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Infrastructure, Innovation and Investment: Vietnam is Becoming Increasingly Attractive to Investors

With ambitious growth targets and multi-billion dollar investments, Vietnam is positioning itself as Asia’s new economic engine, says Mario Timpanaro, Portfolio Manager of the Lumen Vietnam Fund.

Mr. Timpanaro, the Vietnamese government has raised its GDP forecast for 2025 to 8 percent. Is that realistic?

Mario Timpanaro: The growth target is ambitious, but certainly achievable—especially in light of the government’s strong push for infrastructure investment. The authorities have shown determination to accelerate infrastructure development to fully unlock the country’s growth potential. We believe these investments could contribute between 1 and 1.5 percentage points to GDP over the next few years.

This includes the expansion of Terminal 3 at the central airport in Ho Chi Minh City—scheduled to open on April 5—as well as the new airport south of the city, expected to be completed in the first half of 2026. Additionally, nine new metro lines are planned, with the first line successfully commissioned at the end of 2024. A major city cannot thrive without a well-functioning metro system. The highway network is also being expanded with significant effort, which will ultimately benefit both logistics and tourism. On top of that, a major high-speed rail project is underway to connect the capital Hanoi with the economic center Ho Chi Minh City—an investment of USD 67 billion, expected to be completed by 2035.

During your last visit, optimism regarding domestic growth seemed to lag behind market expectations. What is needed to reverse this trend?

Timpanaro: We’re noticing that people are saving more. While new car registrations rose slightly by 2.6 percent last year, there is still a degree of restraint when it comes to purchasing durable goods. Sales of electronic components are also lagging behind expectations, although exports of these goods have increased significantly. This cautious sentiment is reflected in the PMI index, which has remained below the 50-point threshold for the past three months—49.2 in February. Domestic consumption contributes a significant 55 percent to GDP.

A very positive economic development is the recovery of tourism: overnight stays increased by 30 percent in the first two months of 2025. In addition to visitors from Southeast Asia, we are seeing strong demand from Europe—particularly from Germany. Tourism already accounts for approximately 8 percent of GDP.

In addition to the traditional manufacturing sector, Vietnam seems to be making inroads into advanced industries such as semiconductors and AI. How do you view this development?

Timpanaro: It’s an extremely exciting trend. Vietnam has not only established itself as a manufacturing hub, but is also gaining prominence in advanced industries such as semiconductor production and artificial intelligence. Major tech companies including Samsung, Intel, LG, Apple, and Google have built production facilities in Vietnam. This reflects not only the country’s competitiveness but also its growing capacity for innovation. Particularly noteworthy is Nvidia’s establishment of an AI research center in Hanoi—reinforcing Vietnam’s ambition to become a leading AI hub in Southeast Asia.

Despite the optimism, concerns remain around tariffs and trade policy. How is the government addressing these issues?

Timpanaro: While U.S. tariffs are creating uncertainty globally, Vietnam remains relatively calm—partly because it brings strong bargaining chips to the negotiating table, including potential offsetting deals worth several billion USD. With its so-called “bamboo diplomacy”—flexible yet firm—the Vietnamese government is skillfully navigating geopolitical tensions. Compared to direct competitors such as China, tariffs on Vietnamese exports remain relatively low.

How important is Vietnam for investors in the Asian region?

Timpanaro: Vietnam currently offers one of the most compelling investment opportunities in Asia, especially considering its robust economic growth and impressive recovery in corporate earnings. For the Lumen Vietnam Fund, we anticipate earnings growth of 17 percent per share, with a price-to-earnings ratio of just 11.9. GDP growth is expected to reach 7 percent this year—something Europe can only dream of. Vietnam provides strong diversification for any portfolio, as its correlation with most major global indices is very low.

What is your assessment of the Vietnamese stock market?

Timpanaro: We’re seeing domestic investors return to the market. Average daily trading volume is around USD 800 to 900 million. After a prolonged sideways movement between 1,260 and 1,300 points, the market has recently broken upward. Several factors are driving this: one is the launch of the new KRX trading system, which enables intraday trading and is expected to boost liquidity. A more significant catalyst is the anticipated upgrade of Vietnam to emerging market status by FTSE in September 2025, which will bring renewed momentum. A reclassification by MSCI is expected within the next one to two years and would provide a much larger boost to the Vietnamese equity market.

How stable is the government in Hanoi, and what is it doing to attract international investors?

Timpanaro: The government is very stable. On the one hand, it is taking the necessary steps to ensure rising prosperity in this emerging country—an effort that is being positively received by the population. On the other hand, it is earning credibility and building transparency with international partners. Whether through infrastructure, innovation, or ambitious investments—Vietnam is becoming increasingly attractive to investors. It is therefore not surprising that foreign direct investment has performed so well: in 2024, a record USD 25.35 billion flowed into the country. Whereas in the past, international companies were the ones relocating production from China to Vietnam, we are now seeing—already since Q4 2024—Chinese companies following this trend as well, out of concern about U.S. tariffs. We expect this trend to continue for the next few years before any consolidation may occur.

Vietnam: Between Superpowers

Vietnam finds itself at the center of the trade conflict between the United States and China. Vietnamese equities are historically undervalued. Over a five-year horizon, active funds have outperformed passive strategies.

It is no easy task for To Lam, Vietnam’s de facto top political leader as General Secretary of the Communist Party, to navigate between the two global powers—the U.S. and China. The Southeast Asian nation has not been spared from the tough stance of the U.S. President: Donald Trump imposed tariffs of up to 46 percent on Vietnamese imports. Lam responded swiftly, given that the United States is one of the country’s most important export destinations.

Just a few days later, he held a phone call with Trump and proposed, among other things, a reciprocal reduction in tariffs from the Vietnamese side. A document from the Ministry of Industry and Trade now reportedly confirms that Vietnam intends to take action against illegal transshipment of goods into the United States. While the tariffs are currently on hold, Trump’s 90-day suspension expires in early July.

On the other side of the conflict stands China—Vietnam’s second major trading partner. In a recent meeting with Chinese President Xi Jinping, the two nations signed numerous bilateral cooperation agreements, thereby deepening their trade relations.

Xi explicitly called for stronger supply chains between the two countries. “Vietnam’s foreign policy, which aims to remain open to all sides—including the U.S. and China—is being put to the test,” summarizes Ulrich Stephan, Chief Investment Strategist at Deutsche Bank.

Strong Ambitions Amid Fragile Balance

And yet things had been going so well. Vietnam, which is still classified as a frontier market—one tier below emerging markets—aims to become an industrialized nation by 2045. The government wants to reduce bureaucracy and create more space for investment.

The official growth target for 2025 is eight percent, after the country already achieved seven percent in 2024. The World Bank is slightly more cautious in its forecast, projecting growth of 6.8 percent in 2025 and 6.45 percent in 2026. “These strong growth prospects are primarily driven by demand and exports in the technology sector,” explains Stephan. “In addition, Vietnam is rated positively as a destination for foreign investment. It could outpace other Asian neighbors in growth thanks to a combination of exports, investment, and robust domestic consumption.”

Now it is up to General Secretary Lam to walk the tightrope between the two superpowers. Should he succeed, Vietnam might even benefit from the tariff dispute, as more countries could look to diversify their supply chains and include Vietnam. However, if he fails, there could be significant economic consequences: exports to the U.S. account for roughly 30 percent of Vietnam’s GDP.

Investor Uncertainty and Valuation Gaps

This uncertainty is also reflected in the stock market. The MSCI Vietnam Index—which tracks the 63 largest Vietnamese companies—is currently trading nearly 20 percent below its 10-year valuation average.

“Indices are reacting to global concerns around tariffs, even though the largest Vietnamese companies are not in the tech sector but in more traditional industries like steel, real estate development, banking, and food,” explains Stephan. Based on historical price-to-earnings ratios, the MSCI Vietnam Index still appears ambitiously valued, posting a P/E ratio of nearly 18 as of the end of March.

Limited Retail Access—But Strong Fund Alternatives

It remains difficult for retail investors to trade Vietnamese stocks directly. Most brokers do not offer access to the Ho Chi Minh Stock Exchange (HOSE), and individual stocks from frontier markets are considered high-risk. Investment funds provide a much easier and more diversified entry point.

One of the largest and most well-known actively managed options is the Lumen Vietnam Fund from Swiss investment firm Aquis Capital. With USD 348 million in assets under management, it is one of the heavyweights in the space and has been active since its inception in 2012.

Over this period, the fund has delivered an annualized return of 9.5 percent (as of March 31). Even more impressively, the five-year average annual return stands at 18 percent. However, this comes at a cost: a front-end load of up to 3 percent and ongoing charges of 2.45 percent make it one of the more expensive options.

A slightly more affordable option is the Galileo Vietnam Fund from Luxembourg-based asset manager IP Concept. While the ongoing charges are around 2 percent, the fund is much smaller in scale, with approximately USD 86 million in assets. In terms of performance, it also lags behind, posting an annualized five-year return of 14 percent.

For those seeking a passive alternative, there is the Xtrackers FTSE Vietnam Swap ETF, which synthetically replicates the FTSE Vietnam Index. With a total expense ratio of just 0.85 percent, it is significantly cheaper than the active funds and manages around USD 265 million in assets—positioned between the two active strategies.

However, its performance has disappointed: over the past five years, the ETF has posted an average annual loss of 1.2 percent. It appears that active management continues to provide real added value—particularly in less liquid markets such as Vietnam.

Vietnam is becoming an increasingly popular destination for foreign investors. Robust economic growth, a growing middle class with rising consumer spending, and an increasing number of promising listed companies are making the country more attractive for equity investors as well.

In Vietnam’s capital Hanoi, the metro has been running for three years—and just before Christmas 2024, the first metro line also launched in the country's economic center, Ho Chi Minh City. Six more lines are planned. Not far from the metropolis, a new international airport is also under construction. The Vietnamese government is vigorously pushing forward with infrastructure development. “In 2025, it plans to increase infrastructure spending by 70 percent. That could boost economic growth by 1 to 1.5 percentage points,” says Mario Timpanaro, manager of the Lumen Vietnam Fund. In addition to state investment, he sees other drivers supporting the Vietnamese stock market this year and beyond.

The economy grew by 7.06 percent in 2024, and expectations for the coming years range between 7 and 8 percent. “In addition, rising consumer demand and continued inflows of foreign direct investment will provide strong economic momentum,” Timpanaro says.

Vietnam is home to nearly 100 million people, with an average age of just under 33. The middle class is expanding and spending—domestic consumption accounts for around 55 percent of GDP. “After the pandemic, the government implemented numerous measures that have increased prosperity. People have more money in their wallets, which benefits domestic consumption. This trend will continue,” says the fund manager. A growing number of internet users and improved logistics are also fueling rapid growth in e-commerce.

China+1 and Bamboo Strategy Supporting Growth

Industrialization is progressing strongly thanks to rising foreign direct investment, which reached an impressive USD 25.3 billion in 2024. “The government is now implementing reforms more swiftly than in the past, attracting new investors,” explains Timpanaro. Vietnam is benefiting from the China+1 strategy pursued by many international companies seeking to diversify production due to cost and risk factors. Since the start of the U.S.-China trade war, which may escalate again with the change in U.S. leadership, Chinese companies are also increasingly investing in Vietnam.

While the U.S. trade deficit with Vietnam remains large, proactive steps have been taken to reduce the surplus. For example, Vietnamese airlines have ordered aircraft from Boeing, and LNG purchases from the U.S. (USD 3 billion) are set to increase. Vietnam benefits from its so-called “bamboo strategy”—firmly rooted but highly flexible—allowing the country to remain open to all potential partners.

The positive growth outlook leaves Timpanaro optimistic about the long-term performance of Vietnamese equities: “The country is only at the beginning of a long journey and remains highly attractive for equity investors.” He also highlights the attractive valuation relative to other Asian equity markets. “We believe the valuation gap will narrow as Vietnamese equities outperform,” he says.

Around 1,600 companies are listed on the Ho Chi Minh City (HOSE), Hanoi (HNX), and UPCOM stock exchanges. Market capitalization and liquidity on Vietnamese exchanges have increased significantly in recent years, even surpassing other emerging markets. Nevertheless, index providers still classify Vietnam as a frontier market. Timpanaro expects an upgrade by FTSE this year; MSCI may take another one to two years.

Interview with Mario Timpanaro, AQUIS Capital
"Our fund offers access to a fascinating growth market and proven portfolio diversification."

Mario Timpanaro, co-founder and portfolio manager of the Lumen Vietnam Fund, discusses the opportunities in Vietnamese equities, the country's expected upgrade to emerging market status, and the benefits of investing in small and mid-cap companies.

Mr. Timpanaro, the MSCI Vietnam and FTSE Vietnam indices have yet to recover from their sharp 2022 downturn, but the Lumen Vietnam Fund has already bounced back. How did you achieve this?

Timpanaro: One of the key success factors is a disciplined approach combining fundamental analysis and technical charting. Our performance is based on an active, fundamental investment strategy that enables us to selectively invest in undervalued companies with strong growth potential. The secret is stock picking, which wouldn’t be possible without our twelve-member team on the ground in Ho Chi Minh City.

Your fund focuses on small and mid caps. Why do you prefer smaller companies?

Timpanaro: In every country, small and mid-sized companies are the backbone of the economy—and Vietnam is no exception. They are dynamic and generally more profitable than large caps. Our well-trained analyst team is able to identify these gems early, before they appear on the broader market’s radar.

Which sectors are you currently investing in? Where are you cautious?

Timpanaro: We find sectors like energy, technology, consumer goods, insurance, and banking particularly attractive. For financial institutions, we pay close attention to price-to-book ratios and non-performing loan levels. We are more cautious with residential real estate, especially when it comes to heavily indebted companies.

With approximately USD 350 million in assets, the fund has grown significantly. Can the investment universe accommodate further growth?

Timpanaro: Yes, Vietnam's equity universe still offers sufficient potential for further expansion. The market continues to grow, and the ongoing liberalization for foreign investors is opening up new opportunities. Our active strategy allows us to target growth areas while maintaining flexibility. We also expect several IPOs this year.

How dependent are Vietnam’s economy and stock market on developments in China?

Timpanaro: China, as Vietnam’s second-largest trading partner, plays a key role, especially as a supplier of critical raw materials and components. However, Vietnam has reduced its dependency by diversifying trade relationships and signing free trade agreements with major countries and blocs. Thanks to its bamboo strategy, the country has gained autonomy and resilience.

How relevant is the Vietnamese currency for euro-based investors? What impact has it had historically on performance?

Timpanaro: The Vietnamese dong has been relatively stable against the U.S. dollar in recent years. One reason is the low national debt—only 38 percent of GDP. For euro investors, exchange rates are important, as a weakening dong could reduce returns. The dong has benefited from steady capital inflows and a strong trade balance. The U.S. dollar has strengthened against both the euro and the dong, largely due to interest rate differentials, which also raise hedging costs and weigh on net returns.

Vietnam is still classified as a frontier market. What does it need to achieve emerging market status, and when do you expect the upgrade?

Timpanaro: The main obstacle is ensuring equal treatment for foreign and domestic investors. There are several potential approaches, and it remains to be seen which one the government in Hanoi will choose. Last year, we observed that key reforms—long delayed—were suddenly advanced with renewed urgency. We expect FTSE to upgrade Vietnam to emerging market status by September 2025. MSCI may take until 2027 or 2028.

Why should investors consider Vietnamese equities—and particularly the Lumen Vietnam Fund—now?

Timpanaro: Vietnam is in a unique position: stable economic growth, a dynamic domestic market that contributes 55 percent to GDP, integration into global value chains, and a strong commitment to sustainable development. The Lumen Vietnam Fund offers targeted access to one of the world’s most exciting growth markets, combining attractive return potential with a long-term ESG perspective.

Fund Portrait

In Search of Diversification and Opportunity: Vietnam

For over ten years, the Lumen Vietnam Fund has provided investors with access to the Vietnamese equity market of this fast-growing Asian economy. Its success is driven by a strong local team and a long-standing ESG focus.

More than a decade ago, Mario Timpanaro recognized the enormous potential of the Vietnamese equity market. At the time, Vietnam was facing challenges and was largely overlooked by investors. In his view, share prices did not reflect the country’s underlying potential. In 2012, he co-launched the Lumen Vietnam Fund—the first actively managed UCITS fund focused solely on publicly listed Vietnamese equities. He still manages the fund today, now under the umbrella of Swiss boutique AQUIS Capital in Zurich.

He is not alone in managing the now USD 350 million fund. Since 2013, he has been supported by a team based in Ho Chi Minh City at Vietnam Holding Asset Management (VNHAM). “Our twelve-person team analyzes companies, meets with management, and visits production sites,” Timpanaro explains. He himself travels to the country five to six times per year. Vietnam is his second home, and the VNHAM team is his second family.

On-the-ground expertise is critical for the fund. The strategy focuses on small and mid-cap companies, which Timpanaro sees as having the highest growth momentum. Large-cap names are added tactically. The analyst team aims to identify hidden gems early—before they become expensive. Fundamental analysis is supplemented by technical screening.

Strong Governance as Key to Sustainable Growth

The selection criteria are strict: out of around 1,600 listed companies, only about 100 make it into the fund’s investable universe. Financial filters aren’t the only factor. As an Article 8 fund under SFDR, ESG criteria have been central to the Lumen Vietnam Fund since 2013—even when that approach was initially met with skepticism. “Our primary focus is on the 'G'—governance. Good corporate governance is the key to sustainable growth, stable capital markets, and long-term success,” says Timpanaro. Especially in emerging markets like Vietnam, transparency, shareholder rights, and ethical business practices are critical to gaining investor trust and ensuring economic resilience. “Companies with sustainable business models tend to be more resilient and better prepared for future challenges. Our ESG focus is both an ethical and strategic decision,” he emphasizes.

The fund holds 30 to 40 stocks. Financials (retail banking) currently account for about 30 percent of the portfolio. Consumer staples and industrial real estate (industrial parks) make up another 27 percent. Major holdings (each weighted over 5 percent) include tech firm FPT and Saigon Thuong Tin CJS Bank (as of end-January 2025). The active management combined with a unique strategy has paid off: since launch, the fund has achieved an annualized return of nearly 10 percent in USD—with relatively low correlation to the MSCI World, MSCI Emerging Markets, or EURO STOXX.

AQUIS Capital
Active Asset Management

AQUIS aims to be a leading specialist in active asset management, with a focus on alternative investments and emerging Asia.

Client-Centric Philosophy
We take time to understand our clients’ needs and translate them into tailored solutions. Our passion for what we do is reflected in our work with clients.

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Lumen Vietnam Fund
Source:https://www.private-banking-magazin.de/vietnam-faszination-und-diversifikation/