What to buy? Vietnamese stocks are rising ahead of schedule

Vietnam is now considered an emerging market rather than a frontier

Kaylie Pferten says it is still a promising choice.

Vietnam finished the year with one of the best stock market returns in the world, with its VN index up 38%. However, if investors had a great year in 2025, 2026 might be the cherry on top. With index provider FTSE Russell upgrading Vietnam from frontier to emerging market status in September, the country should experience a turning point. As a result, there will be more interest in Vietnamese stocks, including from passive funds that will change their emerging-market weightings.

According to Qian Zhang, an investment specialist at Baillie Gifford, it has taken 20 years to get here. "Vietnam is currently among the emerging markets' best structural growth stories," she claims. "We continue to be selective, but it's still a lesser-known and off-index market. is increasing for patient, long-term investors. A "

Vietnam's youthful population is one of the basic structural factors that favor many emerging markets. However, Zhang identifies three more attractions. "Through high-volume, cost-efficient manufacturing, the nation has spent two decades integrating itself into global supply chains," she says. "A rapidly expanding middle class is driving a shift from informal to formal consumption, and a bold pro-growth policy shift under the new leadership is reviving domestic economic momentum. The "

One might have anticipated that Vietnam would be severely impacted by President Donald Trump's tough deal on "Liberation Day." Since the first Trump administration, the nation's trade surplus with the US has increased dramatically, and Vietnam has profited from the president's attempts to make the world less dependent on China. However, US tariffs on Vietnam were more than halved as a result of a deal announced in July; in any event, Vietnam bulls should note that the country's economic story is far more complex than the export narrative.

Conor Finn of Barclays Bank states that "government reforms aim to accelerate GDP growth to enable Vietnam to achieve high-income status primarily through empowering the private sector and leveling the playing field." "The most obvious example of the reforms' impact to date is the rise in infrastructure spending. In 2025, investment had increased by 43%.

Three investor-friendly Vietnamese trusts.

According to Thomas McMahon, an investment analyst at Kepler Partners, there will undoubtedly be hiccups along the way (especially considering the unpredictable nature of US trade policy, which led to a sharp sell-off of Vietnamese shares on April's Liberation Day), but the long-term outlook is attractive. One of the world's most fascinating emerging markets is Vietnam. The "

Due to strict trading regulations and restrictions on non-Vietnamese ownership of certain companies, foreign investors have historically found it difficult to obtain exposure to Vietnamese equities. But now, investors can choose from three Vietnam-focused investment trusts that are listed in the UK.

"These three funds are all quite strong. records and have each surpassed the FTSE Vietnam index and the MSCI Vietnam index during the previous five years," says Alex Trett, a research analyst for investment trusts at Winterflood Securities. Vietnam Enterprise Investments Limited (LSE: VEIL), the largest of the three, is presently attempting to address the significant discount at which its shares have recently traded in relation to the value of the funds underlying assets. Investors will be able to cash in 30% of their shares through three different 10% tender offers this year at near net asset value (NAV), as opposed to the 13% discount that existed prior to the proposals, according to plans that were announced earlier this month.

Andrius Makin, associate portfolio director at the stockbroker Killik, says, "I wonder if shareholders will want to lock in some profits or to take a longer-term view given returns of close to 60 percent since April lows." But "the longer-term investment case for Vietnam is still very much intact," he continues. The board of Vietnam Enterprise has already made significant progress on the discount, which was significantly higher than 20 percent a year ago prior to a number of share buybacks, according to Anthony Leatham, an investment trust analyst at Peel Hunt. "We believe that these suggestions will serve as an extra catalyst for additional discount reduction. A "

The 750 million VinaCapital Vietnam Opportunity Fund (LSE: VOF), the second-largest fund in the industry, has also made an effort to allay investors' concerns regarding discounts. It manages the discount through recurring share buyback programs.

With a market value of 76 million, the third choice is the considerably smaller Vietnam Holding trust (LSE: VNH). In addition to running frequent share-buyback programs, it has demonstrated the best share-price performance of the three over the previous five years. In contrast to VEIL, which exclusively invests in listed stocks, the other two trusts also engage in private equity.

This focus on value for shareholders and governance is crucial because even minor changes in perceptions of Vietnam can cause trust discounts to increase, putting investors at risk. Nevertheless, in an illiquid market, investment trusts' closed-ended structure also offers helpful protection. Killiks Andrius Makin thinks that all three trusts are currently worth a lot of money, even though the Vietnam stock market did well last year. "All three are positioned to capitalise on the growth of the domestic Vietnamese economy, which is set to benefit from a young population and the growth of the middle class, driven by increasing urbanisation," he claims. "Investors should anticipate significant allocations to industries that offer exposure to this theme, primarily retail stocks, real estate, and finance." The "

If you're interested in learning more about Vietnam, you can listen to Andrew's interview with Thuy-Anh Nguyen, the manager of VEIL and product specialist at Dragon Capital, on YouTube (see below) or any podcast.

Watch this video: Thuy-Anh Nguyen, Dragon Capital | BFIA Talks | YouTube.