Institutional investors eye increased exposure to Vietnam

Most pension fund managers and institutional investors plan to increase their exposure to Vietnam over the next three years, according to research from Dragon Capital.

Dragon Capital, a Vietnam-focused investment firm reported that 96% of them expect to increase their exposure to Vietnam over the next three years, with 42% anticipating a dramatic rise.

Moreover, the research found that 99% of professional equity investors interviewed agree that frontier markets can offer attractive diversification benefits compared to emerging and developed markets.

Vietnam Enterprise Investment Limited lead portfolio manager Tuan Le said the appeal of investing in Vietnam was clear; it offers both returns and diversification.

"Over the past decade, we've seen the Vietnam Index rise by 199%, a stark contrast to the 78% rise in the MSCI EM index and 23% in the MSCI FM Index (in GBP terms)," Le said.

"Vietnam continues to show strong forecasts. GDP doubled from £169bn in 2013 to £340bn in 2023, and is projected to grow by a further 6% in 2024.

"The country is also working towards being upgraded to both FTSE Russell and MSCI emerging market status, which will pave the way for billions of pounds to pour into Vietnam's capital markets."

Dragon Capital noted the Vietnamese government's 2030 Stock Market Development Strategy, approved in 2023, targets a market capitalisation of 120% of GDP, doubling the current 60%.

Key initiatives include a new trading and settlement system, with priority directives from the prime minister to relevant ministries.

If Vietnam gains emerging market status, 88% of surveyed investors would increase their allocations, with 55% planning substantial increases and 7% investing for the first time.

Should Vietnam be upgraded, 86% of professional investors would boost their allocations through actively managed funds, with 12% investing for the first time via these strategies.