Vietnam stocks are perking up and that recent resurgence comes against the backdrop of what some call political volatility.
Assuming “upheaval” and “volatility” are the accurate words to describe the current state of affairs, the one-month gain of 6.63% notched by the VanEck Vietnam ETF (VNM) is that much more impressive. In reality, those words are hyperbole regarding what’s happening in Vietnam. But the recent performance of the VanEck exchange traded fund is still impressive.
In reality, Vietnam isn’t experiencing regime change. It’s still a communist country. However, it remains an impressive gathering of foreign direct investment. Interestingly, the turmoil, as it’s described by some outlets, could be a major catalyst behind foreign companies’ and investors’ increasing comfort with Vietnam.
Turbulence Leads to Upside
The reality of what’s happening in Vietnam is arguably a positive for its financial markets and assets such as VNM. Over the past several years, the government there has taken strong steps to dampen corruption and graft – issues that often hinder the performance of markets in developing economies.
While those efforts have ensnared some high-profile Communist Party officials and members of the Politburo, those moves could also be paying dividends in terms of fostering more confidence among foreign investors. Data confirm that may be exactly what’s at play.
“Between January and April, disbursed foreign direct investment rose 7.4% from a year earlier to $6.3 billion, after 2023 saw the figure reach a new record of $23.18 billion. The nation’s external account has stayed healthy, with current account — the broadest measure of trade — in surplus,” reported Bloomberg.
Of note to investors considering VNM is the point that while Vietnam engaged in a corruption crackdown, for which it should be commended, the overall political climate in the Southeast Asian nation is remarkably stable. That includes a long-serving general secretary.
“The resilience of foreign investment into Vietnam shows that the party has mostly been able to contain the fallout of a period of prolonged political infighting spurred by questions over who will succeed Communist Party General-Secretary Nguyen Phu Trong, the 80-year-old leader who has held the nation’s top job since 2011,” according to Bloomberg.
So while Vietnam’s political system is at odds with much of the West, it is at the very least stable, and well-known Western firms are pouring money into the country. Those include Apple (AAPL) and Nvidia (NVDA), two of the largest U.S. companies.
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