VNM: The Go-To Vehicle To Capture Vietnam's Upside

seekingalpha03-31

Vietnam remains the best-performing equity market in Southeast Asia. The future growth potential is as strong as ever, yet valuations aren't all that demanding. As the largest and most...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nVNM: The Go-To Vehicle To Capture Vietnam's Upside\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-31 21:25 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4681359-vnm-the-go-to-vehicle-to-capture-vietnams-upside><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Vietnam remains the best-performing equity market in Southeast Asia.\n        The future growth potential is as strong as ever, yet valuations aren't all that demanding.\n        As the largest and most...</p>\n\n<a href=\"https://seekingalpha.com/article/4681359-vnm-the-go-to-vehicle-to-capture-vietnams-upside\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"VNM","symbol_name":"VanEck VietnamETF","start_time":0,"source_url":"https://seekingalpha.com/article/4681359-vnm-the-go-to-vehicle-to-capture-vietnams-upside","article_id":"2423222851","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2423222851","pubTimestamp":1711891519,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Vietnam remains the best-performing equity market in Southeast Asia.The future growth potential is as strong as ever, yet valuations aren't all that demanding.As the largest and most liquid ETF play, VNM screens attractively.","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"VNM":"VanEck VietnamETF","BK4585":"ETF&股票定投概念","VNAM":"Global X MSCI Vietnam ETF","BK4550":"红杉资本持仓","BK4588":"碎股","FDN":"First Trust Dow Jones Internet I"},"translate_title":"VNM：抓住越南优势的首选工具","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"VNAM":1,"VNM":1,"FDN":0.9},"content_text":"Vietnam remains the best-performing equity market in Southeast Asia.\n        The future growth potential is as strong as ever, yet valuations aren't all that demanding.\n        As the largest and most liquid ETF play, VNM screens attractively.\n           Khoa Nguyen/E+ via Getty Images Vietnam has been the pick of Southeast Asia so far in 2024, with VanEck's Vietnam ETF (BATS:VNM) now up high-single-digits % year-to-date despite currency depreciation headwinds. Fundamentally, there's been plenty of support for investors' bullishness, with the Vietnamese government pushing through more structural reforms since I last covered VNM (see VNM: Still An Attractive Frontier Market Growth Story). These span the real economy (e.g., revisions to the 'Land Law' and banking governance), as well as capital market accessibility (e.g., a new platform for T+0 settlement, eased pre-funding requirements, and potentially a new depository receipt framework for foreign capital). The latter is key, as it marks the current administration's commitment to its ambitious long-term financial targets, which include a market cap of 100% of GDP by 2025 (120% by 2030), as well as ~9m stock accounts by 2025 (~11m by 2030). And in the near-term, it adds fuel to a potential uplisting catalyst as Vietnam looks to transition from 'Frontier' to 'Secondary Emerging Market' within the next year - a move that has historically resulted in outperformance (Kuwait's 2020 upgrade is a recent example). As for Vietnam's economic fundamentals, they remain as solid as ever. For one, there's the region-leading +6% GDP growth forecast for 2024, which could well surprise to the upside (note the official target is 6-6.5%), given the pace of foreign direct investments entering the country so far. As for earnings per share growth, estimates are spread around a wide range, though consensus seems to be in the high teens to +20% for 2024 (albeit off a low base) - again well ahead of the region. Hence, while VNM's current high-teens trailing earnings multiple might seem demanding, it really isn't when you roll valuations one or two years forward (low-teens 2024 and <10x 2025 earnings). All in all, the compelling macro/micro setup means VNM's rally likely still has legs from here. Data by YChartsVNM Overview – The Largest and Most Liquid Vietnam ETF  Fundamentally, the VanEck Vietnam ETF remains mostly unchanged. For context, the fund tracks the country's large-caps via the same market-cap weighted MarketVector Vietnam Local Index, inheriting the index's size (>$150m), liquidity (>250k shares traded monthly), and weighting (8% cap for single-stocks) criteria. The fund, like the index it tracks, rebalances on a quarterly basis. VanEckThe most notable change to VNM, on the other hand, since last quarter is its asset base, which has further expanded to ~$560m (up from ~$531m prior). VanEck has, however, kept the fund's expense ratio intact at ~66bps, comprising ~50bps from management fees and ~16bps from other expenses. This may still be about eleven basis points above the expense ratio of key US-listed alternative, Global X's MSCI Vietnam ETF (VNAM), but the wider liquidity gap (68bps bid/ask spread for VNAM vs. 7bps for VNM) means VNM investors should make this up, and then some, on execution. VanEckVNM Portfolio – Real Estate/Financials Heavy but Still the More Diversified Vietnam Option As for the portfolio, the number of holdings is unchanged at 47 since last quarter. But there has been some reshuffling in the sector exposure as Real Estate (down over one percentage point from ~29% previously) cedes share to Financials (up slightly to 27.6%). Elsewhere, VNM retains the same sector makeup, led by Consumer Staples (unchanged at ~19%), Materials (12.5%), and Industrials (9.8%). Key comparable VNAM retains similar sector allocation levels despite incorporating a 25/50 approach to weighting limits (i.e., <25% for the largest single-stock holding and a <50% cumulative allocation for all holdings with a >5% weighting). VanEckThe single-stock makeup is also mostly unchanged since last quarter, though there have been some weighting shifts. The most notable are dairy producer Vinamilk and property developer Vinhomes, which now contribute a lower 7.3% and 6.7%, respectively. Top holding conglomerate Vingroup, on the other hand, remains slightly over the fund's weightage cap (albeit also at a lower 8.1%) and will likely be rebalanced soon. The rest of the top five, comprising commodities player Hoa Phat Group and state-owned Vietcombank, have similarly seen their allocations cut, in turn, reducing the overall portfolio concentration. Much like prior quarters, VNM stands out for its relative diversification; the other US-listed Vietnam ETF, VNAM, maintains a higher top-five concentration by virtue of its different weighting approach (<25% for VINAM vs. <8% limit for VNM's largest holding). VanEckVNM Performance – A Solid Start to 2024 After Last Year's Rebound VNM's year-to-date performance (+6.3%) underlines the positive momentum here, particularly given the Vietnamese Dong's quite significant depreciation relative to the US Dollar so far. Also notable is VNM's relative return vs the more concentrated VNAM across all relevant timelines (note that VNAM was only established in 2021). Still, it's worth noting that VNM, along with the Vietnamese large-cap equity universe, isn't yet anywhere near its pre-2022 high, leaving ample room for an extended recovery. VanEckA key contributor to VNM's performance remains its relatively narrow tracking error (by frontier market ETF standards) vs its benchmark index. Over the last year, the delta is now down to ~44bps (vs ~84bps since 2009 inception); by comparison, VNAM trails its index by a much wider >150bps over the same period. Add in the higher VNM trading volumes and liquidity (hence the narrower bid/ask spread), as well as higher distributions (~4.9% trailing twelve-month yield vs ~2% for VNAM), and it becomes quite clear why VNM remains the go-to option for Vietnam exposure. VanEckVNM Valuation – Growth Potential Keeps the Forward Multiple Undemanding Unlike many of its Southeast Asian peers, Vietnam's economic growth has translated into underlying earnings momentum for its large caps (albeit with a good deal of cyclicality). And with the country playing a key conduit role for both sides of the geopolitical divide (evidenced by its recent foreign direct investment growth), odds are that GDP growth will only further pick up from here. 2024, for instance, will see a slight acceleration, with consensus forecasts placing real GDP growth in the high-single-digits % (vs the 6-6.5% official target range). S&PValuation-wise, the good news is that this growth potential likely hasn't been priced in. Yes, VNM trades at a seemingly pricey 19.5x trailing multiple; it's worth keeping in mind, however, that 2023 was a relatively poor year for earnings (down low-single-digits %) after a series of external and internal shocks. Now that Vietnam has turned the page, consensus earnings growth estimates point to high teens % growth in 2024 and a further acceleration to >20% in 2025 (per Vietnam's VN-Index) – not unrealistic for a country growing nominal GDP at sub-10% levels. Even if consensus proves optimistic, though, the attractive one and two-year forward P/E multiples (low-teens and <10x, respectively), along a possible reclassification catalyst, leave VNM investors with a healthy margin for error here. Bloomberg, JP ResearchFinal Say   Vietnam looks to have well and truly put its 2022 troubles behind it. After a strong 2023, equities have extended their recovery into this year as well, far outperforming the rest of Southeast Asia. From here, the fundamental and technical setup looks quite attractive. Key structural reforms spanning both Vietnam's real economy and its capital markets are in full swing, and this should keep the growth runway well-supported for the years to come. Meanwhile, valuations are very reasonable relative to underlying forward earnings, and thus, at current levels, investors aren't paying much for growth. Ahead of a possible reclassification catalyst, I remain quite upbeat on VNM as a low-cost way to gain exposure.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2423222851"}