Some of the world’s cheapest stocks are in Vietnam. The Southeast Asian country’s benchmark index is trading at its lowest valuation in a decade. That gives investors a reason to get serious about this long-overlooked market.
A rising dollar has caused the Vietnam Stock Index to fall nearly 30 percent this year, trading at less than 10 times future earnings. It is one of the worst performing among regional industry peers. The blue chips include real estate and technology conglomerate Vingroup, which is down 37 percent this year.
There is a lot of potential. The economy is expected to grow at the fastest pace in Asia this year. The population is growing and is young. More than 70 percent of Vietnamese are under the age of 35. GDP per capita is just $3,694, less than a third of China’s figure. This leaves plenty of room for growth.
Vietnam is one of the biggest beneficiaries of the US-China trade war. US groups have moved suppliers to Vietnam to evade US tariffs and blacklists for operations in China.
Apple already gets some of its popular AirPods earphones from Vietnam. It is also testing the production of watches and laptops there. Exports to the US grew by more than a quarter in the year to September as a result of the shift. Pandemic lockdowns in China have reduced manufacturing dominance.
Vietnam’s growth was impressive. The economy grew 13.7 percent in the third quarter, after growing 7.8 percent in the previous quarter. With global travel normalizing, tourism, which accounts for about a tenth of the economy, should give those numbers a further boost. Vietnam’s quasi-socialist market economy has helped the country rapidly reduce its poverty rate from 17 percent to less than 5 percent in the space of just 10 years.
But it has drawbacks. Moving capital out of Vietnam is complicated. Foreign exchange controls limit the outflow of foreign currency.
Partly because of this, Vietnam has been the country of the future for much longer than investors had hoped. But at current valuations, the risks are diminishing.