While still, ostensibly, a communist country, Vietnam’s progression towards a form of capitalism since the late 1980s – akin to the changes in mainland China over roughly the same period – has seen its profile surge in popularity with frontier/emerging market investors. We talk to Dragon Capital about its UK-listed fund.

When President Donald Trump announced sweeping tariffs on 2 April this year, one nation with plenty of reason to have a sharp intake of breath was Vietnam. Trump imposed a 46 per cent levy, although that has been paused for 90 days. 

But while Vietnam and its Southeast Asia neighbours anxiously await developments, a long-standing London Stock Exchange-listed investment fund is focusing on domestically-driven Vietnamese sectors.

This news service recently spoke to Thuy Anh Nguyen, director, product specialist, at Dragon Capital Group, about Vietnam Enterprise Investments Limited, aka “VEIL” – a closed-end fund. At an annual meeting in London last week, investors voted to continue using the fund's LSE listing. 

VEIL has a focus on domestically-driven business with not much exposure to exports, which is important given the US tariffs on Vietnam and other Asia countries, Thuy Anh Nguyen said.

When Trump announced his tariffs on 2 April, slapping a 46 per cent tariff on Vietnam; the 90-day pause – which ends on 9 July – cut that to 10 per cent. Vietnamese equities were initially hit, but they have subsequently recovered, she noted. 

“Our investment philosophy is quality growth at reasonable prices,” Thuy Anh Nguyen said. 

The PE ratio of portfolio companies on average is about 10x, which is considerably lower than the 10-year average, which is around 12.5 times. In 2024, earnings growth for the Vietnam market came in around at 22 per cent. 

“We expect an outturn for the market of about 13 per cent in 2025,” she said. “We think as a market it [Vietnam] is quite under-owned because it is still classified as a frontier market…but it is under consideration for an emerging market upgrade by FTSE [classification]. People should have exposure to it.”

Investment style
VEIL takes a bottom-up approach to stock selection; it also takes more “top-down” macro-economic considerations into account.

Thuy Anh Nguyen pointed outed that there is a rising Vietnamese middle class. About 40 per cent of the VEIL portfolio is in banking and financial services of the sort that a rising middle class uses; 19 per cent of the portfolio is linked to real estate; and 11 per cent is linked to the retail sector.

One benefit of VEIL being one of the largest such funds in Vietnam, is that it is invited to be a cornerstone investor in IPOs, she said. Its reputation and track record are an attraction. Operating in the pre-IPO space can “create a lot of Alpha,” she said.

“This is an exciting time and there are massive reforms happening [in Vietnam],” she said, referring to developments such as Vietnam’s government ministries merging, provinces consolidating and reducted bureaucracy and costs. 

Thuy Anh Nguyen referred to a recent policy initiated by the Vietnamese government.

“Resolution 68 announced that the private sector is to be at the forefront of economic growth, with its contribution to GDP expected to increase to 58 per cent by 2030 from the current 51 per cent,” she added.

While still, ostensibly, a communist country, Vietnam’s move towards a form of capitalism since the late 1980s – akin to the changes in mainland China over roughly the same period – has seen its profile surge in popularity with frontier/emerging market investors, not to mention its rise as a holiday destination. 

Still classified as a frontier market, the country wants to achieve emerging market status – however, controls such as limits on foreign ownership need to be lifted before that can happen.