How Not To Look At Foreign Markets

By Roger Nusbaum | August 28, 2008 | 12:55 PM | 3 Comments

On August 20th I put up a post about Vietnam being in the middle of a stealth rally. Since then the stealthness has continued and, best as I can tell, it seems still that no one cares.

Why bring this up again? Well it is sort of a counter point to an article that I found (some other folks have written about it too) about not picking individual countries because there is no way to predict what they will do. 

That type of sentiment is very pervasive but I believe is the wrong way to look at the issue. Anyone trying to guess which country will be hot, as in the What Countries To Buy Now sense, will likely always be chasing heat. In that light they will be very late or sort of late very often and make the task of growing their portfolio more difficult.

But there is a way that makes more sense which is to learn what makes other countries tick and understand whether the things that make them tick are different than what makes the US tick. If the underlying fundamentals of a country are different from the US then you probably have a good shot at diversification versus your US holdings.

The US is a big, deficit, service based, slow moving economy. Any country that is not like that (to be clear some are just like that and some are not) offers a starting point. From there diligence needs to be undertaken just as with anything else but the big picture is that you invest in foreign for diversification. Good diversification comes from owning countries that are fundamentally different from this one.

That includes Vietnam. Back to diligence and, I would add, knowing your own limits. In the context of this article understanding that Vietnam is much different than the US is the first step. Then comes a top down analysis and decision as to whether that different country is a fit based on how you view the world (like are you longer term or shorter term in focus). If you are shorter term, Vietnam's inflation rate should scare you away. If you are longer term, then you realize that over a ten year period things will evolve there in a very positive way.

Reply to both Thanks for the comments. No one cares, yes meaning bigger participants and also the media. As far as accessing the country you are both right not easy/ideal. I have mentioned the Vietnam Opportunity Fund which trades in London. You would use ticker VOF in London to get info and ticker VTOPF to trade in the US if you are so inclined. It is a combo of all sorts of things from Vietnam as opposed to a pure play equity market exposure. As far as Market Vectors filing they came with a couple of other things they probably thought would be better received at the moment. Assuming no problem with the filing maybe the Vietnam ETF will come when excitment picks up a little?? Submitted by Roger Nusbaum on Thu, 2008/08/28 - 2:32pm » reply |

Vietnam When you say no one cares, you must mean the big market makers, rather than your readers. I'd love to invest in Vietnam, but don't see an attractive vehicle for it. There are no funds on the U.S. market. I could pay a big commission to trade on the London market, but the funds available there are narrowly focused, and don't show the bottoming curve that the broad index does. Market Vectors filed to create a new Vietnam ETF months ago, but no word? Submitted by Aalan (not verified) on Thu, 2008/08/28 - 1:23pm » reply |

Vietnam I've heard a lot of chatter about Vietnam over the last year or so. People have said Vietnam is the "new China" in terms of manufacturing tangible goods at a lower cost etc., etc. However, Vietnamese companies are either untradeable or illiquid. Given that there isn't a Vietnamese ETF that I know of, how do you gain exposure to this theme? Thanks, Submitted by Anonymous (not verified) on Thu, 2008/08/28 - 1:21pm » reply |