Illustrations by Nilaksiya Thiruchelvam
As with any investment, your capital is at risk.
In a decade of investing in Vietnam, I’ve seen the country of 100 million people become one of the best of all emerging-market export-growth stories. Foreign manufacturers thronged, supply chains deepened, and ports thrived. All this despite recent trade wars and geopolitical tensions.
What was missing was strong domestic growth. The ‘blazing furnace’ anti-corruption drive, which began in 2013, brought discipline but froze decision-making. The property market stalled, pressure built in the banking system, and a small bond crisis followed. Factories kept running for global customers such as Samsung and Nike. But Vietnam faced the dreaded ‘middle-income trap’ – failing to compete on wages without moving up the value chain.
Positive picture
I see exciting signs it can spring free. The new leader, To Lam, is the antithesis of his predecessor. His unprecedented reforms emphasise momentum, not enforcement. Annual GDP growth is already 8 per cent – Lam is targeting 10 per cent. He’s restoring confidence, unblocking investment and allowing the private sector to do what it does best: grow.
Meanwhile, index provider FTSE Russell is upgrading Vietnam from a ‘frontier’ to an ‘emerging’ market, potentially attracting billions of dollars in new investment.
We back companies, not countries. The eight Vietnam-based firms that make up 10 per cent of Pacific Horizon’s portfolio – from plastic pipe makers to commercial banks and supermarkets – are all modestly valued compared to earnings.
As reforms channel more credit to the private sector, these firms should benefit from accelerated domestic investment and growing consumer demand.
Important information
Investments with exposure to overseas securities can be affected by changing stock market conditions and currency exchange rates. The Trust invests in emerging markets, which includes China, where difficulties with market volatility, political and economic instability including the risk of market shutdown, trading, liquidity, settlement, corporate governance, regulation, legislation and taxation could arise, resulting in a negative impact on the value of your investment.
The views expressed in this article should not be considered as advice or a recommendation to buy, sell or hold a particular investment. The article contains information and opinion on investments that does not constitute independent investment research, and is therefore not subject to the protections afforded to independent research.
Some of the views expressed are not necessarily those of Baillie Gifford. Investment markets and conditions can change rapidly, therefore the views expressed should not be taken as statements of fact nor should reliance be placed on them when making investment decisions.
Baillie Gifford & Co Limited is wholly owned by Baillie Gifford & Co. Both companies are authorised and regulated by the Financial Conduct Authority and are based at: Calton Square, 1 Greenside Row, Edinburgh EH1 3AN.
The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the Financial Conduct Authority.
A Key Information Document is available by visiting bailliegifford.com
