THE hype about Vietnam's World Trade Organisation entry last year and its 'mini-China' potential has been washed away by double-digit inflation. Ironically, however, now could be the time for funds to pour money into the country's ravaged stock market.
Investment managers say that amid the slump in shares, bargains are emerging in the US$70 billion (S$97 billion) economy, expected to grow by as much as 7.5 per cent this year despite a global slowdown.
After two years of what some call gambling in the fledgling stock markets of the Communist Party-run South-east Asian country, investors are urged to take a long-term view.
Mr Bradley Lalonde, chief investment officer at BIDV-Vietnam Partners Investment Management, said companies had not borrowed heavily.
They need capital to take advantage of an emerging middle class and a fast growing economy that has drawn manufacturers such as Samsung, Intel Corp, Compal and Foxconn.
'Yes, they've got an inflation problem, but it's a great market to pick up value,' he said.
He said price-earnings ratios for many firms had fallen to below 10 times - cheaper than the Thai and Philippines markets.
Investment strategist Spencer White said market bubbles were popping.
"One bubble has burst - equities. The other bubble currently bursting is the property market," said Mr White, who is an adviser to Thien Viet Securities in Ho Chi Minh City.
Property prices have fallen 10-15 per cent this year, after quadrupling in cities last year.
"That means opportunity," Mr White said at a sparsely attended Hong Kong conference.
While the global credit crunch has done little to encourage investment in risky emerging markets, Vietnam's headaches are rooted in soaring food, fuel and house prices, reflected in a 19.4 per cent jump in the consumer price index in March.
To battle inflation, authorities have sought to restrict bank lending, which grew 50 per cent last year. The government has also raised bank reserve requirements and interest rates, and imposed stricter rules on lending.
The Ho Chi Minh Stock Exchange is the worst performer in Asia this year, losing 43 per cent, after being one of the top performers a year ago.
Vietnam remains an opaque market, lacking research to aid investors. The stock market is still illiquid and the government interventions have highlighted the risk that new rules can be sprung on investors.
'It's possible to make a quick killing but you could be the one to get killed,' Mr Lalonde said.
