The Vaneck Vietnam ETF (VNM) is one of the most popular Vietnam ETFs with investors since its inception in way back in 2009. Whilst many VNM ETF reviews (like mine in the past) have cited its unique feature of having exposure to other Asian countries stock markets, it is crucial to note the recent changes made in March 2023.
In this update, I shall go through such changes, and tie them into the comprehensive Vietnam ETF reviews I have done in the recent past.
Read on to get the complete updated review of the VNM ETF, to make an educated assessment of whether VNM ETF might be a buy for 2023 and beyond.
PROS AND CONS OF VANECK VIETNAM VNM ETF
| PROS | CONS |
|---|---|
| Well established ETF with the inception date back in 2009 that has good liquidity. | Historical performance since inception has been weak. |
| Good liquidity on the US exchange makes it very accessible to global investors. | |
| Cheaper Management Expense Ratio (MER). | Many Vietnam active fund managers have done better even after their high fees. |
| Ability to redeem near NAV compared to Vietnam closed end funds (CEFs). | As a foreign structured ETF, faces difficulty buying Vietnam listed stocks that are near their foreign ownership limits (FOLs). |
| Underlying exposure to strong large businesses that might better withstand a volatile economy. | Can miss out on good opportunities in private equity and small cap stage of a company’s life cycle. |
2023 change – From 17 March 2023 the ETF will hold all Vietnam listed securities as per the MarketVector Vietnam Local Index (MVVNMLTR). | An ETF will be fully invested even if valuations are extremely expensive. |
SOME COMMON MISCONCEPTIONS ABOUT THE VANECK VIETNAM VNM ETF
Some key factors that I wanted to draw attention to in this regard were touched on briefly in the pros and cons points above. They can be in-depth discussions so I wanted to summarise these in a few brief points, where then one can read further explanations in my previous blog posts if interested.
- VNM ETF is not like some index ETFs in developed markets, its performance has stacked up poorly vs many active Vietnam fund managers.
VNM ETF holds a significant investment weighting to stocks that are not listed in Vietnam, for example investments in South Korea, Taiwan and Japan etc.Since inception in 2009, the VNM ETF has often had investments listed on stock exchanges in for example South Korea, Taiwan and Japan. The have sometimes been major exposures to this ETF, on the basis they have significant business operations tied to Vietnam. In March 2023, the VNM ETF now owns 100% in Vietnam companies.- VNM ETF is at a somewhat structural disadvantage to Vietnam stock market ETFs that are listed on the Ho Chi Minh City stock exchange. It does not have the same level of access to get set in Vietnam stocks that have reached their foreign ownership limits. (FOLs).
With the above being said, I want to be clear that these 3 points don’t necessarily mean the conclusion is it will not outperform other rival products in the future. However arguably in the past these factors may have contributed to their lacklustre performance record.
The main reason I wanted to highlight these points are I feel they are glossed over when I read many other reviews on the Vaneck Vietnam ETF (VNM). I have seen some US investors on other forums that identify the Vietnam economic story as a reason to get some exposure to the Vietnam stock market. They identify VNM ETF quickly as it is well known and established, has moderate fees, and often come up with a positive review on the product. They do so regularly without paying any attention to some of the factors I have just raised.
If you want to learn more about factors like active vs passive in Vietnam, foreign ownership limits (FOLs), different Vietnam ETF structures, etc I recommend these other blog posts of mine below:
COMPLETE LIST OF ALL THE VIETNAM ETFs
Below you will get an understanding why there has been strong growth in Vietnam listed ETFs. You will also appreciate how foreign ownership limits (FOLs) are an important issue for Vietnam investors.
COMPLETE LIST OF ALL VIETNAM ETFs
VNM ETF PERFORMANCE review
This discusses some recent performance issues of VNM ETF and other Vietnam fund structures etc that has occurred in recent years such as 2021 and 2022.
VNM ETF PEFORMANCE COMPARISON VS OTHER VIETNAM FUNDS
Here is an updated summary of some of the Vaneck Vietnam ETF (VNM) factsheet details as it stands as in the second quarter of 2023.
VANECK VIETNAM VNM ETF SUMMARY
- What index it tracks – The MarketVector Vietnam LOCAL Index (MVVNMLTR).
- Size – Approximately US $495 million as at April 30, 2023.
- Inception Date – August 2009.
- Management Expense Ratio (MER) – Approximately 66 bps.
- Average Daily Volume – Approximately 200k shares.
- Top 5 holdings – Vinhomes, Vingroup, Vinamilk, Hoa Phat Group & Vietcombank, these 5 total about 35% of the fund at April 30, 2023.
Source: VanEck
VANECK VIETNAM VNM ETF HOLDINGS
Source: VanEck
VANECK VIETNAM VNM ETF PERFORMANCE
Source: VanEck
SHOULD I BUY THE VANECK VIETNAM VNM ETF?
From what I have observed to date I would prefer owning one of the Vietnam closed end funds (CEFs), that only last week were at persistently sizeable discounts, rather than VNM ETF.
I wouldn’t however rule out VNM ETF is a potential investment vehicle purely because their historical performance has lagged some active funds out there. From a contrarian perspective perhaps, there is an opportunity for a bit of mean reversion there going forward.
The objective of this post was to help emphasize some of the structural differences with the VNM ETF compared to other Vietnam fund products. For those that understand and are comfortable with such differences, the low MER, convenience of access, and good liquidity within VNM ETF might be quite attractive still. It offers access to a wide range of Vietnam listed stocks where generally speaking, the valuations look cheap relative to the globe given Vietnam’s favorable growth prospects.
Below are some indicative portfolio statistics to help visualize current valuations of the market.
vnm etf portfolio statistics 2023
Source: VanEck
vnm etf sector exposures 2023
Source: VanEck
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