Travelogue

Vietnam

In early 2024, we spent a week in Vietnam in our first visit to this dynamic country.  Vietnam has been one of the world’s fastest growing economies.  This country of 100 million people boasts a GDP per capita north of $4,000 from less than $1,000 only 15 years ago.  This economic boom has been driven by the manufacturing industry, especially in recent years as global companies seek to diversify their supply chains away from China.  Vietnam boasts annual foreign direct investment north of 4% of its GDP which is about double the level of its regional peers.

Despite its official name, the Socialist Republic of Vietnam has been pro-business since the Doi Moi reforms in the late 1980s after a horrendous decade of a state-controlled economy.  Like China before the consolidation of power under President Xi, Vietnam’s single-party government’s social contract with the population is to drive economic prosperity.  We expect the success of this system to continue, especially since Vietnam doesn’t have the same nationalist ambitions as its northern neighbor.

Vietnam’s economy and middle class are rapidly expanding. This is evident in new shopping malls like the Vincom Center in bustling Ho Chi Minh City as well as the density of scooters on the country’s roads.

Many global investors are understandably bullish about Vietnam’s market given the country’s impressive economic fundamentals.  The country is classified as a frontier market by MSCI and has been implementing reforms to qualify for an upgrade to emerging market status, which would increase flows to its stock market.  Today, however, the country still has some challenges for foreign investors including foreign ownership limits, multiple stock exchanges with different listing requirements, and the lack of English filings.

We found many high-quality companies to add to our watch list, including businesses that will continue to benefit from a growing middle class with higher disposable income.  Despite Vietnam’s progress on many fronts, including livings standards, health, and education, we were taken aback by the high level of informality in the retail sector.  Modern retail penetration is only 11%, which is much lower than other Southeast Asian countries like Indonesia, the Philippines, or Thailand.  We expect there to be significant value creation in the upcoming growth of modern retail.

Informal retail is still how most Vietnamese buy their consumer goods.
The National Assembly of Vietnam in Hanoi (left). As a single-party state, there is a plethora of propaganda (right).
St Joseph’s Cathedral in Hanoi, built in the 19th century, is a remnant of French colonialism. Given its history, Vietnam is wary of any foreign influence in its affairs, whether it be American, Chinese, Japanese, or French. Given this stance, we are optimistic that Vietnam’s share of global trade can keep rising despite any geopolitical surprises.
Vietnam has a vibrant beer culture, with among the highest per capita consumption in the region.  Heineken, Carlsberg, and Sabeco are the three largest players in what should continue to be a large and growing profit pool.