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Vietnam’s communist government has recognized the past to attract investors, strategist says

Limits market Vietnam has the right strategy to make it a foreign direct investment hotspot, according to one strategist.

The Vietnamese ministry has recognized that “instability isn’t going to attract foreign direct investors” Andy Ho, chief investment police officer at VinaCapital Vietnam Opportunity Fund, told CNBC’s “Squawk Box Europe” Wednesday.

“Over and beyond the last five to 10 years, they have created a basis of stability where the FX (foreign exchange), the legal infrastructure, the inflation, the enrol rates — all of that is stable,” he explained.

Vietnam is among Asia’s unexcelled performing stock markets, though volatility persists. April 2018 unmistakable both its record high and its worst month in two years. Nonetheless, the Vietnam Guide in Ho Chi Minh City has risen 42 percent in the last 12 months.

The Cosmopolitan Monetary Fund sees growth for Vietnam at 6.6 percent in 2018, fit above the emerging market average of 4.9 percent.

But, emerging sells across the board are threatened by investors drawing their cash late to the U.S. in anticipation of higher yields as interest rates rise.

Vietnam’s Communist Party-led rule has been in place since the mid-1970s following the country’s reunification after its savage north/south war.

Ho highlighted the presence of technology firms Intel and Samsung in the surroundings as examples of the government realizing that foreign direct investment is creating capital.

The creation of jobs, crucial given the country’s youth population lump, as well as the growth of urban areas provides an investment opportunity according to Ho. “This is where we allot, because as people move into the city, they’re going to homelessness basic goods and services,” he added.

Opportunities lie in sectors such as banks, training and pharmaceuticals, he added.

Strong foreign capital inflows — of which focus investment is roughly $20 billion annually — stabilize the currency and entrusts the management of inflation and interest rates, Maarten-Jan Bakkum, a senior strategist for emerging furnishes at NN Investment, said in a note on Tuesday.

“The consumption boom that effects from this is currently one of the strongest in the entire emerging world,” he revealed.

“Over the last twenty years, Vietnamese exports have burgeoned five times faster than the average growth in the emerging excellent and twice as fast as the export growth in China, the country known as the export titleist,” Bakkum explained.

For Ho, the country’s promising export potential is boosted by its inexhaustible coastline, which pertains to the creation of ports connecting to markets embracing southern China.

But, the Southeast Asian country does face headwinds. While Vietnam’s flow labor cost is one third that of China, “the biggest concern to the next five to 10 years is wage inflation,” Ho said.

He combined that the country was a “diversification play (as) it is volatile, higher risk,” but it “expresses higher return.”

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