ETF Talk: Vietnam Grows Like a Reed

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

With all of the recent talk about the economic turmoil in Europe, the growth in emerging market economies like Vietnam could be a bit overlooked. But let’s not overlook this potential opportunity for investors. A quick review of the 2011 performance of country-specific exchange-traded funds (ETFs) reveals one that is doing well but not gaining much attention. That fund is the Market Vectors Vietnam ETF (VNM).

With total retail sales reaching $75 billion for 2012, up 25% from 2009, the economic movement in Vietnam is worth noticing. Furthermore, Vietnam’s 2011 exports reached a record $96 billion, a 33% year-on-year rise, according to the country’s Ministry of Industry and Trade’s Planning Department. Vietnam has become an increasingly business-friendly country, based on a growing number of franchises and an aggressive plan to boost exports in 2012.

With trade relations on the rise in Vietnam, its Asian neighbors are looking to set up operations there. Japanese companies may start investing to build factories in Vietnam, after a recent flooding disaster in Thailand exposed a dramatic need to diversify manufacturing operations. The following chart of the fund’s performance for the past year shows investors now are recognizing its promise. In recent pricing, VNM closed at $19.99 on Feb. 27, marking its highest point since the fund reached $20.10 back in September of last year.

The VNM fund normally invests at least 80% of its total assets in securities that comprise the index. The largest holding in the fund is Vincom Jsc (VIC VN), accounting for 8.47% of the ETF’s holdings. The other stocks that form the fund’s top-five holdings and their weights are: Vietnam Joint-Stock Commercial Bank (CTG VN), 7.85%; Jsc Bank for Foreign Trade of Vietnam (VCB VN), 7.43%; Bao Viet Holdings (BVH VN), 6.6%; and Petrovietnam Fertilizer & Chemicals Corp. (DPM VN), 6.62%. The ETF’s largest sector holdings, as of Jan. 31, featured: financials, 44.4%; energy, 25.4%; industrials, 11.6%; materials, 7.7%; and consumer staples, 4.7%.

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