When Vietnam Enterprise Investment Limited (VEIL) was launched in 1995, with $16m of assets under management, it was not alone. There were other veteran emerging-market investors that could see the same promise that Dragon Capital did. They too had set up Vietnam funds, but struggled to deploy their capital since the stock market, whose start-up had been planned for 1994, did not materialise until 2000. 
Meanwhile, on the ground, Dragon was establishing close relationships with local corporates, and it accumulated the stocks that were first to list when the exchange was finally created.
The investment landscape has changed dramatically since then. From two stocks at launch, Vietnam’s capital markets now consist of three exchanges, with a total of 1,639 companies and a combined capitalisation of $178bn.
The Ho Chi Minh City Stock Exchange is the largest and best-known bourse, covered by the VN-Index. It has 380 listed companies and capitalisation of $132bn. Between them the exchanges have daily liquidity of $230m (12-month average), ahead of much bigger regional peers such as Malaysia at $220m and the Philippines at $90m.
The market has been fuelled by new listings as much as by economic growth.
Privatisation has been a key force, with the government putting hundreds of state-owned enterprises onto the exchanges. But non-state companies have been a feature too, such that 54 per cent of market cap comes from the private sector, attesting to the country’s entrepreneurial spirit. VEIL has sought to harness these opportunities and has participated in 65 IPOs over the last 25 years.
Although Vietnam is known as an export powerhouse, this has not actually been the main driver of the stock market. Exports remain the preserve either of foreign multinationals, or local workshop operations too small for listing. Instead, the exchanges channel the vibrant domestic economy, powered by middle-class formation and urbanisation. This has put the financial, consumer, property, industrial and tech sectors at the forefront of the market, collectively accounting for about 80 per cent of the VN-Index.
Vietnam has had its fair share of upheavals since VEIL was established: the 1997 Asia crisis, the 2008-09 global financial crisis, the 2008-12 domestic bubble, and now the 2020 Covid-19 pandemic. The government has managed to work through these disruptions rather well.
Looking to the future, we hope to derive continued success as much from our behaviour as a responsible investor as from Vietnam’s thriving economy.
Dien Huu Vu is a portfolio manager of Vietnam Enterprise Investment Limited. The views expressed above are his own and should not be taken as investment advice.