Vietnam On My Mind

Generally speaking, I am not a big ETF fan. It is not so much that I do not like the concept, but rather I just usually have the belief that I can do better than a particular index or collection of stocks. So, it is a mix of pride, arrogance, stubborness, and confidence that gets in my way. Still, I do appreciate that ETFs can let us invest in concepts that might otherwise be beyond the capabilities of a regular retail investor.

I mention this all as prelude because I find myself taking another look at the Market Vectors Vietnam ETF (NYSE: VNM) today.

I am a long-term bull on Vietnam, as I see it as something of a "China Jr." - a centrally-controlled export-driven economy with low labor costs. Unfortunately, current conditions are a little worrisome.

Vietnam just recently sprang another devaluation on the market, its third since November. That is going to raise concerns about inflation and it does no favors relative to the company's foreign currency debt burden. Still, the government realizes that export growth is paramount, so they are doing what they can to keep their exports looking nice and cheap relative to other locales in SE Asia.

Vietnam's market is still in its infancy - the two main markets have a combined market valuation around $35 billion (almost the same size as EMC (NYSE: EMC) or Lilly (NYSE: LLY)) and there are scarcely any Vietnamese companies that are well-known outside of SE Asia. In addition, there are some of the standard investing limitations that you might expect - foreign investors have to comply with some limits in the banking and telecom sector and moving money in and out of the country is not quite as easy as it is with Japan or the UK.

If that was not enough, there is the fact that Vietnam is basically in a bear market now (down nearly 20% from the high in May) and is down more than 60% from its all-time high. Oh, and the country needs to do more on the domestic policy front to get the economy on a sustainable trajectory.

And yet ... and yet, I am still intrigued.

Maybe Indonesia is the better bet today, as it is certainly a more developed economy at this point. Or perhaps the Philippines is finally going to pay off on decades of hopes and expectations that it will be the next tiger. And what about Sri Lanka now that a devastating civil war is over?

I am a big fan of what I call second-tier tigers. Everybody knows all about China, Brazil, and India, but how many investors take the time to bone up on Vietnam, Turkey, South Africa, or Poland? In my experience, you make more money if you invest *before* a country is designated as the next go-to area.

With that in mind, I may just have to start buying some of this Vietnam ETF soon. I do think Vietnam is a good place to be long-term, and there just are not any other ways to play that theme right now.

Additional info: 
Indonesia -  Aberdeen Indonesia Fund (IF), Market Vectors Indonesia (IDX), iShares Indonesia (EIDO)
Turkey - iShares Turkey (TUR)

South Africa - iShares South Africa (EZA)
Poland - iShares Poland (EPOL)