1. Stable political environment
Vietnam elected an all new class of General Secretary, President and Prime Minister in April 2016, which leaves people wondering in which direction the new leaders will take. So far, we’ve seen a surprisingly determined push towards a more pro-business, pro-investment government. While corruption remains an issue, Vietnam has a fairly stable political environment, ideal for sustainable economic growth. This stability is especially valued, in light of the political tumult in other Southeast Asian countries such as Thailand or the Philippines.
2. Impressive GDP growth
When most of the developed economies are still in recovery mode, Vietnam stands out as an out-performer with 6.4% GDP growth in 2016. This growth has been attributed to strong performance in manufacturing, exports, and agriculture. Forecasts point to similarly stellar performance in 2017–2020 period.
3. Middle-class to double by 2020
Vietnam’s middle-class, specifically people whose monthly income is above 15 million dong (~$670), is expanding 14% every year and is expected to continue growing at this rate until 2030. Some 33 million Vietnamese will have ever-increasing demand for new, higher quality products and services. This is a great market opportunity to be captured by the right companies with the right execution. I expect to see tremendous growth across most consumer sectors, such as F&B, education, healthcare, entertainment, etc.
4. Once-in-a-decade opportunity to invest in state-owned IPOs
Over the last several years, Vietnam’s government has been pushing state-owned enterprises (SOEs), a legacy of the past, to IPO and eventually divest most of the government’s ownership in these companies. Since 2014, 557 companies were green-lighted for IPO, but only 426 have done so. This is a rare opportunity for value investors to get early access to market leading companies.
5. Public valuations are still relatively cheap
While stock prices are not as cheap as they used to be 2 years ago, valuations are still very attractive compared to other markets.
6. Ample opportunities for value-add in private space
Modern management best-practices are still foreign concepts for most businesses in Vietnam. This presents an opportunity for value-add investors to bring capital and operational expertise into companies, helping them realize their full potential. This gap, combined with a largely untapped market, are the right conditions for private equity to thrive.
7. Foreign investors are welcome
Vietnam’s government has made it very easy for foreign investors to invest in both public and private markets. Foreign ownership limits have been lifted for most industries (exceptions are banking, financial services, etc.). Benefits and rights of foreign investors are clearly presented in the Ministry of Planning and Investments’ website . The message is clear: foreign capital is welcome here and will be protected.
8. Opportunities for outsized returns
Ultimately, investing is a competitive sport. It has become much harder to generate alpha in developed markets where competition is fierce. It’s naturally wiser to be a contrarian and go explore territories that are less popular, wherein lies opportunities for outsized growth & returns.