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Low valuations and positive economic outlooks in Vietnam and Southeast Asia are attracting equity frontier market funds from places such as Sweden and South Africa.
Data shows that money managers from overseas have so far bought Vietnamese shares worth a net amount of $277.1 million this year, which already makes for a 5.3% gain from the total amount in 2013. The country’s benchmark index, the VN Index, has climbed 20% in the Ho Chi Minh City Stock Exchange during the same time.
A number of investment firms such as Asia Frontier Capital LTD, Coeli Asset Management, and RenAsset Management believe that Vietnam’s rally still has ground to cover based on improving growth forecasts. Inflation is easing in the South East Asian country alongside a projected rise in exports partly due to its central bank’s devaluation of the dong. Additionally, a more balanced payment sheet and larger foreign reserves have pushed Vietnam’s sovereign rating to be revised up by Moody’s Investors Service last July 29th.
Asia Frontier Capital’s chief executive officer Thomas Hugger said that they are continuing to open more positions in Vietnam. He added, “Even though it has been among the leading performers in Asia this year, we still think many stocks offer value.”
The positive sentiment for further gains was echoed by other fund managers such as the Frontier Markets Fund of Coeli in Sweden and RenAsset Management who have said that they are “still finding attractive stocks” in the country.
Economic growth for Vietnam accelerated in the second quarter from 5.09% to 5.25% behind the strength of exports which climbed by 14.9% during the first half of 2014. Inflation continued to be stable for the sixth straight month at just below 5% from a record high of 28% in August 2008.
