Viet Nam’s economic growth hit a 10-year high of 6.8 per cent in 2017, cementing the country’s status as an investment hotspot. But while we expect growth to remain robust in the years to 2022, replicating last year’s pace is unlikely amid a Chinese slowdown and the difficulties of sustaining the surge in credit growth of recent quarters.
The services sector is poised for a great 2018 however, spurred by strong retail growth and a continued boom in tourism. Overall, services saw a 7.4 per cent expansion in 2017, while retail sales grew by 9.5 per cent. We forecast services sector growth of 8.1 per cent in 2018, aided by ongoing buoyant private consumption from the young population and high consumer confidence.
Yet the really standout numbers come from tourism. A record 12.9 million foreigners visited Viet Nam in 2017, up by a very impressive 29.1 per cent on the year before. This year, the Government aims to attract 15 million visitors in a bid to up the tourism sector’s direct contribution to GDP to 8-8.2 per cent, compared with 7.5 per cent in 2017. Although ambitious, we see these as eminently achievable figures due to recent moves to expand the electronic visa system and visa-waiver scheme to cover more countries.
And, further turbo-charging visitor numbers will be all the fanfare and activities around 2018 being National Tourism Year. Highlights include the opening ceremony and Carnaval Ha Long in April, but exciting events are planned right across the country for the entire year.
So, how can ordinary Vietnamese individuals benefit from the country’s growth story, and in particular its burgeoning tourism trade?
Not by investing directly into shares!
Although it may be tempting to pile into individual stocks, a far wiser approach is to put money into investment funds that buy a wide variety of stocks in all the major economic sectors within Viet Nam. These are commonly known as mutual funds or collectives and, because they diversify across a whole range of companies, they slash the risk investors are exposed to.
Currently, there are only a few companies offering this kind of investment but you may find these very attractive:
The Vietnamese Opportunity Fund
This fund trades predominantly from London and is managed by Vin Capital. Investors may choose from six different funds to suit their risk appetite, with some of the vehicles trading directly from Viet Nam.
Viet Nam Holding
Viet Nam Holding is a sustainable value investor, which was initially launched to invest primarily in the privatisation of State-Owned Enterprises (SOEs) in Viet Nam. The majority of the first portfolio was acquired at the IPO stage or in the OTC markets, with the majority of its investments now listed on the stock markets of either HCM City or Ha Noi.
VNH ensures diversification by investing in at least 10 economic sectors, but good practice in ESG (environmental awareness, corporate social responsibility and governance) are the foundation of the composition and maintenance of the investment portfolio.
In short, you too can share in the success of National Tourism Year 2018, along with that of the other sectors driving the Vietnamese economy – all with relatively little risk and only investing perhaps a modest sum.
Next week we will be taking a look at Why Getting Shareholder Protection Insurance Might Be One of Wisest Moves You Ever Make.
Note to readers: Spence has not invested in the aforementioned companies; nor is he affiliated with or incentivised by them in any way.
* Brian Spence is Managing Partner of S&P Investments. He has over 35 years’ experience in the UK financial services industry as an investment manager, financial planner, and M&A specialist. He is a regular contributor in the UK financial press and has a deep understanding of the financial services community. Brian’s column will reflect on all the challenges and opportunities within the Vietnamese market, bringing a fresh perspective to today’s hottest issues.
The columnist’s email is brian@sandpinvestments.com.