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A horrible year for emerging markets

Matein Khalid

King Dollar, aggressive Federal Reserve monetary tightening, an oil shock, recession in Europe/China and pandemic related hits to world trade have converged to make 2022 a classic annus horribilis for emerging markets. Yet my late Dad used to say – “when the going gets tough, the tough get going”. This is why I am now hunting for potential triple baggers in the Saigon stock exchange, though President Thieu’s former capital has been renamed Ho Chi Minh City since the last US Marine was yanked from an embassy roof via helicopter in April 1975.

Memories of the tragic, lost war on the Mekong Delta still haunt American culture and I had tears in my eyes as I watched the loved ones of a dead US soldier search for their father’s name on the polished granite surface of the Vietnam Memorial Wall in DC. Whoever said time heals all wounds obviously never lost a parent.

Vietnam stock market trades at 9.6 times forward earnings, its lowest valuation since the failure of Lehman in 2008. The stock exchange has lost 34% in 2022 and is one of the worst performing bourses in Southeast Asia. Yet Vietnam clearly benefits from the US-China trade war and Washington’s tariffs/sanctions on Chinese Telecoms and Semiconductor firms. Vietnam is a strategic ally of the US in its Pacific Basin cold war with the PRC and a haven for Western supply chains.

While ostensibly Marxist-Leninist, the government is committed to its pro-reform doi moi and privatisation program. Vietnam’s GDP growth is stellar and even beats India at 8%. Its demographics make it a magnet for Western and Japanese/South Korean manufacturing companies since 70% of its citizens are below the age of 30.

Vietnam is a tourist delight and tourism is already 10% of GDP. Vietnam’s banks, property empires and consumer products firms are now dirt cheap. Exchange controls make it difficult to get money out of Vietnam but offshore fund managers have created legal mechanisms to invest in local equities. This is a country and stock exchange I have sworn to get to know much better in 2023, even if I have to do my due diligence on a motorcycle in the traffic clogged city named after Ho Chi Minh, who liberated Vietnam from Tojo’s imperial Japanese Army, France’s colonial empire and finally Uncle Sam.

Also published on Medium.

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