Trade between UAE and Vietnam increases by more than 150% in 2012

Vietnam's benchmark VN Index powered ahead in January on growing investor confidence driven by recent government action to address high levels of bad debt in the banking system and macro-economic stability and is one of the top-5 performing markets in the world during the opening weeks of 2013.

Vietnam Customs announced that trade between the UAE and Vietnam grew by more than 150% during 2012 compared to the previous last year. Similarly trade with Saudi Arabia has more than doubled over the same period. The figures for the entire Middle East show that trade was up by 30% to $4.86bn, with the UAE forming the bulk of that figure, at $1.48bn.

Kevin Snowball, CEO of the second-oldest asset management company in the country - PXP Vietnam Asset Management and who is back in Dubai, talking to Middle East investors, said the figures confirm what discerning shareholders have known for a long time - that Vietnam is rapidly moving up the value chain in terms of its exports.

"This is supported by healthy foreign investment from global giants like Samsung and Intel, and it offers considerable opportunities for both direct and portfolio investment," he says. "While Asia's major equity markets have delivered strong gains of up to 10 percent since the start of the year, Vietnam has been quietly outperforming its illustrious neighbours - rising 19.4 percent year-to-date - making it the third best performer in the Asia region thus far, trailing only China's Shenzhen B Share index and the two-stock Laos market.

Numerous fund managers said that expectations for new measures to boost foreign investment, solid earnings growth and attractive valuations will support the market going forward.

"I think there is further to go in terms of the optimism, and the government proving it's capable of handling pressures in the economy," said Snowball. "My forecast is for at least a further 13% upside over the next 10 months."

Last month, in a bid to boost the equity market, the government raised the daily trading band for stocks on the Ho Chi Minh Stock Exchange, the country's main stock market, to 7% from 5%, and revealed that it may increase the foreign ownership limits in some sectors - including consumer and brokerages. A move such as this would provide a large boost to the country's stocks.

Analysts meanwhile said another clear support for the market will be its relatively cheap valuation compared to its peers in the region and own historical levels. The market is trading at around 10 times projected 2013 earnings. It has previously traded between 8 and 35 times.

"From a valuation point of view, Vietnam has far underperformed the rest of ASEAN ever since the tumble in the post-Lehman crisis - they haven't been restored to historical valuations," adds Snowball.

However, the nation's favorable demographics and rising attractiveness as a destination for foreign investment owing to cheap labour costs, continues to make it an attractive market in the longer run.

"The fact that Emirates now offers direct flights from Dubai also tells its own story," says Snowball. "We think investors who look beyond historic macro-economic concerns and occasional lurid headlines about non-performing loans at the banks will be well rewarded as the Vietnamese stock market still looks very cheap."