Greater labor market participation, a recovery in consumer demand and economic growth are among the reasons why emerging markets are in the spotlight this year. Emerging markets on the MSCI list include Brazil, China, Greece, India, Indonesia, South Korea, Malaysia, Mexico, the Philippines, Qatar, and Thailand. But one fund manager is looking beyond that list to Vietnam, “emerging markets and Asia’s next dragon.” “We are in a sweet spot in terms of economic growth, urbanization, labor market participation and good government policies. The market is also very cheap,” Shasha Li Mahri said. Eric Sturdza Investments’ senior fund manager manages the $83 million Strategic Vietnam Prosperity Fund, which seeks long-term capital growth through investments in Vietnam’s structural growth themes. In an interview with CNBC Pro last month, Mahri, who specializes in investing in Asian stocks, pointed out similarities between Vietnam’s economy today and China’s economy 15 years ago. Similarities include strong manufacturing, a growing middle-income class, a young population, the stage of infrastructure development and strong foreign direct investment flows, he said. “Vietnam has achieved great success over the past 10 to 15 years and is now positioned to grow significantly from current levels. “It’s likely to reach $1 million,” Mahri said. The fund manager acknowledged that the two countries are different in size and scale, and said the similarities in their economic structures provide insight into Vietnam’s potential trajectory. The Southeast Asian country’s economy grew by 6.42% in the first half of this year, up from 3.84% in the same period last year, with FDI inflows rising 13.1% to $15.19 billion, data from the General Statistics Office showed. The International Monetary Fund forecasts the country’s growth rate for all of 2024 to be 6.1%. Despite its strong growth, Vietnam is still not included in the MSCI Emerging Markets Index. Mahri expects this to change over the next year or two, with the country expected to be added to the FTSE Emerging Asia Pacific Index and the FTSE Emerging Markets Index for the first time next year, followed shortly thereafter by the MSCI Emerging Markets Index. It will be added soon. Mahri is betting on “high-growth sectors” and “strong stock performance in unprofitable sectors” as his “big themes.” She said one of the themes she is focusing on is consumption, given Vietnam’s rapidly growing middle- to high-income population. “This is a big theme that I will work on in Vietnam because it will benefit many sectors such as retail and will continue to drive Vietnam’s growth for the next five to 10 years,” Mahri added. Stocks she covers on this topic include electronics retailer Mobile World Investments, which she describes as “a very successful company.” “We are one of the best companies in terms of growth and quality of management,” she said. Mobile World’s stock price has increased nearly 55% since the beginning of the year. Of the 12 analysts covering the stock, 11 give it a buy or overweight rating, and one has a hold call, according to FactSet data. The average price target for the stock is VND 74,473.80 ($3.01), with upside potential of 12.3%. Infrastructure initiatives Another area that Mafli is focusing on is infrastructure, given developments in areas such as logistics, energy and utilities. He noted that energy infrastructure, including oil and gas and wind farm projects, has been weak for the past decade and is likely to strengthen further. She said she is playing those themes at PetroVietnam Technical following the acceleration of oil and gas projects and advances in wind power facilities and green energy. The company’s stock price has increased nearly 9.5% since the beginning of the year. According to FactSet data, all six analysts covering PetroVietnam rate the stock as Overweight or Buy, with an average price target of VND49,411.20. This could cause the stock price to rise by 18.5%. A ‘hugely undervalued’ sector Mahri also likes real estate, a sector she believes has been “hugely undervalued, especially over the last two years.” Vietnam’s real estate market entered a crisis in 2023 due to declining supply and liquidity. However, there have been signs of recovery since the end of last year due to government support and the resumption of projects. Mahri explained that Vietnam’s real estate market problems are different from China’s in that the country is still in its early stages of growth and does not face oversupply issues. He expects the country’s rapid urbanization to increase demand for residential, industrial and commercial real estate over the next decade.
