Vietnam Enterprise Investments Limited (LON:VEIL) is a London-listed investment company investing primarily in listed equities in Vietnam and is a FTSE 250 constituent.
Emerging Market Upgrade: Reform-Led Growth and Modernisation
Mr Tuan Le, Lead Portfolio Manager
Vietnam: The Quiet Contender
Global investor attention is increasingly dominated by the tariff tensions driven by the US administration. Amid this volatility, Vietnam stands apart, quietly laying the tracks for sustained growth beyond the noise of global tariffs. At Vietnam Enterprise Investments, we have pivoted the portfolio decisively toward domestic demand drivers like banking, retail, and infrastructure, firmly aligned with Vietnam’s resilient growth fundamentals.
Ignore the Noise, Follow the Signal
While the 90-day tariff pause between the US and its trading partners creates considerable uncertainty, how or when future tariffs may impact global trade remains unclear. Nevertheless, Vietnam has responded pragmatically, offering to reduce tariffs on US imports to zero, a clear signal of its commitment to balanced trade and constructive negotiation. Yet amid the noise, Vietnam is charting a clear, home-grown path, built on rising consumption, public investment, and decisive policy reform.
Mispriced Growth
Despite consistently outperforming regional peers, Vietnam remains a glaring omission in global portfolios, trading at valuations more akin to frontier markets than its fundamentals suggest. Its equity market currently trades at around 10.5x forward earnings, significantly below the ASEAN average of approximately 13.0x, and well below major emerging markets like India at around 18.5x. Vietnam’s PB ratio further illustrates this undervaluation, below its 5-year average of 2.0x at approximately 1.6x, driven more by a temporary shift in sentiment than any deterioration in fundamentals. Despite downward revisions due to potential tariff impacts, net profit growth for 2025 is still expected to reach 11%, underscoring the resilience of the corporate earnings outlook and the disconnect between valuation and performance.
The Vietnam Upgrade is Not a Story, It’s a Strategy
A formal FTSE EM Index announcement is expected by October 2025, followed by likely inclusion in March 2026. Historical examples, such as Saudi Arabia and Kuwait, demonstrate that substantial foreign inflows often precede official market inclusion, implying increased potential inflows for Vietnam:
· Estimated passive inflows from EM-focused ETFs range from US$500 million to US$1 billion.
· Active inflows from global institutional investors could range between US$2.5 billion and US$7.5 billion.
These flows have the potential to transform market depth, breathe life into the IPO pipeline, and support a broad-based rerating.
An EM Economy in a Frontier Wrapper
Vietnam’s economic fundamentals already mirror those of established emerging markets, with wide-reaching government reform promising to lay the foundations for accelerated growth:
· GDP growth reached 7.1% in 2024, and the government targets 7.5-8.5% over the next five years. The private sector, now central to economic strategy under the new Resolution 68, is likely the most important factor in achieving this, with the government aiming to double the number of private businesses by 2030.
· A new legal environment is being established where civil and economic disputes are decriminalised, and businesses are permitted to operate freely unless explicitly restricted by law, a game-changing shift for investor confidence and entrepreneurial activity.
· Policy measures target a 30% cut in business costs, supported by expanded access to credit, streamlined land use policy, and preferential treatment for small and medium-sized enterprises.
Under the leadership of General Secretary Tô Lâm, a sweeping reform agenda is accelerating. Public investment will reach an estimated US$36 billion in 2025, with the bulk directed toward infrastructure. In parallel, a bold administrative overhaul is underway: 18 ministries are being consolidated into 14 to eliminate inefficiency, while the number of provinces will be reduced from 63 to 34 to streamline governance and improve scale. The pace is nothing short of extraordinary – phase one is set to conclude by 30 June, with full rollout by 30 August. This rapid execution underscores the political resolve and a reform tempo more often seen in corporate turnarounds than government bureaucracy.
Portfolio Strategy: Leaning into the Transition
In anticipation of structural shifts, Vietnam Enterprise Investments has rebalanced away from volatility-prone sectors and leaned into Vietnam’s domestic growth engines:
· Reduced exposure to volatile, cyclical sectors such as steel and heavy industries.
· Increased allocations to banking (42.4% NAV) and retail consumption (11.9%), sectors crucial to long-term domestic economic growth.
· Enhanced positions in infrastructure and logistics, which directly benefit from increased government and foreign investment.
· Added to select real estate holdings set to benefit from infrastructure investment, urbanisation, and a more supportive legal framework designed to stimulate new developments and revive previously stalled projects.
Crucially, 72% of exports are generated by FDI firms which are not listed on the Vietnam Index. As a result, the Vietnamese equity market remains largely domestic, with limited direct exposure to global trade tensions.
Capital Market Reforms are Clearing the Path for Global Investors
Vietnam’s capital market reforms, including the successful launch of the new Korea Exchange Trading System (KRX) in April 2025, are enhancing infrastructure and improving investor access. The platform is now technically capable of introducing intra-day trading, faster settlement, and expanded derivatives products, addressing long-standing structural barriers for foreign investors. These upgrades are unlocking long-sealed doors to Vietnam’s capital markets, aligning them with global standards and welcoming greater EM-focused participation.
In parallel, regulatory simplifications and the planned removal of foreign ownership limits in key sectors further support Vietnam’s move toward global investor norms, significantly lowering the risk premium traditionally associated with its equity market.
Vietnam is not simply responding to external pressure, it is pursuing a deliberate and comprehensive reform agenda aimed at strengthening long-term fundamentals. With a policy focus on fostering a strong private sector, increasing domestic demand, enhancing administrative efficiency, and improving capital market access, the country is quietly repositioning itself within the global investment landscape. For institutional investors, Vietnam increasingly reflects the hallmarks of a maturing emerging market, one whose trajectory is being shaped more by internal momentum than external volatility.
Top Ten Holdings (55.9% of NAV)
| Company | Sector | NAV Weight % | VNI Weight % | Weight vs Index % | YTDReturn % | 1-Year Rolling Return % | |
| 1 | Mobile World | Consumer Discretionary | 8.1 | 1.8 | 6.3 | (2.3) | 8.8 |
| 2 | Asia Com. Bank | Financials (Banks) | 6.2 | 2.1 | 4.1 | (8.6) | 4.0 |
| 3 | Techcombank | Financials (Banks) | 6.0 | 3.6 | 2.4 | 4.6 | 13.5 |
| 4 | Vietcombank | Financials (Banks) | 5.7 | 9.4 | (3.7) | (7.9) | (8.4) |
| 5 | VP Bank | Financials (Banks) | 5.4 | 2.6 | 2.8 | (15.5) | (8.3) |
| 6 | FPT Corporation | Information Technology | 5.2 | 3.1 | 2.1 | (29.7) | 0.9 |
| 7 | BIDV | Financials (Banks) | 5.1 | 4.7 | 0.4 | (9.8) | (17.2) |
| 8 | Hoa Phat Group | Materials | 5.0 | 3.2 | 1.8 | (6.2) | (3.7) |
| 9 | Vietinbank | Financials (Banks) | 4.9 | 3.9 | 1.0 | (3.5) | 10.6 |
| 10 | Vinhomes | Real Estate | 4.4 | 4.7 | (0.3) | 43.1 | 39.5 |
| VEIL NAV | – | – | – | – | (10.5) | (1.1) | |
| Vietnam Index | – | – | – | – | (5.0) | 0.6 |
Source: Bloomberg, Dragon Capital
NB: All returns are given in total return USD terms as of 30 April 2025
