Non-obvious markets: Vietnam on its way to global indexes

The best stories in the market are rarely accompanied by bold headlines with tickers and daily coverage on TV. More often, they are “footnotes on the back pages.” Today, I’d like to talk about one such footnote.

Last year, Vietnam’s economy grew by around 7%. The target is 8% and above. The population exceeds 100 million people, nearly 70% of whom are of working age. The country exports close to $400 billion worth of goods annually and has maintained a trade surplus for nine consecutive years.

Figures like these are typically associated with established economies. Yet in this case, we’re talking about a country many investors still classify as frontier. An interesting contradiction.

Global companies are gradually reshaping their supply chains. Trade tensions between the world’s largest economies are forcing them to look for alternatives. Vietnam has become one of the beneficiaries of this redistribution.

The tailwind here is not accidental. But, as is often the case, it comes in bursts.

Rising energy prices, disruptions in oil supply, and pressure on currency liquidity driven by the current conflict in the Middle East are already showing up in inflation, which has accelerated to around 4.7% annually.

The manufacturing sector continues to expand, but growth is slowing, and new export orders are fluctuating.

That’s normal behavior for a fast-growing economy. Problems emerge quickly – but so do opportunities.

Recently, Vietnam’s stock market received something like a “passport” into a more prestigious club. In the coming years, it will gradually be included in global indices. This alone could bring several billion dollars into the market through “mechanical” capital reallocation. Not because anyone suddenly became smarter – the rules have changed.

In the short term, the market is behaving exactly as a market should. After a strong rally (around 65% last year), it is correcting, responding to interest rates, geopolitics, and the usual desire of participants to take profits. Some investors see capital outflows as a warning sign. I see them as a normal part of the cycle.

Is the game worth the candle?

Well, this is not a story about “cheap today, expensive tomorrow.” We’re talking about a country gradually moving from the watchlist to the priority list for investment. About a market becoming part of the global system. About an economy where tailwinds still outweigh headwinds.

The price still matters. And discipline is even more important. Mood, as we know, is an unreliable partner.