00:00Vietnam shares have hit a record high after index provider FTSE Russell announced its upgrade to emerging market status,
00:07a move that could bring in billions of investment.
00:10The country's main VNI index has risen 30% this year, making it one of the top-performing stock markets in Asia.
00:18While the main exchange for emerging markets globally, the MSCI index, well, that's up 28% on the same time last year.
00:26Let's talk now to Fiona Sincotta, who's an analyst at Citi Index.
00:29Yes, good to see you again, Fiona.
00:31So there's been this upgrade for Vietnam.
00:34What kind of difference could that make to it?
00:37Yes, so, I mean, there has been a lot of work or has been a lot of work behind the scenes to get to where we are.
00:44So there have been, you know, improved settlement technologies.
00:49There's been improved regulatory and legal reforms.
00:54There have been reforms as far as funding is concerned.
00:57And all this means that, you know, barriers have been lowered to foreign investors now.
01:02If we do see this go through, continue to go through, then it does mean that, you know, liquidity is going to be greatly improved.
01:09We're going to see, you know, passive funds that track the different indices around the globe.
01:14They're going to be getting involved, which broadens the client, the investor base for this index and could reduce the spreads.
01:22That's the difference between the buy and the sell for particular stocks on the indices.
01:27So this is good news.
01:28Well, what about emerging markets more broadly?
01:31This has now been designated emerging market status, but they more broadly have been on a strong run, haven't they?
01:36Why is that?
01:39Yes, you know, we've seen the MSCI is up 28 percent this year.
01:43So a really strong rise.
01:45And I think a lot of this has to do with actually what we're seeing going on in the U.S. dollar and over in the U.S.
01:51So the U.S. dollar is actually significantly weaker, trades down around 10 percent this year, its worst year for really quiet, well, since 1970.
02:01So for a long time.
02:02Now, what that does mean is it does mean that it's more attractive.
02:06Emerging markets become more attractive for investors as also local currency earnings are improved as the dollar is weaker.
02:16So we're also seeing as well that rotation away from the U.S.
02:21Now, U.S. stocks are obviously now at record highs, but there has been this sense of looking to diversify away from the U.S.
02:28And emerging markets have very much been at the forefront of that diversification.
02:33And there was a time, wasn't there, when emerging markets were seen as perhaps being more risky in terms of investment.
02:38Are they now becoming, let's call them, more mainstream?
02:42I think there is a sense that because of the macroeconomic issues that perhaps we are seeing elsewhere in the globe, you know,
02:50there's been a lot of uncertainty as far as what's been going on in the U.S.
02:55As far as trade is concerned, government shutdowns at the weaker U.S. dollar in Europe, you've got stagnant growth.
03:02You've got some political crises as well.
03:04So, you know, it is looking to be potentially a good alternative to move away from the more Western problems that we've been seeing.
03:13And the returns tend to be much better when they do come around.
03:17So, that risk-reward payoff can be really quite worth it in some occasions.
03:21So, picking up on some of the better performers in emerging markets, many of them in Asia, Korea, Vietnam, as we've just mentioned,
03:29how much of that is surrounding the enthusiasm on AI and semiconductors?
03:35Yes, a lot of it has been directed there.
03:39You know, because these are seen as sort of big players as far as AI chips are concerned, as far as equipment for data center is concerned.
03:50And obviously, this is a trade that is attracting a lot of attention at the moment.
03:54And, you know, it's almost as if you see sort of the broadening out of that AI trade, which we know has helped drive the U.S. stock markets to record highs.
04:02We're also now seeing a similar performance.
04:05You know, we've seen record highs for certain indices across Asia as well.
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