My curiosity about frontier markets investing has led me to follow Asia Frontier Capital and their research almost since they began over a decade ago. In the past I’ve met a few people involved in their funds, so I thought this time I would share some of their current views.
Last week in Ho Chi Minh City I caught up with Ruchir Desai who is the Co-Fund Manager of the AFC Asia Frontier Fund at Asia Frontier Capital. He was kind enough to answer some specific questions I thought might be of interest to readers.
How long has AFC been investing in Vietnam and how does it fit in within the fund’s history in frontier markets?
The AFC Asia Frontier Fund was launched in March 2012 and hence has been investing in Vietnam since its inception. Furthermore, we also have a very successful Vietnam dedicated fund which is the AFC Vietnam Fund, which was launched in December 2013 and overall, this gives AFC more than a decade of investment experience in Vietnam.
Have you been personally involved with AFC from the beginning and are you directly involved in selecting Vietnam stocks for the fund?
Yes, I have been with Asia Frontier Capital since day 1 of its establishment and research and cover markets like Bangladesh, Georgia, Jordan, Kazakhstan, Oman, Pakistan, Sri Lanka, and Vietnam as part of co-managing our AFC Asia Frontier Fund.
As part of managing the AFC Asia Frontier Fund I play a role in selecting stocks for the Vietnam portion of our portfolio and therefore, I am regularly on the ground in Vietnam in addition to our other markets.
How has the allocation from the AFC fund to Vietnam evolved since the significant correction seen in 2022 that saw the market fall some 30%?
Currently as of 31st August 2025, the AFC Asia Frontier Fund’s allocation to Vietnam is 8.2%. This allocation has reduced over the past year as the fund’s other key markets like Pakistan and Sri Lanka have done exceptionally well.
In the past one year, in US Dollar terms, Pakistan and Sri Lanka have returned +100% and +80% respectively while the VN-Index in Vietnam has gained +21%.
As we sit here in late September 2025, Vietnam has been one of the hottest markets globally, already up more than 30% this calendar year. Is this causing valuations to become stretched?
Vietnam has seen a strong rally this year especially since the correction in early April 2025 post the first announcement of the U.S. reciprocal tariffs. Though valuations for some stocks and sectors do look a bit rich, the rally in Vietnam should be put in perspective as the market did not really perform very well between 2022 and 2024.
Firstly, do you expect Vietnam to be upgraded to emerging market status in October? Secondly, do you have a view on the likely market reaction given it is highly anticipated now?
It is important for readers to note that the potential emerging market upgrade that market participants are discussing refers to the FTSE Russell Emerging Markets Index. There is a larger emerging market index in terms of size of assets being tracked which is the MSCI Emerging Markets Index and Vietnam is still some time away from an upgrade to this index for a number of reasons.
Coming back to Vietnam’s upgrade to the FTSE Russell Emerging Market Index, it appears that Vietnam has met most of the criteria to qualify for the upgrade. Therefore, expectations around a positive announcement on 7th October have built up over the past few months.
It is also important to note, that the decision on 7th October if positive for Vietnam, is an announcement of the emerging market upgrade decision. The actual inclusion in the index will take place either in March 2026 or September 2026 and details on that front will be announced on 7th October.
If the announcement on 7th October is positive for Vietnam, this will boost investor sentiment especially towards large cap stocks as investors will expect many passive and active funds to begin allocating to Vietnam in anticipation of the actual upgrade at some point in 2026.
What sectors within Vietnam’s stock market do you currently favour?
Given the outlook for GDP growth of 7% or greater over the next year or so as well as the government’s focus on infrastructure spending a variety of sectors look interesting. The banking sector can benefit from the government focus on public spending as well as the recovery in domestic demand and the broader real estate sector.
Consumer companies should also see a positive spillover from improving economic growth while ports and logistics companies should benefit from Vietnam’s stable trade growth given that FDI numbers have still been very strong this year despite the uncertainty of U.S. trade policy.
Any stocks in the market that look particularly attractive right now that you can mention?
I like FPT Corp. (FPT). It has significantly underperformed the VN-Index so far in 2025 as its global IT business faced headwinds from slower spending especially due to the uncertainty in the U.S. earlier this year. However, its deal flow is beginning to come back, and it has recently won some large deals which provide the prospects for revenue and earnings momentum getting back on track in 2026. I think valuations now look attractive and I would not be surprised if FPT re-rates from current levels.
There was talk in a Reuters article this week that Vietnam’s IPO market has a potential issuance pipeline that could add circa 15% to the overall market’s size in the next couple of years. What is your view on this and is AFC likely to be involved in such IPOs?
There are a number of larger IPOs in the pipeline, especially that of brokerage firms given the positive investor sentiment. I think it is overall positive for Vietnam to have more large listings but in terms of us participating in the IPOs it would come down to whether we are comfortable with the valuations.
What are the main risks you see that could potentially put an end to the current Vietnam bull market?
With both banking sector credit growth and government public spending accelerating, a concern for me is inflation in 2026 coming in higher than anticipated which could soften investor sentiment.
What other countries within the AFC fund are you most bullish on heading into 2026?
One of our top country picks with a 3-to-5-year view is Sri Lanka. The country had a very tough economic time between 2018-2023 but its policy makers took some tough decisions, especially in 2022 which are now paying dividends.
GDP growth in 2024 and so far in the first half of 2025 have come in well ahead of expectations at 5.0% and 4.8%, respectively. Tourism, which is a very important industry, has seen a big comeback with tourist arrivals in 2025 expected to reach all-time highs.
Most importantly, besides economic momentum, the country now has much needed political stability after a long time. A combination of both economic and political stability should re-rate the stock market even further despite its strong gains in the last few years as the earnings recovery has only begun and valuations are still below pre-crisis levels.
I was in Cambodia recently which seems quite welcoming to overseas investors, do you have any exposure there even though there are very few listed stocks?
Yes, we have exposure to Cambodia via one stock that is listed in Australia. It is a gold producer with a profitable gold mine in Cambodia that is doing very well, and its stock price has also done very well given the rally in the gold price in the past year.
Since you travel extensively in your role, (this year I already see trips to Bangladesh, Uzbekistan, Sri Lanka for example), what do you enjoy most about coming to Vietnam regularly?
I love the buzz of Vietnam, especially in Ho Chi Minh City. However more importantly, Vietnam is an enterprising economy with an outlook for sustainable and solid economic growth over the next decade. Hence, I enjoy meeting many of the well run and well managed companies from various industries that will benefit and grow from Vietnam’s economic growth and transformation.
Lastly, where can investors keep up to date with your work and that of AFC?
We have a wonderful and very informative website. Investors can visit www.asiafrontiercapital.com and be up to date with our monthly newsletters and travel reports and also sign up for our monthly newsletters and also as a member on our website.
If they sign up on the website, they will automatically receive our regular updates like monthly newsletters, travel reports, and invites to our quarterly webinars.
Disclaimer: For disclosure purposes I (Steve Green), notes that I happened to invest a small amount in the Asia Frontier Capital Fund almost a couple of years ago. Just to be clear though I have no working involvement or affiliate relationship with them. It is not a recommendation so do your own research.
