🌟Vietnam's Economic Miracle: The VNM ETF Investment Case

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Welcome back, ETF UNO community! Today, we’re diving into one of the most fascinating single-country ETFs available: the VanEck Vietnam ETF $VNM ( ▼ 0.23% ) . As global investors seek growth opportunities beyond traditional markets, Vietnam has become a compelling investment destination that warrants serious consideration for diversified portfolios.

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What is VNM?

VNM is the first ETF in the U.S. focused exclusively on Vietnam, launched in 2009. It tracks the MarketVector Vietnam Local Index, which includes publicly traded companies that are either incorporated in Vietnam or earn at least 50% of their revenues from the country. With around $400 million in assets under management and a 0.68% expense ratio, VNM offers investors a convenient way to access this dynamic Southeast Asian economy.

Vietnam's economic transformation over the past three decades has been nothing short of remarkable. Economic reforms since the launch of Đổi Mới in 1986, coupled with favourable global trends, helped transform Vietnam from one of the world's poorest countries to a middle-income economy in a single generation. This Southeast Asian nation has captured the attention of international investors for several compelling reasons.

• 📈Impressive Economic Momentum: Vietnam's economy grew 7.09% last year, surpassing 2023's 5.05% due to strong exports and foreign investment. HSBC economists predict that by 2025, Vietnam will have the highest GDP growth among the six largest Southeast Asian economies, with a rate of 6.5%.

• 🎯Attractive Demographic: Vietnam is among the world's most populous nations; roughly 40% of the population is under 25. This young, increasingly educated workforce provides a solid foundation for sustained economic growth and consumption patterns favouring long-term investors.

• 🏭Manufacturing Powerhouse: Vietnam's strategic location and lower labour costs—about 50% less than China—make it an appealing option for relocating businesses. The country benefits from supply chain diversification as companies seek alternatives to Chinese manufacturing.

VNM offers a comprehensive view of Vietnam's economic development. Its portfolio includes the top five holdings: Vingroup JSC, Vinhomes JSC, Vietnam Dairy Products JSC, Hoa Phat Group JSC, and the Bank for Foreign Trade of Vietnam JSC.

The portfolio highlights Vietnam's economic transformation, featuring major investments in real estate developers Vingroup and Vinhomes, which benefit from rapid urbanisation. It also includes Bank For Foreign Trade, representing the growing banking sector, and industrial firm Hoa Phat Group, poised to capitalise on infrastructure development.

Investment Strategy📊

For ETF investors, VNM serves several strategic purposes within a diversified portfolio. As a single-country fund, it functions primarily as a satellite holding that can enhance returns through geographic diversification beyond traditional developed markets.

Consider allocating 2-5% of your international equity exposure to VNM, depending on your conviction in the Vietnam growth story. The fund pairs well with broader emerging market ETFs, allowing you to overweight a specific high-growth market while maintaining broader EM exposure.

Timing considerations matter with country-specific ETFs. Given Vietnam's multi-year economic development trajectory, VNM works best as a long-term holding rather than a trading vehicle. Dollar-cost averaging can help smooth out the inherent volatility of single-country exposure.

From a geographic allocation perspective, VNM complements other Asian ETFs focused on larger markets like China, India, or Japan. Vietnam's lower correlation with these markets can provide diversification benefits within your Asian equity allocation.

VNM at a glance

ETF Issuer: VanEck

Inception: 2009-08-11

Asset Class: Equity

Underlying Index: MarketVector Vietnam Local Index

Geographical Focus: Vietnam

Expense Ratio: 0.68% (as of last data point)

Dividend Yield: N/A (as of last data point)

Distribution Frequency: N/A

Historical Performance

VNM's performance history illustrates the opportunities and challenges of investing in frontier and emerging markets. As of May 2025, it has a compound annual return of -2.93%, highlighting the volatility of single-country investments. This underscores the need for VNM to comprise only a small part of most investors' portfolios, as the fund has faced significant drawdowns typical of emerging market investments.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Exposure to Southeast Asia's Fastest-Growing Economy: Vietnam's economic fundamentals remain strong, with GDP growth consistently outpacing regional peers. The country's focus on digitalisation and green transition positions it well for future growth cycles.

2. Manufacturing and Export Powerhouse Positioning: Exports in 2024 grew 14.3% from a year earlier to $405.53 billion, led by shipments of electronics, smartphones, clothing and farm produce. Vietnam's role in global supply chains continues to expand.

3. Favourable Demographics and Urbanisation Trends: With a young population and rapid urbanisation, Vietnam offers compelling long-term consumption growth potential. The expanding middle class should drive demand across multiple sectors.

Top 3 Reasons Not to Invest

1. High Volatility and Concentration Risk: Single-country ETFs carry higher risk than diversified funds. VNM is a nice option for investors who want to invest in Vietnam but be aware that the fund could experience high volatility.

2. Liquidity and Market Development Concerns: Vietnamese capital markets remain relatively small and less liquid than developed markets. This can lead to wider bid-ask spreads and potentially challenging exit conditions during market stress.

3. Currency and Economic Dependence Risks: The Vietnamese dong's volatility and export dependence make VNM sensitive to global trade conditions and currency fluctuations. Trade tensions or global economic slowdowns could disproportionately impact performance.

🚀Riding the Vietnam Wave

The VanEck Vietnam ETF offers a unique opportunity to participate in one of the world's most dynamic emerging economies. Vietnam's impressive economic transformation, young demographics, and strategic position in global supply chains create a compelling long-term investment case. However, VNM is not for the faint of heart. The fund's high volatility, concentration risk, and emerging market characteristics make it suitable only for investors who can tolerate significant price swings and view it as a long-term satellite holding.

For ETF investors seeking to diversify beyond traditional markets and capture exposure to Southeast Asia's growth story, VNM deserves consideration as part of a well-balanced international allocation. Just remember to size your position appropriately and maintain realistic expectations about the inherent risks and potential rewards.

Are you ready to explore innovative ETF strategies and discover hidden gems in the world of ETFs? Join the ETF UNO community for regular insights, analysis, and investment ideas that can help you build a more diversified and dynamic portfolio. Together, we will navigate the ever-evolving landscape of ETF investing and uncover opportunities in both familiar and frontier markets.

DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.