Despite recent clashes with China that made the headlines in the media, some very positive economic and financial factors have attracted a lot of capital in Vietnam. In this Bloomberg video, Rishaad Salamat asks Don Lam of Vinacapital about the fundamentals and outlook for the Vietnamese economy.
Key economic and financial perspectives for Vietnam
In another video that covers more political and economic perspectives, some key strengths and challenges of Vietnam are also presented into more details.
Strong financial fundamentals of Vietnam
Investors have been back in Vietnam since 2013 on improving macro-economic conditions, as the Government reforms launched in 2011 are starting to bear fruits.
- GDP has been growing steadily at 5-6% per year.
- Inflation has been kept under control at about 5%, down from 23% in 2011
- The rating agency Moody’s recently upgraded Vietnam’s credit rating with a positive outlook from B2 to B1. It’s the first upgrade of Vietnam in 9 years.
- Manufacturing has been strong, with a move towards more value-added manufacturing, especially in garment & textile and electronics.
- Stocks valuations is 20 to 30% cheaper than other countries in the region, with 13 to 14 Price to Equity (P/E) ratio.
The benchmark index of Vietnam has risen about 20% in 2014, but it seems that there is still some room for growth.
For more information on the financial perspectives, see how Vietnam aims towards the “Emerging Market” status.
Political and financial challenges of Vietnam
The recent political concerns with China have spurred some concern to reduce reliance on China. But the cheaper labor in Vietnam, about one third of China’s labor cost, is currently attracting big parts of the manufacturing supply chain from China to Vietnam, reducing its industrial need for import in the long-run. Furthermore, short term concerns create opportunities for investors to buy for the long term which remains very attracting.
The Vietnamese banking sector remains fragile, yet the Vietnamese government has moved towards alleviating bad debts by allowing it to be sold through a special company called “Vietnam Asset Management Company”.
423 State-Owned Enterprises (S.O.E.) are also on track to undergo some reforms and be privatized in the long-run.
Bloomberg video from August 2014