For The Patient, Vietnam ETF Looking Good

Until recently, the Market Vectors Vietnam ETF

, one of the top performers among global ETFs in 2012,

. Amid heightened concerns about a Chinese slowdown and lingering doubts the Euro Zone will make it another year under its current composition, many emerging markets have taken a bath so it hasn't been surprising to see VNM, one of just three country-specific frontier market funds on the market today, do the same. Vietnam's benchmark VN Index and VNM touched their 2012 highs earlier this month, but since May 8, the VN Index has slid 11%. VNM is nearly as bad with a 10.8% loss. But on a day when

, VNM is trading higher by almost 1.1% and it's easy to see why. Already up 24% since December, the VN Index could surge another 65% through next year

. As the Bloomberg piece notes, inflation rests at 8.3% this compared to a whopping 23% in August 2011, allowing policymakers to pare borrowing costs. The result is palpable. Vietnam mutual funds tracked by EPFR Global lured inflows for 20 straight weeks, the longest stretch for any developing nation, Bloomberg reported. What's noteworthy is that to this point, policymakers have been more concerned with fighting inflation than engineering economic stimulus. That could change later this year if inflation continues to ebb prompting the powers that be in Hanoi to move forward with plans to combat Vietnam's economic slowdown. As inflation falls, it is widely expected Vietnam's central bank will cut interest rates further and that's good news for VNM, which devotes more than 49% of its weight to bank stocks. Still, the Vietnamese stock market is small with a total value of just $40 billion. In other words, Facebook

has a market value that is more than 50% above that of the listings on the Ho Chi Minh City Stock Exchange. On the other hand, Vietnamese stocks are cheap. The VN Index currently trades at 9.8 times earnings, 34% below its five-year average, Bloomberg reported. That's also a more compelling valuation than investors will find in some of the BRICS or the emerging markets realm at large. Over the past five years, Vietnamese stocks have been the worst performers in the region, but that trend is reversing course in 2012. This year, every major country-specific ETF tracking an emerging Asia-Pacific market has lagged VNM by a large margin. The fund has trounced the likes of the iShares FTSE China 25 Index Fund

, the iShares MSCI Malaysia Index Fund

and the Market Vectors Indonesia ETF

. Even other Asia-Pacific stalwarts such as the iShares MSCI Thailand Investable Market Index Fund

and the iShares MSCI Philippines Investable Market Index Fund

have lagged VNM by double-digit margins. And the best VNM has to offer could be on the horizon, not in the past. For more on the Vietnam ETF, please click

.