Vietnam vs. Emerging Markets 2018
Sources: Bloomberg, 29 June 2018
30 day average daily trading volume (HSX and HNX combined) from 2006 to 2018
Sources: HSX, HNX