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Friday, August 14, 2009

Van Eck Rolls Out Vietnam ETF

by: John Alzate

New York-based asset manager Van Eck Global launched the first ever U.S.-based Vietnam ETF on Friday.

The Market Vectors Vietnam ETF, which comes with an expense ratio of 99 bps, is the firm's 21st ETF. Derek Van Eck, principal at the firm, told The MFWire at a press briefing at the company's Madison Avenue headquarters Friday morning that the firm will continue looking at other standout emerging markets such as Brazil for continued opportunities to expand its business.

Others present at the press briefing include Adam Philips, managing director of ETFs, David Semple, director of international equity, Edward Kuczma, Jr., fund administrator for international portfolios and UN ambassador to Vietnam Bui The Giang.

Philips said the new ETF offers investors a "broad representation of the [Vietnam] market," noting that the fund consists of 28 companies representing 8 different sectors in the underlying Market Vectors Vietnam Index. Currently, approximately 70 percent of companies in the Index are based in Vietnam while the remaining 30 percent are based elsewhere and generate at least 50 percent of revenues from operations in Vietnam.

Ambassador Giang said factors such as the rapid capitalization of Vietnam's market and its expanded international cooperation have ushered in the Southeast nation to a more participatory role in the world economy. However, he added that such increased visibility in global markets can be a double edged sword.

"To be open to the world also means to be exposed to outside risk," Giang said.

However, Giang noted that market numbers have been "encouraging," with the country expected to achieve a GDP growth rate of 5 percent for 2009.

Robert Gartland, partner at Vietnam Partners, which focuses on investment and advisory services in the Southeast, said that the burgeoning Vietnam market has had strong second quarter numbers for many of its companies. The current Vietnam market is valued at $30 billion US, up 62 percent from the previous year. Also, over 60 percent of companies said their profit has climbed 60 percent or more this past quarter when compared year-over year.

"I can tell you Vietnam's market structure is straightforward but it's very sound," Gartland said.

Semple, for his part, said Vietnam's entrance into the global market may be unparalleled when compared to other emerging markes.

"It came to a lot of people's attention in 2006, 2007 and 2008 as it went through an interesting and frenetic introduction into people's consciousness in terms of portfolio investments in Asia," Semple said.

Semple noted that the emerging markets team saw one of Vietnam's "sweet spots" was central towards burgeoning market growth: its youth. Vietnam is the 13th largest country in the world by population with over 70 percent of its population under 30 years of age.

van Eck added that various factors have coalesced into making Vietnam an attractive prospect not only for Van Eck Global, but future investors looking at emerging markets.

"We have much more sustainable growth rates in Asia, with much more stable banking systems, and the demographics are favorable, so in our opinion, there's no question the emerging markets are set to grow at a sustainable growth rate much higher than developed countries," van Eck said. 

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