Viva Da Nang

I write about some wacky investment destinations, but I do so with a purpose. The idea is that in the coming years, returns in the U.S. might be much lower than we are used to, so I want to help you seek out new options.

With that in mind, and with apologies to Adrian Cronauer, "Good Morning Vietnam!"

I first started to think about Vietnam last year. The country has 80 million people and is well on the road to capitalism. In a few years, I believe Vietnam -- and for that matter, probably Pakistan -- will be included in the BRIC mix of newly industrialized economics. (Although I don't know what the acronym will be then.)

The country offers potentially high growth rates, a new stock market, a nascent sense of capitalism, a large and young population, and some manufacturing capacity. This mix could make the country an important investment destination in the next few years. In the short term, however, it makes sense to expect some feast and some famine as the country grows into capitalism.

The country's stock market is tiny, with a total of 35 listed companies. According to Merrill Lynch, the ratio of stock market capitalization to GDP is 4%. By way of comparison, the regional average for stock market capitalization to GDP is 130%. But Vietnam's number is likely to go up considerably as the government privatizes several state-run companies. Among the candidates for privatization are four banks -- Vietcombank, Vietnam Bank for Agriculture and Rural Development, The Industry and Commerce Bank of Vietnam and Vietnam Bank for Investment and Development. There are no guarantees on these four, as nothing is certain yet.

The regulatory body that governs the country's stock market estimates that 90% of the very thin volume comes from retail investors, but more institutional and foreign interest could be the catalyst for higher prices in the coming years. Merrill Lynch believes that there will be a large inflow of capital from Japan and that brokerage firms are in the process of creating easier access to Vietnamese markets.

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At the time of publication, Nusbaum was long VTOPF in client and personal accounts, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, Ariz., and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.