There are many reasons that lead our clients to be interested in investing in Vietnamese stocks.
Some of these reasons are relevant and make perfect sense while some others might be based on an incorrect reasoning. Many people who are interested in investing in Vietnamese stocks sight the following reasons for this investment:
• Vietnam is rightly seen as one of the fastest-growing economy in the world.
• Some investors believe that the trade war between the US and China will benefit on the long term the Vietnamese economy.
• They also believe that Chinese salaries keep increasing and that Vietnam could become the new China in a way and become the new manufacturer of the World.
• Some other investors come to Vietnam on a regular basis and see with their own eyes the speed of change of this country. You have to be impressed.
Even tough all the four points above seem to make perfect sense; they tend to ignore one key element that is not very well known by unexperienced investors. This element is that there is little evidence of a correlation between GDP and stock market returns. This is unfortunately true but if you suddenly think that you should not invest in Vietnamese stock markets anymore please just keep reading since you may change your mind again. One of the illustration of this lack of correlation between GDP growth and stock market returns is the Chinese example. In 2006, many people believed (following a similar logic as the one above) that China was a great place to invest only because the GDP growth was amazing. In 2020, fourteen years later, the time to look and analyse at the stock performance over these past years has come and wat do these investors see? Well, that China had one of the worst performing stock market over the period. This seems to mean that hell yeah GDP growth is not relevant when it comes to stock performances. However, this would be a dramatically wrong analysis. The truth is that in 2006-2007 the Chinese stocks were in a bubble and that in 2020, the Chinese stocks ae actually pretty cheap in terms of valuation. When it comes to Vietnamese stocks, at Anh Thomas Investment we have good reasons to believe that at current prices the stocks are still relatively cheap and that they represent a good investment for any investor with a long-term horizon.