Vietnam ETF, Lagging This Year, Could Catch Up Soon (VNM)

We have not profiled the country of Vietnam in this piece in quite some time, but earlier this week we saw some stronger than average trading volume in the benchmark product.

It also happens to be the only fund in the listed U.S. universe dedicated to exposure to Vietnam, VNM (VanEck Vectors Vietnam, Expense Ratio 0.66%, $305 million in AUM).

Vietnam is considered a “Frontier Market” by Index companies such as MSCI, as we see the country is the third largest weighting at 12% in FM (iShares MSCI Frontier 100, Expense Ratio 0.79%, $604 million in AUM) behind Argentina (16%) and Kuwait (20%). In these terms, Vietnam, measured by VNM, although it is turning in positive performance in 2017, has trailed the MSCI Frontier 100 Index by nearly six hundred basis points YTD.

Most of this under-performance has stretched back further than 2017, as we see in the trailing one year period VNM has lagged behind FM by nearly fifteen hundred basis points.

VNM is a very specific ETF in that the local underlying market is rather small in terms of diversification and market capitalization size, and the fund only holds twenty-six individual securities. The top three holdings within the ETF encompass greater than 23% of the overall portfolio and the weightings are as follows: 1) Vingroup JSC (8.56%), 2) Vietnam Dairy Products JSC (7.76%), 3) No Va Land Investment Group Corp (6.70%), 4) Joint Stock Commercial Bank for Foreign Trade of Vietnam (5.95%), and 5) FLC Faros Construction JSC (5.34%).

From an industry standpoint, Financials (20%) and Consumer Staples (19%) carry the heaviest weightings, following by a 17% allocation to Real Estate and a 16% weighting to Consumer Discretionary.

Averaging about 165,000 shares traded daily, but moreover for the reasons we mentioned above including having a rather narrow underlying basket and small local market (twenty-six individual equities), VNM can be tricky to trade at times without the proper techniques and awareness of local market hours. This said, it is the “only game in town” in terms of accessing single country equity exposure to Vietnam.

Year-to-date, fund flows have been relatively flat in VNM (about $8 million in creations) but it is possible that activity may tick up in the fund if portfolio managers believe that VNM will narrow the performance gap that has been present for some time between Vietnam and the rest of the “Frontier Markets” universe.

VNM-2017-08-03

The VanEck Vectors Vietnam ETF (NYSE:VNM) was trading at $14.70 per share on Thursday afternoon, down $0.04 (-0.27%). Year-to-date, VNM has gained 12.73%, versus a 11.54% rise in the benchmark S&P 500 index during the same period.

VNM currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #24 of 75 ETFs in the Asia Pacific Equities Ex-China ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.