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Dien Vu, Dragon Capital

Why now could be a good time to invest in Vietnam


Dien Vu, portfolio manager of the GBP1.7 billion LSE listed investment trust Vietnam Enterprise Investments (LSE:VEIL) Limited outlines the investment case for Vietnam.



As geopolitical tensions intensify in the wake of Russia’s invasion of Ukraine, alongside rising inflation and interest rates, it is no wonder investors are boarding a flight to safety.

Assets offering some protection from a potential global recession makes economic sense, thus there is an argument for considering stock markets that offer cheap valuations with considerable growth potential.

The Vietnam Index (VNI) was one of the world’s best performing indices last year, increasing 39.0 per cent, almost identical to corporate earnings growth. However, with the VNI flat in Q1 2022 it then fell over 20 per cent by the start of June amidst global and domestic volatility. This was despite corporate earnings growth averaging 27.1 per cent in Q1 2022 and its expected expansion of over 20 per cent for the year.

For investors with a long-term horizon, macro and microeconomic growth outlooks remain strong and suggests the country’s stock market presents compelling investment possibilities.

Attractive valuations

Vietnamese stocks look good value, particularly when compared to peers.

Equity valuations ended May 2022 a forward price-to-earnings ratio of 9.9x, while earnings per share (EPS) growth is forecast at over 20 per cent this year.

While past performance is no guide to the future, over the five years to May 2022, MSCI reports annualised returns of 9.76 per cent for Vietnam, beating the Frontier Market Index by 6.86 per cent and the MSCI All Country World Index by 76 basis points.

For investors to capitalise on the attractive valuations, however, they need to find stocks that are aligned with the underlying factors driving economic growth in Vietnam.

Stocks and sectors

Dragon Capital’s Vietnam Enterprise Investments Limited (VEIL) fund invests in companies that are set to benefit from the country’s rapidly expanding middle class, which is driving greater urbanisation, digitalisation and overall consumer power.

These include those operating in the banking, technology, real estate, steel and retail sectors.

Banking and Financial Services

If the government is to achieve its ambition to become a high-income economy by 2045, the financial services sector, particularly banking, will need to transform and expand; evidence shows it well on its way.

In recent years, electronic ‘know your customer’ (eKYC) technology has digitally enabled financial participation across Vietnamese society. The emerging middle-class and its demand for investment products has seen 2.9m stock market trading accounts opened in the last 18 months.

Meanwhile, new bank account openings have registered a compounded annual growth rate of 12 per cent over the past five years, largely due to eKYC, and now cover over 70 per cent adult population according to the State Bank of Vietnam, double the 2017 figure.

The State Bank of Vietnam is helping push the digitalisation drive, setting a target that 50-70 per cent all banking services can be done online by 2030. Some of the country’s top private banks have committed to investing 10 per cent of their annual profits into digital R&D over the next five years.

Of VEIL’s top 10 holdings as at 8 June 2022, four are banks including Vietnam Prosperity Bank which has committed to developing cloud infrastructure to support long-term relationships with clients.

Real estate

Alongside banking, real estate also offers strong return potential.

Vietnam’s population is expanding rapidly – by 2050 total inhabitants are forecast to number 120 million people from 97.33 million in 2020 – and as prosperity improves and government provides housing support to lower income households, more individuals than ever before are able to access the property market.

There has been an extraordinary surge in urbanisation – an increase of 6.2 per cent between 2011 and 2020 to reach 37.3 per cent and urban areas are expected to surpass rural by 2050 – creating huge demand for suitable housing.

As at 8 June 2022, two of VEIL’s top ten holdings are in real estate companies – Vinhomes, Dat Xanh – reflecting the 15 per cent compound annual growth rate (CAGR) predicted from residential property by 2027.


With construction so critical to Vietnam’s ambitious economic development, Vietnam’s largest steel manufacturer is also among VEIL’s top 10 holdings.

VEIL has a long track record in steel investment allocating to the Hoa Phat Group, an integrated steel producer, in 2009 when its market cap was USD630 million. Today it stands at more than USD6.7 billion.

The latest report into the Vietnam’s steel market predicts that between 2020 and 2024 it will be the fastest growing in the world. The CAGR of production volume of crude steel is projected to exceed 20 per cent and in the next two years and Vietnam will become a net exporter of steel.


Furthering Vietnam’s digital capability is also vital to the country’s development goals, placing technology companies at the centre of investment targets.

Last September, the Vietnamese government launched its digital transformation plan which targets 20 per cent contribution from digital activities to the country’s economy by 2025, and 30 per cent by 2030. It also aims to be in the top 50 countries on the UN’s ICT Development Index in the next three years.

Tech is core to VEIL’s strategy and the fund has FPT Group – Vietnam’s leading technology and IT services group with a market cap of USD4.3 billion and along-time top 10 holding in the portfolio since 2008.


Reflecting Vietnam’s burgeoning middle class, retail is an essential sector for growth investors.

Prior to the COVID-19 pandemic, the wholesale and retail sector accounted for almost 12 per cent of the country’s GDP and showed consistent year-on-year growth.

Even post pandemic – thanks largely to the Vietnamese’s government’s response to the crisis – retail looks strong.

Government data shows the retail sector generated USD210 billion of sales in 2021, and for the first five months of 2022 rose 6.3 per cent in real terms.

VEIL’s top 10 holdings are aligned with the flourishing retail sector. The fund’s biggest investment is in Mobile World Group (MWG), an omnichannel retailer that inspired Vietnam’s transition to modern trade.

Last year MWG’s revenue was over USD5 billion, and the company aims for USD6 billion in 2022, with profit margin expansion. When VEIL first invested in MWG in 2014, its market cap was just over USD500 million and is now USD4.6 billion.



Vietnam’s fast growing, upwardly mobile population supported by a government keen to progress its ambition for change, has created an attractive growth environment.

Investment in stock markets is never predictable, nor without risk, but Vietnam offers exciting opportunities for investors looking for long-term potential in an uncertain world.















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