Is the high-flying Asian tiger Vietnam on the verge of unraveling?
The Market Vectors Vietnam ETF (NYSEArca: VNM) was retracing its steps early Friday, rising more than 2.5 percent in early trade after it staged a sharp sell-off Thursday on growing investor jitters about Vietnam’s economic outlook in light of this week’s arrest of one of its wealthiest banking tycoons.
VNM dropped more than 6 percent Thursday as the market reacted to what seems like a quick derailing of the once-promising Vietnamese economy. VNM is the only ETF to serve up exposure to Vietnam. Indeed, the rapidly growing Southeast Asian country can’t yet be found in broader regional funds by other providers.
Fears that the Vietnamese economy, while still growing at an annualized pace of around 4 percent, may be getting off its tracks are behind the ETF’s recent volatile price action.
Vietnam was until not too long ago a booming center of economic growth in Asia. But this week’s arrest of Vietnam’s prominent banking businessman Nguyen Duc Kien, on what are still “vague” business-related charges, fueled concerns that more arrests in the financial segment could be looming, the latest tidbit to point to the country’s growing economic troubles.
The news sent the local equities market plunging to its steepest decline in four years earlier this week, making some concerned that Vietnam might be on track to relive the economic meltdown seen in Thailand in 1997, according to a New York Times article that quoted local officials.
While Vietnam’s economy is still growing, hefty debt loads—many of which are linked to state-run real estate speculators—are weighing on the market at a time when the global economy is faltering due to the slowdown in the U.S. and in Europe, the article said.
The $286 million VNM, which launched three years ago, is still in the black, with year-to-date gains of some 12 percent, but that could soon change if Vietnam fails to find a solid footing. The ETF has been among the best-performing ETFs in the past year.