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Vietnam ETFs: Should You Invest in Asian Equities?

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Vietnam ETFs: Should You Invest in Asian Equities?

Are you looking for information for invest in Vietnam ETFs?

Perhaps you have heard of the possibility of investing in this country, and consequently investing in theequity of Vietnam.

We are talking about a very interesting stock market, perhaps one of the most interesting among those currently available to small and medium-sized savers.

This article talks about:

An introduction

Let’s start first of all by saying that choosing an investment towards a specific country it is a choice to be made after having weighed the decision well, and it is also a choice that is good to make from the point of view of a diversified investment.

I personally think ETFs are a very valid and interesting tool from many points of view.

In fact, the ETF, intended as a savings and investment tool, allows you to invest intelligently and there are several advantages that I will list now:

  • Transparency: when you decide to invest in a particular ETF, you know exactly what you are investing in, while often in the world of savings and investment it is not so difficult to come across products where you do not know exactly and in detail what happens to your money;
  • Low commissions: investing in ETFs means having to deal with a passively managed investment, which therefore offers low commissions, especially if we compare them with the commissions of mutual investment funds, which are very high (being an investment actively managed);
  • Differentiation: Your investment is differentiated as the index is broad and invests in multiple companies.

But now we can proceed and try to understand in more detail what you would encounter if you decide to invest in this ETF.

Vietnam, a look at the country

If you are here today it is because you have heard of the Vietnam and you are intrigued in the country enough to give us a little thought for a possible investment.

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Vietnam, as you know, is a Southeast Asian country bordered by China to the north, Laos and Cambodia to the west, and facing the South China Sea to the east and south.

From the point of view that interests us, i.e. that of investments, we can consider Vietnam as a frontier market, a “frontier markets”.

When we speak in these terms we are referring to developing countries, which however are small and have little liquidity.

Precisely for this reason we can also say that they are risky countries.

In 2017 the ETF Vietnam they were also the fastest growing national index ETF in the world.

Furthermore, the country has been growing by double digits in recent years, and even after the pandemic it has had a remarkable recovery.

For all these reasons, Vietnam has attracted the attention of investors, who see it as an interesting investment opportunity.

In fact, as I told you, growth prospects have been good for several years already, even if we must not forget the risks present in emerging economies.

Another factor to keep in mind is related to the currency of Vietnamese securities: they are quoted in Dong, an exotic currency that deserves attention as it tends to lose ground against the main world currencies.

As far as the country’s economic resources are concerned, the main sector is certainly agriculture, and mineral resources such as coal and copper are widespread.

As far as the industries are concerned, we have the naval and rice processing industries which are very widespread, followed by the textile industries and also by the steel mills.

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Best Vietnam ETFs

Now that we have framed the country we can go and examine the only one ETF present on Borsa Italiana.

Xtrackers FTSE Vietnam Swap UCITS ETF

L’FTSE Vietnam index tracks those companies in the FTSE Vietnam Index family that have sufficient foreign ownership holdings. The Vietnam Index provides broad coverage of the Vietnamese stock market.

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The fund has an average size of 285 million euro, and was launched on the market at January 2008so it is a mature fund.

The replication method is synthetic, and has no coverage currencytherefore it is exposed to exchange rate risk.

The one-year volatility is equal to 27.54%, or it is one high volatility.

The fund is domiciled in Luxembourg, while the distribution policy for dividends is ad accumulationi.e. the coupons are not distributed to investors on a timely basis but are reinvested in the fund itself.

I management costs per year for this fund are equal to 0.85%: it is still a fairly high cost.

Il risk profile of the fund is equal to 6, which on a scale of 1 to 7 therefore represents a fairly high risk. In fact, if you decide to invest, know that you will be able to meet high returns, however, in the face of running a considerable risk.

The composition of the fund for geographical allocation is 100% in companies belonging to Vietnam, while thesector allocation it is 38.11% in the real estate sector, 19.65% in basic necessities and 13.86% in the industrial sector.

Should you invest in Vietnam ETFs?

We have reached the end of our discussion: we have seen which country it is, we have analyzed the ETF present on Italian Stock Exchangeso now we are ready to try to reason together on a possible investment in this fund.

Il Vietnam it is a country that offers interesting opportunities, as we have seen, which however need to be carefully weighed.

It is still a risky country, whose currency is exotic and could have repercussions in terms of volatility and exchange rate risk.

If instead we want to focus on the ETF in particular that we have just analyzed we can say that it is a fairly high risk, therefore to be weighted and to know what we are getting into, and if we concentrate instead on the costs we can say that the 0.85 % per year is not that low: in fact, since it is an ETF we are faced with a high cost.

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However, the cost could be attributable to the fact that it is a product that offers exposure to a small market, we can say almost a niche one, so a similar cost is quite predictable.

Invest in Vietnam ETFs so is it worth it?

I can’t give you an unambiguous and certain answer, but I can give you my opinions as I usually do.

Investing in frontier markets is undoubtedly an interesting opportunity, although I must warn you of the risks you are going to run.

In fact, these are countries with risks deriving from possible political decisions, deriving from economic recessions and also from the fact that these are exotic currencies which inevitably expose your investment to exchange rate risk.

It is also an investment that has a low liquiditycompared to what a developed market can be.

In conclusion I can tell you that the best investment strategy to pursue is that of diversification: if you diversify and decide to invest in different sectors, you will certainly gain and benefit from it.

In fact, if you decide to include an ETF on Vietnam in your portfolio, which as we have seen is risky, perhaps you could think of adding other ETFs belonging to certain safe sectors and offering perhaps lower returns, but with the protection of your capital.

I’ll leave you with some resources that could come in handy for a thoughtful investment journey.

See you soon!

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