Emerging Markets: The Vietnamese economic miracle
By Stephanie Grimmett, Managing Editor, Taipan
Communism just never seems to stick. Marx may fill the heads of the young, idealistic or slow with a lot of fantastic rhetoric about the workers rising up to defeat the capitalist demons. If you listen long enough, you start to believe that communism will bring with it unicorns, fairies and afternoons spent picking wildflowers in sunny meadows.
But after the glorious revolution, instead of finding the idyllic society of freedom and economic equality they were promised, those stalwart “workers of the head and fist” (as real socialist slogans used to call them) invariably fall prey to any dictatorial regime that happens to pass by. And countries that were trying to escape from poverty and starvation end up starving and in poverty as their economies are hijacked by a bloated and paranoid Socialist Unity Party.
The free market has usually beaten the pants off the noble ideals of communism, though Bill Moyers may tell you otherwise. In Russia, the transition from communism was violent, and 15 years later, is by no means complete. Putin is still trying to solder a healthy economy together through his country’s natural resources and sheer willpower. In China, the process has been more entertaining as the hodgepodge old- and new-school communist government attempts to juggle all of the different factors in its economic growth without dropping any one of its balls.
But in Vietnam, the economic pressures of government ownership managed in 15 years what a decade-long war couldn't accomplish. In 1986, Vietnam quietly returned its farmlands to private ownership and began opening the economy to capitalist reforms.
Now the country has a seven-year-old stock market, ironically named the Ho Chi Min Securities Trading Center. (That sounds like calling a bar the Pope John Paul II Badda Bing, but it’s actually named the city it’s in, not directly for the communist leader.) And with its emerging economy, Vietnam has become the playground of Japanese investors and the rest of the world is taking notice.
Unlike China, Vietnam is making it easy for foreign investors to cash in on its vital, young market. In fact, the country is courting foreign, especially Japanese, investment with tours of its industries that run almost daily. And despite the lingering bitterness in the U.S. about the war, Vietnam is growing in popularity in the American investment community.
Estimates show that about $5 billion of the country's $20.5 billion stock market cap (that's including both the Ho Chi Min and the Hanoi exchanges) are from foreign investors. And foreign funds account for between 20%-30% of the country's overall market investment capital.
Vietnam is still a tiny stock market, with only about 200 companies listed and a market cap of less than 1% of the New York Stock Exchange (of course, the NYSE can make even the largest foreign exchanges appear diminutive). But the country has posted economic growth of 7% or higher every year since 2002, and the economy grew 8.2% in 2006.
The country became the 150th member of the World Trade Organization in January. And Vietnam investment funds are popping up all over the place.
In February, the Indochina Capital Vietnam Holdings Fund raised $500 million, $150 million more than expected, when it debuted on the London Stock Exchange. Lion Capital Management just opened its first Vietnamese fund for Singapore investors, and of course, Japan's investment firms operate multiple Vietnamese funds, as well as offering direct investment in the country's stock exchanges.
Here in the U.S., funds specializing in Vietnam have been slower to arrive, possibly because of the enduring distaste for the country in the baby boomer generation or because of its small market size. But with an expanding economy and an open environment for foreign investment, that could change any day now.
By Stephanie Grimmett, Managing Editor, Taipan
Communism just never seems to stick. Marx may fill the heads of the young, idealistic or slow with a lot of fantastic rhetoric about the workers rising up to defeat the capitalist demons. If you listen long enough, you start to believe that communism will bring with it unicorns, fairies and afternoons spent picking wildflowers in sunny meadows.
But after the glorious revolution, instead of finding the idyllic society of freedom and economic equality they were promised, those stalwart “workers of the head and fist” (as real socialist slogans used to call them) invariably fall prey to any dictatorial regime that happens to pass by. And countries that were trying to escape from poverty and starvation end up starving and in poverty as their economies are hijacked by a bloated and paranoid Socialist Unity Party.
The free market has usually beaten the pants off the noble ideals of communism, though Bill Moyers may tell you otherwise. In Russia, the transition from communism was violent, and 15 years later, is by no means complete. Putin is still trying to solder a healthy economy together through his country’s natural resources and sheer willpower. In China, the process has been more entertaining as the hodgepodge old- and new-school communist government attempts to juggle all of the different factors in its economic growth without dropping any one of its balls.
But in Vietnam, the economic pressures of government ownership managed in 15 years what a decade-long war couldn't accomplish. In 1986, Vietnam quietly returned its farmlands to private ownership and began opening the economy to capitalist reforms.
Now the country has a seven-year-old stock market, ironically named the Ho Chi Min Securities Trading Center. (That sounds like calling a bar the Pope John Paul II Badda Bing, but it’s actually named the city it’s in, not directly for the communist leader.) And with its emerging economy, Vietnam has become the playground of Japanese investors and the rest of the world is taking notice.
Unlike China, Vietnam is making it easy for foreign investors to cash in on its vital, young market. In fact, the country is courting foreign, especially Japanese, investment with tours of its industries that run almost daily. And despite the lingering bitterness in the U.S. about the war, Vietnam is growing in popularity in the American investment community.
Estimates show that about $5 billion of the country's $20.5 billion stock market cap (that's including both the Ho Chi Min and the Hanoi exchanges) are from foreign investors. And foreign funds account for between 20%-30% of the country's overall market investment capital.
Vietnam is still a tiny stock market, with only about 200 companies listed and a market cap of less than 1% of the New York Stock Exchange (of course, the NYSE can make even the largest foreign exchanges appear diminutive). But the country has posted economic growth of 7% or higher every year since 2002, and the economy grew 8.2% in 2006.
The country became the 150th member of the World Trade Organization in January. And Vietnam investment funds are popping up all over the place.
In February, the Indochina Capital Vietnam Holdings Fund raised $500 million, $150 million more than expected, when it debuted on the London Stock Exchange. Lion Capital Management just opened its first Vietnamese fund for Singapore investors, and of course, Japan's investment firms operate multiple Vietnamese funds, as well as offering direct investment in the country's stock exchanges.
Here in the U.S., funds specializing in Vietnam have been slower to arrive, possibly because of the enduring distaste for the country in the baby boomer generation or because of its small market size. But with an expanding economy and an open environment for foreign investment, that could change any day now.
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