Vietnam stocks streak ahead in Asia

September 26, 2013

It’s been a good year for frontier markets, though some have done better than others. One success story has been Vietnam.

Hanoi’s domestic VNI equity index  is up 17 percent.  That compares well with stock markets in other Asian frontiers – Sri Lanka has gained only 3 percent,  Bangladesh is down 1 percent on the year and  Mongolia has plunged more than 20 percent, hurt by a restrictive foreign investment law.

Vietnam has also done well compared with more developed Asian markets, many of which have suffered both from talk of Fed tapering and from a slowdown in China. Thai and Indonesian stocks are up only 2-3 percent this year and Malaysia has risen 6 percent.

Min-Hwa Hu Kupfer, chairperson of equity fund Vietnam Holding, says the pace of Vietnam’s economic recovery and slowing inflation are helping the market:

The economy is recovering, though it’s below its long-term average of 7 percent. Inflation had been double-digit, it was reduced to single digits through 2012.

Foreign direct investment has also been stable, Hu Kupfer says, with Japan a big investor, helping to make up for a slowdown in growth in Vietnam’s neighbour China.

As with many frontier markets, domestic consumption is spearheading growth, and small and mid-cap companies are often the most attractive, Hu Kupfer says. As locals develop western tastes in food, dairy companies are among those with appeal – Alliance Bernstein finds the same trend in India.

There has been one Asian frontier more successful than Vietnam though – Pakistan has risen over 35 percent. Its stock market has roared ahead since Nawaz Sharif won elections in May, cementing investor hopes of stable government.

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