Emerging Markets Guru Backs Vietnam – Here’s How To Play it in the UK

There are emerging markets and then there are “frontier markets”.

Profit Hunter’s Chief Investment Strategist, Manraaj Singh, describes the latter as smaller, less-developed emerging markets. He calls them emerging emerging markets. And right now these frontier markets offer huge potential returns for smart investors.

These markets cover almost a billion people and about $2.4 trillion in capital. They have been described as high-risk, low-income countries. They offer the potential for huge returns… but also the risk of huge declines. And they are typically difficult for outside investors to access – at least for investors not prepared to do a bit of ground work.

And that’s where Manraaj and his Profit Hunter service come in. It’s exactly this sort of work he excels at. Digging up investment ideas that the average investor doesn’t know about… and finding simple ways to play it.

The right time for our favourite frontier market

What Profit Hunter aims to do is find the right company in the right market at roughly the right time. Of course, timing is tricky in “frontier markets”. But it’s not so important when you’re working on a long-term horizon. And when you consider the potential returns on offer.

Right now, Profit Hunter’s favourite frontier market play is Vietnam. This is not about sending your money out to invest directly in Vietnam. But buying shares in a UK-listed company with broad exposure to this fast growing economy. Profit Hunter first recommended this investment last year – and now investors are starting to catch on.

Foreign investors pumped a record-beating £26 billion into the Vietnamese economy in the first eight months of 2008. That’s a four-fold increase on the same period last year, according to Vietnam’s Ministry of Planning and Investment (MPI).

The major investors are Taiwan, Japan, and Malaysia. They know the value of being able to tap into Vietnam’s cheap work force, according to analyst, Andrew Mickey of Stockhouse. “Wages in China have risen 300% in the last 15 years. Vietnamese factory workers make 55% less than their Chinese counterparts. As a result, low-cost Vietnam is poised to become the new manufacturing centre of Asia. China has been outsourcing manufacturing activities to Vietnam for years.”

Vietnam is being backed by big name investors

And there’s further solid endorsement from some big names in emerging markets investing.

The world’s best-known emerging markets guru, Mark Mobius of Templeton Asset Management, is keen on Vietnam. So much so that Templeton has just opened up a new office in Hi Chi Minh City.

Mobius said: “Vietnam is a young market, but the potential is immense. We believe it will grow to become one of Asia’s most important markets and we want to provide our investors with the opportunity to take advantage of that growth.

“Having analysts on the ground in frontier markets like Vietnam benefits our company research efforts, enabling more frequent company visits and greater insight into how companies operate. It is with this in mind that we have placed an emerging markets research team in Ho Chi Minh City.”

John Shrimpton, co-director of Vietnam’s first fund management firm, Dragon Capital, which he co-founded in 1994, is equally bullish about Vietnam’s outlook.

According to New Zealand’s The Dominion Post, “Mr Shrimpton estimates that in 1990 there were 14,000 enterprises, of which only 100 were private sector companies. Today, there might be anywhere from 500,000 to one million private sector companies, on top of a multitude of household businesses. Despite global tremors, Mr Shrimpton expects no abatement.

“[Vietnam] is the 13th most populous nation with 87 million people, half of whom are 20 or younger. Eighty per cent are under 35, and 1.5 million enter the job market each year. Gross domestic product is snowballing, with growth averaging 7 per cent for the past 15 years; last year it stood at 8.5 per cent.”

There’s no disputing that the Vietnam stock market has been volatile. Since we first recommended exposure here in Profit Hunter, it’s been a rollercoaster ride. We tipped our specific investment in July last year. Since then it’s been as much as 23% higher and as much as 42% lower than our entry price.

A long-term investment in a high growth economy

But like Mark Mobius, Profit Hunter is committed to Vietnam as a long-term investment. This isn’t an overnight speculation. We are investing in a frontier economy that is again on track to grow by 7% in 2008. It’s an economy that we believe could be a major global investment destination in the years ahead. As we’ve seen, that trend has already started.

The International Monetary Fund’s chief economist calls Vietnam an “emerging China.” “Citigroup calls it “the New Powerhouse of Southeast Asia.” Mark Mobius declares: “The market will go up and will be much more valuable in about three years.”

Profit Hunter’s own Manraaj Singh is hunting out new opportunities in Asia right now. He was in Kuala Lumpur, Malaysia, last week. This week he’s on the ground in Mumbai, India. He expects to unveil new investment opportunities to his small circle of investors on his return to London next week. (I can get you on the list to receive his new recommendations, if you’re looking for some exciting Asia plays. More on that below…)

But right now, Vietnam is Profit Hunter’s firm favourite frontier market.

It looks like Vietnam has bottomed out – buy now with this UK listed share

The Ho Chi Minh City stock market index was beaten down almost 70% from the high at 1109 in October to the recent June low at 364. But since then, the market has been showing strong signs of recovery, rising by 48% in a little over three months. It looks like we’ve seen the bottom.

And now could be a great time to get into Manraaj’s specific London-listed Vietnam play. It, too, has bounced nicely off recent lows and there looks to be very good technical support at that level.

Inflation running at 28% remains a threat to this market, but Vietnam’s central bank is fighting that with interest rate increases. With foreign investment pouring in to the country and with support from renowned emerging markets investors like Mark Mobius, things should only get better.

When you look at this as a long-term investment, it remains a highly attractive opportunity.

You can read Manraaj’s full report on Vietnam by clicking on this link. He’ll show you exactly why Profit Hunter believes this is the next great investment opportunity – and how you can play it with a UK-listed share.

Regards,

Frank Hemsley
For The Profit Hunter

P.S. If you enjoyed this article then we encourage you to sign up for Profit Hunter. Track down exciting opportunities in the worlds’ emerging markets and always stay ahead of the curve.

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