Vietnam and ex-Soviet states have potential
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Few investors have ventured into the ex-Soviet states in recent years. But thanks to strong recent economic growth and abundant commodities supplies, emerging-market fund managers have now begun to invest money in the region, says Jessica Brown in The Sunday Times. One country attracting plenty of attention is Kazakhstan, which posted GDP growth of more than 10% last year, while inflation is down from 1,000% in the mid-1990s to under 7%. The oil-dependent state is set to triple production over the next ten years, and it also boasts large gold and copper reserves. Copper miner Kazakhmys recently floated on the London Stock Exchange, and more Kazakhstan-based businesses are expected to follow suit.
There is also plenty of potential in Ukraine, although investors will be watching to see whether a reform-friendly government is elected next spring. Ukraine’s assets include huge iron-ore deposits and low-cost agricultural crops: it could undercut virtually every cereal producer in the EU if it succeeds in joining.
The Credit Suisse European Frontier fund is among those highlighted by Jessica Bown as a means of gaining access to the two countries. The fund holds the Ukranian national oil firm and fertiliser producer Concern Stirol, while its biggest holding is Russia’s Lukoil, a back-door play on Kazakhstan, as the group is beefing up its presence there. A riskier bet is Hambledon Mining (HMB, 11.5p), which holds gold exploration rights in Kazakhstan; note that the government has been getting “increasingly agitated” about foreign companies grabbing its strategic assets, according to The Daily Telegraph. Meanwhile, a possible play on an incipient consumer boom in Ukraine is Austria’s Raiffeisen International (RIBH.AV, e51), now the biggest bank in Ukraine.
Vietnam opens its doors
Vietnam is “high on the list” of “underappreciated” Asian economies, says William Pesek on Bloomberg.com. The Communist-run country is due to grow by 8% this year, having opened its doors to foreign investment over the past few years and nurtured a “vibrant private sector”, as ratings agency Standard & Poor’s puts it. The world’s second-biggest exporter of coffee, rice and seafood also hopes to join the World Trade Organisation by next June.
The government is now looking to drum up further interest in Vietnam’s tiny stockmarket, says Laura Santini in The Wall Street Journal. It will lift its cap on foreign ownership to 49% from 30%, and with 1,000 companies due for privatisation, plenty of new issues are likely to join the market, whose main exchange boasts just 30 stocks. Foreign funds based in Vietnam are now tapping investors for more cash, and the benchmark index has already climbed by 20% since early August.
Investors who get into Vietnam before the inevitable rush “may be a happy crowd” over the next few years, says Pesek. One of the few possible plays on Vietnam is the Aim-listed Vietnam Opportunity Fund (VOF, $1.70).
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