[Practical Finance] Which National Funds Are Promising This Year?

Easing of US-China Trade Dispute Revives Emerging Market Investment
Vietnam Attracts Bargain Buying Interest

[Asia Economy Reporter Park Jihwan] In the first half of this year, the global stock markets are expected to be promising in some emerging countries such as Vietnam, along with the United States and China. In particular, it is analyzed that the benefits of the US-China trade negotiations will be concentrated on emerging countries that had difficulties recovering their stock markets last year. With the easing of trade disputes and the weakening of the US dollar, investors' risk appetite has revived, raising expectations for returns on emerging market funds.

According to financial information company FnGuide on the 20th, Vietnam funds posted a 5.78% return last year. This contrasts with emerging market funds such as Russia and China, which achieved returns exceeding 30%. In the past month as well, Vietnam funds showed a return of about -0.62%, ranking among the lowest returns among major overseas equity funds.

However, it is noteworthy that investment funds have been noticeably flowing into Vietnam funds this year. Compared to the declining trends in fund assets for major emerging markets such as China (-128.1 billion KRW), Russia (-10 billion KRW), and India (-6.2 billion KRW) over the past month, the inflow of funds into Vietnam stands out. Vietnam funds have seen net inflows of 18.7 billion KRW over the past month and 10.8 billion KRW over the past three months.

Although the Vietnam stock market has been sluggish and fund returns remain stagnant, domestic investors appear to be taking advantage of this adjustment phase to buy at low prices. This is because there is no doubt about the fundamentals of the Vietnam market, with the country's economic growth rate reaching 7% for two consecutive years.

In particular, there is a forecast that next year the VN Index, Vietnam's representative stock index and the cause of last year's poor fund returns, will break out of its current range, further brightening the outlook for Vietnam funds. Morgan Stanley Capital International (MSCI) recently decided in May this year to reclassify Kuwait from a Frontier Market (FM) to an Emerging Market (EM). As a result, the weight of Vietnam in the MSCI Frontier Market index is expected to increase, and passive investment is likely to expand. Lee Changmin, a researcher at KB Securities, explained, "This is a time to increase the investment ratio in Vietnamese stocks when prices are weak," adding, "The VN Index is expected to rise to 1,100 points this year."

Russian funds, which posted the highest returns last year, are also expected to remain promising for the time being. Last year, Russian funds achieved returns in the 30-40% range, supported by a trend of interest rate cuts and rising oil prices. However, this year, with easing tensions in the Middle East, international oil prices are expected to gradually stabilize, so some adjustments may occur. International oil prices have recently shown a sharp decline. The possibility of a full-scale conflict between the US and Iran has disappeared, reducing concerns about global oil supply instability. On the 13th (local time), West Texas Intermediate (WTI) crude oil futures on the New York Mercantile Exchange (NYMEX) closed at $58.08 per barrel, down 96 cents (1.6%), the lowest since December 3 last year.

Additionally, for investors who want to invest in developed country stocks, investing in European stocks, which have a lower price burden compared to the recently surged US stock market, can be a good alternative. European funds have risen 22% over the past year, which is not significantly different from the 27% increase in US funds.