4 Reasons Vietnam ETF Has More Gas In Its Tank

Following a savage beating in 2011 that saw the fund tumble more than 43%, the Market Vectors Vietnam ETF

has come roaring back in 2012. Among equity-based ETFs, VNM was the third-best performer in the first quarter, trailing only two other Market Vectors funds: The Market Vectors India Small-Cap ETF

and fellow frontier market fund, the Market Vectors Egypt ETF

. VNM followed up that impressive first-quarter run with an

. Four months and over 40% later might have some thinking the easy money in VNM has already been made. Here are some reasons why that might not be the case.

One of the favorite past times of the chattering class is to say a security is overbought when it has experienced a substantial upside move in a condensed period of time. Looking at

it's clear this ETF has spent little time this year in what can be considered overbought territory. Remember this: Plenty of people thought Apple

was overbought at $300 and $400. Funny, we haven't heard much from those folks lately.

Vietnam is a communist country, but this isn't Russia in the 1960s. This is more a benevolent brand of communism akin to what is found in China. Under Doi Moi, Vietnam opened its arms to foreign investors and adopted policies that are somewhat free market in nature. And that was back in the mid-1980s, so it's fair to say Vietnam has been more open economically speaking than some of its Southeast Asia rivals for a longer period of time.

Today, the U.S. is the biggest investor in Vietnam, but the level of foreign direct investment in the economy fell last year and was a mixed bag from 2007-2009 because of the global credit crisis. The FDI numbers for this year are mixed as well, but Taiwan, South Korea, Singapore, Japan and Malaysia have been voracious investors in the Vietnam growth story. As an example, Samsung has promised to invest $1.5 billion in the country. The Ho Chi Minh City Department of Planning and Investment been seeking technology, biotechnology, and health care-related investments from the U.S. and developed European nations. Regarding VNM, the ETF had less than $200 million in AUM at the end of the first quarter of 2011. Today it has almost $339 million.

Since inflation is very much a four-letter word in Vietnam, leading to concern among some regarding VNM's 49% weight to finanicals, looking at the health of the country's banks is critical before making a bet on this ETF. Investors are embracing Vienam's five-year sovereign bonds and banks there

. That's a lot of dongs and it's a good thing for VNM's largest sector weight. For more top-performing ETFs, please click

.