Vietnam is now a thriving regional hub with ample scope for further rapid development, assessed an article recently published on the UK news site of financial analysis moneyweek.com.
According to the author, Vietnam’s smartphone dominance is in large part due to huge investments by the Republic of Korea (RoK)’s giant Samsung. The country is intent on pivoting from “labor-intensive” textiles and electrical assembly work into more profitable sectors, such as semiconductors. Foreign capital is keen to help, given the growing pressure to diversify supply chains.
Smartphone production at Samsung Electronics Vietnam Company Limited located in Yen Binh Industrial Park, Thai Nguyen province.
“Vietnam’s booming economy has remained below the radar for most foreign investors for a simple reason: it is still not classified as an emerging market by MSCI,” noted the article. An upgrade to emerging market (EM) status would prompt large inflows from funds that track the benchmark EM index, delivering a boost to local stocks of an estimated 5 billion USD – 8 billion USD.
Vietnamese stocks are the single largest component of the frontier-markets sector, and foreign investors have spent recent years betting that an upgrade for such a dynamic emerging economy was only a matter of time, it said.
Meanwhile, Vietnam has faced milder inflation than many Western economies of late, enabling the central bank to cut interest rates four times this year.
“For investors, the volatile nature of the local stock market means that Vietnam isn’t yet one to put at the centre of a portfolio, but it still merits a nibble,” said the author, adding that even as a frontier market, the Southeast Asian nation is a compelling play.