How Vietnam benefits from deglobalisation and an upgrade into the MSCI emerging markets

How Vietnam benefits from deglobalisation and an upgrade into the MSCI emerging markets
Vietnam is currently in a “Goldilocks” phase and is increasingly moving into the global spotlight. With geopolitical uncertainties, ‘slowbalisation’ with ‘friendshoring’, supply chain shifts and intelligent domestic economic reforms, the country is taking advantage of the moment, say specialised asset management boutique AQUIS Capital.

In Vietnam, the current trend of deglobalisation brings significant advantages. The country has positioned itself strategically during times of global supply chain shift, resulting in a stable-to-strong economic growth. Vietnam’s GDP rose by 8% in 2022, a time when global growth was muted and main economic blocks, such as China and Europe, were in economic stagnation.

When looking at the main factors that have enabled Vietnam’s success, it is particularly important to consider the impact this change had on the country. Even though Vietnam is a communistic country, the government is very stable and continues the process of opening up the country.

The instance that this diversification of supply chains and production sites to Vietnam was made possible, gives a clear view on the government support to make the legal and fiscal framework possible. 

With not only a beautiful landscape but infrastructural benefits, such as good opportunities for export, with around 46 seaports, many airports and an improved road infrastructure, it has created a great area to attract large international companies. Therefore, high levels of foreign direct investment flow into Vietnam, which have positive benefits for the country.

AQUIS Capital

The country has a population close to 100 million people with an average age of 32 years, meaning the country has a young, motivated and well-educated population and thus offers a very good and reliable partner for this process. These factors have contributed to a development that is expected to generate economic growth of 6-7 % annually over the next five years. 

A strong earnings increase is expected in the energy sector and the industrial sector is also in a strong upswing. The Vietnamese Dong is one of the strongest currencies in Southeast Asia, which enables Vietnam to tame inflation easier. A low national debt level, which stands at 44.5 % of the country’s GDP underlines this strong macro data for Vietnam. After China’s post-pandemic reopening, we expect the tourism, which contributes around 6%-6.5% of GDP, and the consumption sector to grow again. An important event within one to two years, is the potential upgrade of Vietnam into the MSCI Emerging Markets Index. 

AQUIS Capital

The Vietnamese government is fully supporting this important milestone in putting all necessary reforms in place. Currently, Vietnam still has restrictions for foreign investors. Though, with the introduction of a non-voting share, foreign investments could be propagated and the country would meet the MSCI requirements. Furthermore, the country’s credit rating is only one level below investment grade, and the market capitalisation and daily trading volume are already higher than many other countries with emerging market status. This upgrade would give the Vietnamese equity market an enormous positive boost, due to new investors and higher liquidity. 

The Lumen Vietnam Fund, a UCITS equity fund featuring daily liquidity and a substantial fund assets under management (AUM) exceeding USD $300 million, showcases a track record spanning more than a decade, delivering an admirable average annual return of almost 10%. Lumen Vietnam fund provides investors with streamlined access to a promising market, capitalizing on the favourable geopolitical and economic shifts shaping the country. Furthermore, since 2013, the Lumen Vietnam Fund has integrated the sustainable ESG criteria in the investment process, and meet the ART 8 classification, according to SFDR requirements of the EU.

For more information on AQUIS Capital, click here.


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