Reminder from FT Chinese website: If you are interested in more FT Chinese website content, please search for “FT Chinese website” in the Apple App Store or Google App Market to download the official application of FT Chinese website.
Some of the cheapest stocks in the world are in Vietnam. The Southeast Asian country’s benchmark index is trading at its lowest valuation in a decade. That gives investors reason to take this long-neglected market seriously.
A stronger dollar has sent Vietnam’s stock index down nearly 30 percent this year, trading at less than 10 times forward earnings. It is one of the worst performing banks among its regional peers. Its blue chips include property and technology group Vingroup, which has fallen 37% this year.
There is a lot of potential. Economic growth is expected to be the fastest in Asia this year. The population is growing and younger. More than 70% of Vietnamese are under the age of 35. The per capita GDP is only US$3,694, less than one-third of China’s. This leaves plenty of room for growth.
Vietnam has been one of the biggest beneficiaries of the U.S.-China trade war. U.S. groups have moved suppliers to Vietnam to circumvent U.S. tariffs and a blacklist of operating in China.
Apple has already sourced some of its popular AirPods headphones from Vietnam. The company is also testing production of watches and laptops in China. Reflecting the shift, Chinese exports to the U.S. rose by more than a quarter in the year to September. China’s coronavirus lockdown has eroded its manufacturing dominance.
Vietnam’s economic growth is impressive. China’s economy grew 13.7% in the third quarter, after growing 7.8% in the previous quarter. Tourism, which accounts for one-tenth of the economy, should further boost those numbers as global travel normalizes. Vietnam’s quasi-socialist market economy has helped the country rapidly reduce its poverty rate from 17 percent to below 5 percent in just 10 years.
But it also has drawbacks. Moving capital out of Vietnam is complicated. Foreign exchange controls limit foreign exchange outflows.
That’s why Vietnam has been a country of the future for much longer than investors expected. But at current valuations, the risk is diminishing.