ETF XRAY

Vietnam's Growth Spurs Talk of ETF

By Carl Delfeld of the Chartwell ETF Advisor and Chartwell Partners Asset Management

Vietnam continues to post strong economic growth despite the US slowdown spurring more talk about the feasibility of a Vietnam fund or even an exchange-traded fund down the road.

Nguyen Tan Dung, prime minister, said Vietnam’s communist government was committed to a target of 8-9% for annual GDP growth. It also planned to boost the value of exports by 20 per cent this year. In the first two months, the increase was 30%, Mr Dung said in an interview with the Financial Times.

Vietnam is also trying to increase exports “not only to the US, the EU, Japan and China but also to the large markets of the Middle Eastern countries and African countries”, Mr Dung said, now that Vietnam was a full member of the World Trade Organisation. In 2007 the US accounted for more than $10bn, or a fifth, of Vietnam’s exports.

One rising concern for investors in Vietnam is the surge in inflation which rose to 15.7% in February.
Another is the lack of progress in moving to a more open political system as Vietnam's authoritarian government show little appetite for reforms.

Learn more about opportunities in frontier emerging markets by going to Chartwell ETF.

Southeast Asian ETFs Boosted by Rising Output

Asian ETFs such as the South Korean ETF (EWY), Singapore ETF (EWS), Indonesian ETF (IF), Malaysian ETF (EWM), Taiwan ETF (EWT), India ETF (IIF) and the Philippines are all benefiting from a surprising trend in global manufacturing.

In eight months Intel has committed as much money to Vietnam as it had to China during the previous ten years. In Malaysia, Flextronics has ramped up the production lines of a new M$400m ($110m) factory to make computer printers for another American firm, Hewlett-Packard and in Indonesia, Yue Yuen, a Hong Kong-based shoemaker, has been rapidly increasing its footwear for brands like Nike and Adidas.

All of these developments are highlighted in a current Economist article that describes how South East Asian countries, rather than being hurt by Chinese growth, are being helped by it. Taken together, South Korea, Taiwan, India and the Association of South-East Asian Nations (ASEAN) increased their share of global manufacturing from less than 7% to more than 9% in the decade to 2003. Exports also rose across the board.

Interestingly, only the United States and Canada saw their shares of global output rise—with just over a quarter between them. Most things nowadays might seem to be made in China, but North America remains the true workshop of the world. American manufacturing output leads the world and is twice its nearest competitor,
Japan.

As the Economist article points out, costs are only part of the equation. Just as important is diversification. Having already moved a big chunk of their production to China, many firms are reluctant to put any more of their eggs in the same basket.

Chartwell ETF Advisor’s Asian Opportunity ETF portfolio holds many of the ETFs discussed in this post.
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