Việt Nam’s stock market is among the best performers in Southeast Asia to start 2024, and the VanEck Vietnam ETF (VNM) is participating in the rally, according to a report on the US’s etftrends.com.

As of March 15, the original ETF dedicated to Việt Nam equities is beating the MSCI Emerging Markets Index by a margin of better than 3-to-1 this year. That index is the gauge to which Việt Nam is angling for a market classification promotion.

The financial services sector, specifically brokerage firms, is one of the groups leading the way in Việt Nam this year. That’s good news for VNM investors because that’s the ETF’s largest sector exposure, at a weight of 27.63 per cent.

According to the newswire, there are a few reasons Vietnamese banks and brokerage firms are rallying in the first quarter. One is that rising liquidity in the previously illiquid market. Another is expectations that Việt Nam will, at the very least, be promoted to emerging markets status by FTSE Russell at some point this year. The country is currently classified as a frontier market.

Bloomberg said the liquidity boost and retail trading boom have benefited the overall market as well, with the VN-Index being the best performer among benchmarks in Southeast Asia this year. The daily trading value of Vietnamese stocks hit an almost seven-month high on March 8 while the new brokerage account openings reached 113,300 last month, up 80 per cent from a year ago.

Further supporting upside for VNM and its financial services components this year is a belief among market observers that the long-awaited promotion to the emerging markets designation is bringing more local retail investors into Vietnamese markets.

On a global basis, significantly more capital will be allocated to emerging markets funds — active and passive – than that to comparable frontier markets products. If Việt Nam achieves the desired emerging markets promotion, fund managers and issuers benchmarked to indexes incorporating Vietnamese equities must purchase those stocks, potentially including VNM holdings.

The country is also making technological strides in its capital markets. And those strikes aim to lure more global investors and enhance liquidity.

“The nation plans to introduce a platform that can handle 3-5 million orders per day, compared with the current capacity of about one million, and make settlement smoother. The central bank, meanwhile, has carried out four rounds of policy easing, helping spur an economic rebound and lure more individual investors”, according to Bloomberg. — VNS