Vietnam ignites another stage of Doi Moi

Vietnam continues its reform course Doi Moi with determination and offers equity investors a broad universe of high-return companies. A conversation with Mario Timpanaro, fund manager of the Lumen Vietnam Fund at Aquis, about the country’s progress, potential risks, and Vietnam’s upgrade to an emerging market.

Mr. Timpanaro, Vietnam is considered a country on the rise. What is happening specifically?

Mario Timpanaro: We are currently experiencing the next stage of Doi Moi – a paradigm shift. In 1986, the focus was on opening up to entrepreneurship. Today, the focus is on efficiency and productivity. Three things are central: First, industry is increasingly relocating to Vietnam. In northern Vietnam around Hải Phòng and in the south around Ho Chi Minh City, new clusters for electronics and component manufacturing are emerging. Second, the government is accelerating major projects in infrastructure, ports, and energy supply. This lowers costs and boosts competitiveness. Third, domestic consumption is growing at double-digit rates. Modern retail, e-commerce, and tourism are developing an entirely new dynamic.

Which sectors are driving the economy?

Timpanaro: Vietnam has long since diversified beyond the classic “textile-shoe path.” Today, electronics and high-tech account for a growing share – now over a quarter of GDP. In addition, banks, insurance, logistics, infrastructure, IT services, and fintech are contributing. Textiles remain important for employment, but the direction is clear: more value creation, less dependence on low labor costs.

What makes Vietnam attractive for investors?

Timpanaro: For the Lumen Vietnam Fund, we look at three factors: structural growth, reform dynamics, and geopolitical relevance. The country has a young, well-educated population, benefits from the “China-Plus-One” trend, and remains fiscally disciplined. Government debt stands at 35 percent of GDP, a low level compared to global debt dynamics. For investors, this means: Vietnam is no longer just a frontier market but an emerging market with a broad, investable universe of listed companies, high returns on capital, and improved governance.

Where are the risks?

Timpanaro: Challenges lie in implementation and energy supply. Reforms must continue consistently, and electricity supply must keep pace with growth. Externally, weak demand and tariffs are a burden. The interconnection between real estate and banks also remains a potential risk factor. For investors, this means: balance sheet quality, cash flows, and transparency are decisive. At Lumen Vietnam, we have a competent, experienced, and local analyst team that monitors companies closely on the ground. This gives us a clear advantage in a still inefficient market.

Vietnam has not been spared from Trump’s tariffs. Curse or blessing?

Timpanaro: In the short term, tariffs are a margin headwind in tariff-sensitive segments. Compared with some regional competitors, however, Vietnam is in a better position. The agreed tariff rate of 20 percent is manageable. Companies can better enforce their prices through diversified supply chains, higher quality, and more reliable delivery times. Overall, tariff policy has accelerated the diversification of production to Vietnam and, in the medium to long term, is more of a catalyst than a brake, despite short-term volatility.

In September, FTSE Russell may upgrade Vietnam to “emerging market.” What would that mean?

Timpanaro: One must not compare the dimension with an MSCI inclusion. The capital inflows will be modest. But the symbolic power is significant. It is a clear signal that Vietnam can no longer be ignored by international investors. Passive money will flow in, but more interesting is that active managers will have Vietnam more firmly on their radar. What remains decisive is that the fundamental story holds – and it does: growth, reforms, demographics, and a growing number of investable companies. The fact that our Lumen Vietnam Fund has risen significantly more this year than most other emerging markets, which are also in a bull market, underlines this dynamic impressively.

Source: https://www.private-banking-magazin.de/von-der-werkbank-zum-hightech-standort/

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.