The best funds to purchase as Vietnam changes

Vietnam might become an emerging market, attracting more foreign capital

Terry Tanaka chooses to purchase three funds with a focus on Vietnam in this instance.

Over the next ten years, Vietnam's market is predicted to continue to grow at one of the fastest rates in the world. Growing exports as multinational companies diversify their supply chains from China, a significant investment push supported by both the public and private sectors, and rising consumer spending as the middle class grows are all contributing factors to the economy's success.

Instead of being considered an emerging market, Vietnam is still categorized as a frontier market. It is actually a bigger and more expansive market than some nations that are already categorized as emerging markets, but it restricts the amount of exposure that many foreign investors will have. This distinction is about market infrastructure and access regulations rather than the opportunities that are available. Vietnam will, however, be reclassified into the FTSE Emerging Market index by FTSE Russell in September 2026. A variety of new investors, including tracker funds and active funds that are benchmarked against it, should start to invest in the market as a result.

Vietnam is the focus of three investment trusts that are listed in the UK. The largest is the 1.2 billion Vietnam Enterprise Investments (LSE: VEIL), which is followed by the 75 million Vietnam Holding (LSE: VNH) and the 700 million Vietnam Capital Vietnam Opportunity Fund (LSE: VOF). The fact that emerging markets frequently have a small number of large, superior companies is reflected in the fact that all of these trusts share a number of top holdings.

"Amplified growth proxies" are the banks of Vietnam.

For instance, VEIL has about half of what the other three have. "Vietnam's economy is overwhelmingly bank-funded," Thao Ngo, who works with Tuan Le to manage VEIL, claims. Due to underdeveloped bond and equity markets, bank credit accounts for about 145% of GDP, and credit growth is roughly two to 2.5 times the nominal GDP growth rate. Because of their GDP leverage, banks become more than just a proxy for growth. The industry has a return on equity of 1718%, while the regional average is between 9 and 11%.

Compared to VEIL, VNH's portfolio is more concentrated. Despite having about 75% of larger stocks at the end of 2025 "reflecting adaptation to market realities while maintaining conviction in Vietnam's structural story," according to the managers in the most recent interim report, it leans more toward mid-cap stocks than its peers. Their approach is centered on fast-growing businesses that cater to urbanization, industrialization, and domestic consumption. Mobile World Investment Corp., a significant holding for VEIL and VOF, has the biggest stake (10%). This mobile phone and grocery-to-electronics retailer group intends to grow further in Vietnam and throughout Southeast Asia.

In private markets, VOF seeks a further advantage. It has 21 public investments in addition to seven private holdings, many of which were made prior to the companies going public. This increases exposure to industries like consumer themes, technology, and renewable energy that are underrepresented in public markets. These are "developing quickly, but are still at a nascent stage to achieve maturity for listing," according to Khanh Vu, the fund's manager. Healthcare, for instance, is a significant industry that is underrepresented in public markets; the sector as a whole, which consists of one general hospital, a few generic drug manufacturers, and pharmacies, makes up about 1% of the index. VOF has made investments in three hospital platforms thus far, and it has successfully exited two of them.

The three are currently trading at discounts to net asset value (NAV) of 15%, 7%, and 23%, respectively, which is roughly consistent with their five-year averages. The Middle East crisis has affected the Vietnamese market, but as VNH states, the effects should be "cyclical and temporary rather than structural and permanent." The transition from cheap exports to a higher-value economy with an expanding middle class is still the long-term narrative.