Good Morning, Vietnam!

Tony Sagami

Most investors don’t pay much attention to where the U.S. dollar is headed … but they should.

Before I get into the U.S. dollar and what you should do about it, let me tell you what the Vietnamese government did to their dollar last week.

The State Bank of Vietnam devalued its currency, called the “dong,” by 2.1% last week. The new global interbank exchange rate will increase from 18,544 dong per U.S. dollar to 18,932 dong. Yup, one U.S. dollar is worth more than 18,000 Vietnamese dong.

Those official exchange numbers don’t really reflect the true exchange rate for Vietnam’s currency. There is a thriving black market for currency exchange that is conducted primarily at gold retailers. The black market exchange rate in Ho Chi Minh City has been as high as 19,335 per U.S. dollar recently.

Nonetheless, this isn’t the first time Vietnam’s central bank has devalued its currency. It is the third devaluation in the last 10 months: 3.4% in February and by 5.4% in November.


IFTHEN(FIELD9=1) {

Internal Sponsorship
A crucial question for you …

Why settle for the meager gains and high risk implicit in U.S. stocks today?

If you’re investing in U.S. stocks, you are pinning your hopes on the world’s 104th LEAST profitable stock market.
It’s a fact: 103 other stock indexes around the world are outperforming our best index!

That’s why we created International ETF Trader: To help you harness the huge profit potential in international stock markets.

Click here to learn more.

}
IFTHEN(FIELD9=2) {

Internal Sponsorship
A crucial question for you …

Why settle for the meager gains and high risk implicit in U.S. stocks today?

If you’re investing in U.S. stocks, you are pinning your hopes on the world’s 104th LEAST profitable stock market.
It’s a fact: 103 other stock indexes around the world are outperforming our best index!

That’s why we created International ETF Trader: To help you harness the huge profit potential in international stock markets.

Click here to learn more.

}
IFTHEN(FIELD9=3) {

External Sponsorship
The REAL Reason Iran Wants the Bomb …

NOBODY in the Pentagon will talk about it …

NOBODY in the White House knows what to do …

Watch this video presentation to see how to PROTECT yourself and your family …

}

Why did Vietnam do this? To reduce and hopefully reverse the big trade deficit it has been running.

Vietnam’s trade deficit has TRIPLED in the first six months of 2010. The deficit hit $1.15 billion in July, up from $742 million in June. For the first seven months of this year, Vietnam’s trade deficit totaled $7.4 billion. That is almost double the figure for the same period last year.

The main destinations of Vietnam’s exports were the United States (19%), Japan (13%), China (10%), Australia (7%), Singapore (5%), and Germany (4%).

The major imports into Vietnam are oil, pharmaceutical drugs, machinery, military supplies, vehicles, and food. Vietnam’s major exports are coal, crude, petroleum, peanuts, rice, rubber, tea, and handcrafted bamboo and rattan products.

Vietnam’s problem is that its imports are growing faster than its exports. So far in 2010, imports have increased by 29.4% while exports have only grown by 15.7%.

By devaluing its currency, Vietnam is making its exports cheaper for foreign buyers.

The currency devaluation is going to help stem that deficit. How? A cheaper currency makes Vietnam’s exports cheaper for foreign buyers, so this move is designed to make Vietnam exports more affordable in global markets.



Did you know?

  • Vietnam is the largest producer of black pepper in the world, responsible for one-third of the global supply. Vietnam is the world’s second largest exporter of rice, second only to Thailand.
  • Vietnam has one of the lowest unemployment rates of all emerging markets.
  • Bill Clinton was the first U.S. President to visit Vietnam and was given a hero’s welcome when he arrived in 2000.
  • Vietnam’s official name is the Socialist Republic of Vietnam.
  • Vietnam’s 86 million citizens have a literacy rate of 94%.
  • The four largest motorcycle markets in the world are all in Asia: China, India, Indonesia, and Vietnam.

Vietnam is trying to avoid the slippery slope of becoming hopelessly mired in the cycle of annual trade deficits. Vietnam does not want to follow America’s disastrous trade example.

The U.S. is and has been running massive trade deficits for years. Just in the month of June, the U.S. ran a $49.9 BILLION trade deficit. Yup, almost $50 BILLION dollars!

That’s because the U.S. has bought a total of $177 billion worth of goods from other countries in the first six months of 2010.

That number is almost double the $20-billion monthly average deficit that the U.S. has been running for years.

By the way, most of that deficit — $26.2 billion — was with China. When you think about all the oil we import, it is an amazing testament to the Chinese economy that we spend more on clothes, electronics, shoes and toys from China.

By devaluing its currency, Vietnam is making its exports cheaper for foreign buyers.
By devaluing its currency, Vietnam is making its exports cheaper for foreign buyers.

Those gigantic trade deficits (as well as gigantic budget deficits) are why the U.S. dollar has been on a steady downward spiral for years. Since 2002, the U.S. dollar index has lost 25% of its value against a diversified basket of international currencies.

Vietnam has just recently started to implement some free market reforms into its economy and is on track — with moves like this currency devaluation — for sustainable and meaningful economic growth.

Vietnam joined the World Trade Organization in 2007 and is quickly becoming an economic force in the region. It has a young, enthusiastic workforce, and is attracting tons of foreign capital.

This may surprise you, but many Chinese companies are opening new factories in Vietnam. The reason is that Vietnam wages are even lower than Chinese wages, so new manufacturing plants and factories are being opened at a rapid pace.

Perhaps even more important is a new and LARGE government stimulus package to increase consumer demand and boost construction/infrastructure projects. When I look at Vietnam, I see many of the same advantages that turned China into an economic powerhouse.

It may be a bumpy ride, but I believe Vietnam will be one of the most lucrative markets in Asia for stock market investors.


IFTHEN(FIELD9=1) {

External Sponsorship
The REAL Reason Iran Wants the Bomb …

NOBODY in the Pentagon will talk about it …

NOBODY in the White House knows what to do …

Watch this video presentation to see how to PROTECT yourself and your family …

}
IFTHEN(FIELD9=2) {

External Sponsorship
The REAL Reason Iran Wants the Bomb …

NOBODY in the Pentagon will talk about it …

NOBODY in the White House knows what to do …

Watch this video presentation to see how to PROTECT yourself and your family …

}

Unlike China, Japan, and Korea, there isn’t a single Vietnam stock listed on any American stock exchanges. Plus, the Vietnamese government has made it hard for foreigners to invest directly into the Vietnam stock market.

The most practical way to add Vietnam into your portfolio is with Market Vectors Vietnam (VNM) exchange traded fund, which includes a variety of financial, energy, industrial and consumer stocks.

I would not rush out and buy VNM tomorrow morning, but if you missed out on the early (and HUGE) gains of Chinese stocks, don’t make the mistake of ignoring the big opportunities in Vietnam.

Best wishes,

Tony


About Uncommon Wisdom

For more information and archived issues, visit http://www.uncommonwisdomdaily.com

Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

Attention editors and publishers! Uncommon Wisdom issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.

From time to time, Uncommon Wisdom may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Uncommon Wisdom or its editors. For more information, see our terms and conditions.

© 2010 by Weiss Research, Inc. All rights reserved. 15430 Endeavour Drive, Jupiter, FL 33478

Your thoughts on “Good Morning, Vietnam!”

  1. Dear Tony
    Perfect timing on Vietnam article. I was writing to ask you to do an article on Vietnam. I was wandering as I think its a great time to buy Vietnam Dong currency and hold on to it that his might be a great investment cause of the appreciation value. What is you opinion on this matter. Do you think this fall we will see a Revalue or a Re In-statement of some sort of currency adjustment
    with the Vietnam Dong.

    Thanks God Bless
    Tony Domingue
    Jahoopa

  2. Did you recently mention the Claymore China Real Estate Fund as a “buy”?

    Thank & regards,
    cfrx

  3. Dow Ba..
    Not to poke at other countries but the quality I’ve seen from Vietnam is much better than from China not to mention traffic jams. I thought coffee was up there too with it’s exports. The problem I see investing overseas is we do bad, they do great, everything goes down. We do good, they do bad, they go down. “So far” as a blind cleric once said. Could be after everything finally falls astronomically this might change but right now it seems the world follows us.
    What we used to say applies even more with what I’m doing now. “Never believe anything you hear happened, never believe over half of what you read happened, and only about a fourth of what you just saw happen.”
    In the short term powerful forces can really move things in one direction or the other. Mid terms soon. Will it go up because the Dems will lose some power, or down to make sure they do?
    I like crude because you just can’t scare me out of it no matter what at these prices. I buy low and wait. If it drops down a notch, I wait longer.

  4. It is a great investment but will wait for a profit approximately 10 years.
    I am an Economist and also Accountant.

Comments are closed.