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Market Vectors Vietnam ETF: Vietnam Looks Like A Must Have For Your Portfolio
Market Vectors Vietnam ETF offers pure play way to invest in high growth of Vietnam. ETF is trading towards bottom of 52 week range, despite bullish outlook for Vietnam. Companies pouring money into the country, which is expected to see its middle class double by 2020. Investors are always looking for the next hot sector or international market. Now that the days of large growth from the BRIC countries is slowing down, it’s time to look elsewhere for large international returns. After recent events and research, I have found that Vietnam is one of the markets every investor should consider getting into. There are limited options for most American investors when investing in Vietnam. Most investors should consider the easy hands off approach of Market Vectors Vietnam ETF (NYSEARCA: VNM ). Vietnam has a population of more than 90 million people. The country has a middle class that is expected to double by 2020. Strong exports and a position located between key Asian markets has Vietnam situated well for a continuance of strong growth. Another sign of further bullishness is the company’s increased penetration of the e-commerce market, which is expected to grow to more than $1 billion this year. Here is a look at GDP growth and forward estimates from the World Bank : · 2013: +5.4% · 2014: +5.6% · 2015: +5.6% · 2016: +5.8% · 2017: +6.0% A recent Reuters article pointed out the major expansion coming in Vietnam from Vingroup, a major conglomerate in the country. Vingroup has plans to launch 24 new shopping centers this year. That adds to the already opened 6 shopping centers owned by Vingroup. The expansion will also take Vingroup’s presence from 3 cities to 19 and veering one third of the country. Vingroup is a $3 billion company with a position in hospitals, entertainment, education, supermarkets, and real estate. Other large retailers are entering Vietnam to create shopping malls, supermarkets, and other retail stores. This list showed some of the top players in the country: · 1. Aeon ( OTC:AONNF ) (Japan) entered Vietnam in 2009, goal to open 20 shopping centers in Vietnam · 2. Berli Jucker ( OTCPK:BLJZY ) (Thailand) owns B’s Mart and recently acquired Metro Cash and Carry Vietnam, the owner of 19 distribution centers in the country. Company wants to get to 205 convenience stores in the next 4 years. · 3. Central Group (Thailand) opened Robins Shop centers in 2014 in Vietnam, now owns two · 4. Lotte (South Korea) entered Vietnam in 2008 and now has more than 10 department stores, 60 Lotteria stores, a hotel, and shopping center. Goal is to have 60 department stores by 2020 · 5. Vingroup (Vietnam) Company mentioned above has 13 Ocean Mart stores and more than 1000 convenience stores planned. One area of concern in the region is the banking sector. There has been a large number of bad loans that have weighed downs banks in Vietnam. An article on Reuters pointed out a theme of mergers coming in 2015 that could help boost the banking positions of large companies. Keep in mind that the financial segment represents 36% of the ETF’s assets. The consumer segment is seeing strong growth in Vietnam. Recently, Huy Vietnam, a large operator of restaurants, completed a $15 million financing round that will help boost expansion. The owner of more than 40 restaurants has brands like Mon Hue, Com Express, and Pho Ong Hung. The company plans on using the money for expansion of additional locations across the country. Often seen as a sign of a country really hitting the big time, McDonald’s (NYSE: MCD ) entered Vietnam in 2014. It took a long time to get the first McDonald’s open in the country, but now plans to expand are ramping up. The first one to open saw long lines and strong demand. Plans now call for 100 McDonald’s to open in the next 10 years. McDonald’s entry in Vietnam follows other recent entries from companies like Burger King (20 now), Baskin Robbins, Dairy Queen, Carl’s Jr., Popeyes (NASDAQ: PLKI ), Subway, and Starbucks (NASDAQ: SBUX ). KFC is the leader in Vietnam, among US companies, with more than 135 restaurants. The company entered the country in 1997. Other consumer companies are investing heavily in the region including diaper companies and food giants like Nestle ( OTCPK:NSRGY ). The food giant Nestle has five factories in Vietnam. Mondelez International (NASDAQ: MDLZ ) also recently invested $370 million in the Kinh Do sweets brand, to capitalize on the growth of Vietnam and its consumer spending. Vietnam continues to see a surplus in its import/export market. Ho Chi Minh was the largest city in Vietnam in terms of 2014 exports. The city had exports of $31 billion, marking the first time ever a city in Vietnam had $30 billion in outgoing revenue. Technology/manufacturing made up 70% of the country’s total exports. Another 22% came from the agriculture/forestry/seafood markets. Exports continue to be boosted by demand from several other countries/regions. The Northeast Asia region saw imports increase 32.5% from Vietnam. This was led by South Korea, which had growth of 105%. Now, investors should get used to that strong demand from South Korea, after the recent signing of a free trade agreement. The deal is expected to triple the trade between the two countries to more than $70 billion by 2020. In 2014, South Korea exported $17.7 billion worth of products to Vietnam. That compares to Vietnam shipping $5.9 billion worth of products to South Korea in 2014. Exports to China grew only 4.1%, a low number compared to recent history, but also a positive sign that Vietnam does not rely on the country. Europe saw an 18% increase in imports from Vietnam. The United States had 21% growth in Vietnamese imports. Another area of growth could be found in casino expansion coming soon. The prime minister of Vietnam recently approved casino operations on the southern island of Phu Quoc. This region already has an airport and international seaport, making it a highly trafficked area. Also consider the island is located in close proximity to Cambodia and Thailand. The Market Vectors Vietnam ETF is the way to capitalize on all the trends mentioned above. The ETF is the only pure play on Vietnam. The ETF charges an expense ratio of 0.72% and has more than $480 million of assets under management. According to current values, the fund has a dividend yield of 2.7% and a price earnings ratio of 10.8. Here is the sector breakdown of the fund: · 36% Financials · 18% Energy · 14% Consumer Discretionary · 12% Consumer Staples · 11% Industrials · 5% Materials · 3% Utilities The ETF has 30 stocks held in its portfolio. Here is a look at the top ten positions: · Bank for Foreign Trade 8.6% · Masan Group 8.1% · Vincom 7.9% · Saigon Thuong Tin Communications 6.7% · Petrovietnam Fertilizer 4.8% · Parkson Holdings ( OTC:PKSSF ) 4.7% · Soco International ( OTCPK:SOCLF ) 4.6% · Gamuda (GMAUF) 4.5% · Charoen Pokphand Foods ( OTCPK:CHPFF ) 4.3% · Hansae Co 4.3% Shares of the Vietnam ETF have fallen recently and now trade with a cheap valuation for investors, creating a pristine opportunity for investors looking to get exposure to the country. Shares sit at $18.61, close to 52 week lows. Over the last year, shares have traded between $17.85 and $23.17.
Am I Crazy Enough To Short Volatility Here?
Recent volatility in stocks has presented yet another opportunity to profit. The VXX has moved up sharply after I went long and as a result, I sold my position. I’m now back to being short the VXX on a bet that the markets will calm down this week. Early last week I wrote a piece about how I had gotten short volatility and then reversed quickly after realizing the market was moving against me. That proved to be a fortunate thing to do as I missed the big move up in volatility (in the good way) by not being short. As I detailed in the linked article, I chose to get long right as I sold out of my short position via the short VXX ETF (NASDAQ: XIV ) and moved into a long position in the VIX ETF (NYSEARCA: VXX ) while hedging with covered calls. In this way, I wanted to capture huge premiums that were available on VXX call options and also take advantage of what looked like a coming move up in volatility. As it turns out, that was the way volatility moved last week and the VXX closed up huge on the week. I was fortunate enough to capture most of that move but by hedging with short calls, I did give up some potential upside. Still, being long the VXX for four trading days and hedging with calls netted me a 6% total gain in four days; not bad work if you can get it. The flip from short to long volatility certainly worked out in my favor and given the gains that I achieved in such a short time span, I carefully considered my next move for this week. In doing so, I considered where the VXX had come from and how far it had moved since having a big downturn. This is a one year chart of the VXX and what it shows, as most of us know, is that VXX tends to spike when it does go up and then fall precipitously seemingly without warning. (click to enlarge) I started shorting VXX back in October during the mini-crash that roiled stock markets and since that time, have had pretty good results getting long and short volatility at different times. The most recent spike that has driven VXX up to as high as $37 seems to be running out of steam, in this humble trader’s opinion. And therefore, I’ve decided once more get short volatility via the XIV, the ETF that provides the inverse, unleveraged return of the VXX. For reference, I sold out of the VXX at $36.63 and bought the XIV at $26.45 a few moments later. If you like, of course, you can just short VXX but that’s expensive and difficult to do so just buying XIV is much cleaner. At any rate, the decision was made to get short volatility because I feel like the fear and panic was wavering at the end of the week. Several days of markets being beaten over the head with terrible news and heavy selling tends to exhaust traders and in a world where the central banks of our nations can move markets higher simply by talking, I feel like recent history provides decent precedence from which we can derive the duration and severity of up moves in the VXX. Of course, nothing is perfect and I could be dead wrong about this move being done but in order to make some money, you’ve got to take calculated risks. For that reason, I think getting long XIV here makes lots of sense. There is no doubt that the VXX clearing its previous high from December means we’ve got a situation on our hands. There are plenty of reasons for volatility right now but what I’m betting on is that there will be at least a small reprieve from the panic. Panic, by definition, can only last for so long so a trade into XIV is a bet that the panic is ending and that normalcy will return, at least for a few days. Keep in mind that you don’t need to be right for a long time to make money on this trade; I’m essentially renting XIV until some calm returns to markets again and then it’s back out of the short volatility position. As always, please understand that trading volatility, particularly from the short side, can be quite hazardous. If some shock occurs VXX will spike and XIV will crater, leaving you with massive losses. Please understand how the ETF works and what you’re risking before taking a position. The plan right now is to stay in XIV until one of two things happens; either normalcy returns to markets and XIV moves up very nicely or I’m dead wrong and I get crushed and limp away with my losses. Either way, I think we’ll know this week which one it is and at that point, I’ll reassess which side I want to play on the volatility front. In my first volatility article of 2015 I mentioned I’d keep you abreast of my thoughts and any moves I ended up making and I’m trying my best to do that; please remain engaged in the comments sections because we’re all learning together and sharing thoughts and ideas and I love it. Good luck out there.