The Hottest Market In Asia Keeps Getting Better

Date 15/07/2008

Profit Hunter

Manraaj Singh

It’s been a horrible day in the markets today. Just about everywhere you turn, they’re getting hammered. Wall Street led the way yesterday with a 0.4% fall. But that was just the beginning of it…

Just about every market in Asia tanked this morning. And now we’re seeing red in Europe as well.

But our favourite Asian market has bucked the trend – it was up again this morning. In fact, it’s up by 31% in the last three weeks. And I believe that the rebound is going to continue. This is a great time to get in.

Blood on the trading floors

Asian markets are jittery. Record oil prices are threatening companies’ profit margins. So the last thing that they needed to hear was that the US could be in for another round of economic turmoil as the government looks set to bail out to major mortgage lenders with public money.

That’s probably going to drive the dollar down further, which isn’t good for Asian companies that export to the US. It’s also probably going to send the price of commodities up further, which could hit production costs in Asia’s manufacturing economies.

The net result is the sort of falls we’ve seen today. The Shanghai A-share market fell by 3.4%, Hong Kong was down by 3.8%. Japan fell by 2.2% and in India the Bombay Sensex had its teeth kicked in – it was down by 4.9%.

The fun is continuing here in Europe as well. As I write, the FTSE was down by 3.2%, Germany’s DAX has fallen by 2.9% and Paris is down by 2.28%.

Things are looking good in Vietnam though…

But in the meantime, things in Vietnam are looking up. The Ho Chi Minh City Index was up 2.5% today. That’s a total gain of 31% since it rebounded from a 12-month low on June 20th.

Investors have been coming back in to the market to snap-up undervalued shares. Right now, Vietnam’s markets are trading at about 11-12 times earnings. And they’ve also been tempted back in by the improving outlook for economic stability.

Foreign direct investment could hit a record $40 billion this year. Plus, economic growth is expected to reach 7.3% this year. That’s twice the global average!

Given that kind of performance, I believe that Vietnam’s market is still trading well below fair value right now. Vietnam is still struggling with a 26% inflation rate but the central bank has been raising interest rates aggressively to bring it back down to single-digits next year. That’s good news because it was nervousness about surging inflation that led to foreign investors pulling-out of this market.

We’ve taken a contrarian position on the outlook for Vietnam here at Profit Hunter. The sell-off in Vietnam’s markets was simply overdone.

So, we kept our buy recommendation on it even as investors abandoned the market in droves. Instead I believe that Vietnam is going to remain the most exciting investment opportunity in Asia for a long time to come.

Inflation is a big problem across Asia right now and one of the big drivers of that has been the soaring oil price. But Vietnam actually produces enough oil to meet its needs – unlike China and India. The country is actually a crude oil exporter.

The problem is that they haven’t got any refineries to process that oil. But Vietnam’s first refinery will become operational next year. And they’ve already started building a second, $6.2 billion, refinery that should be operational by 2013.

So the long-term impact of higher oil prices on Vietnam’s economy is probably going to be a lot smaller than it will be on many of the other Asian manufacturers. That practically guarantees that Vietnam is going to remain a hotspot for foreign direct investment.

This country’s growth story is just beginning and we’re in for the long-haul.

Here’s a great way to buy into Vietnam’s market

Our play on Vietnam’s economy – which is listed right here in London could be set to see strong gains in the weeks ahead. This company is now trading at a 5.2% discount to the value of its underlying assets.

That, and the broad rebound that we’re seeing in Vietnam’s market right now, makes this a good time to buy in.

You can read all about this opportunity by clicking HERE. Regards,

Manraaj Singh
Editor
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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