NEW YORK ( TheStreet) -- An increase to the minimum wage in Vietnam will weigh on Market Vectors Vietnam ETF ( VNM), which has dipped over the past two weeks and is now in negative territory for the year. VNM is down 1.7% year to date, while the iShares MSCI Emerging Markets ( EEM) is down 1%.

Much of the recent downside in VNM can be credited to the fund's performance in the latter part of March. Since March 12, VNM is down by almost 7%. But given that the fund experienced a steep two-month decline beginning in October 2009, VNM trails EEM by more than 15% over the past six-months.

The Vietnamese government announced a 12.3% increase to the minimum wage on Friday. The increase in monthly pay will be valid for government workers and workers in state-owned enterprises, but the effects of the change will be felt by the entire economy.

The wage increase is significant for the country's economy because it adds to concerns about inflation in Vietnam and because more money now will be chasing the same number of goods. Inflation already is at a 12-month high in the country after reports from March show that consumer prices increased by 9.5% so far this month.

Despite the mounting pressure of inflation, the State Bank of Vietnam said last week it won't be raising interest rates in April.

Growth has been robust this year, with gross domestic product increasing at an estimated 5.8% in the first quarter. However, a widening trade deficit and now the continuing and potentially worsening inflation issue muddle the future outlook.

To make matters worse, Fitch also recently stated that it may decrease its rating on the country's debt because of a continued lack of confidence in the dong, the Vietnamese currency. The dong is widely traded in Vietnam on a black market that values the currency below its official exchange rate with other currencies. The government has twice devalued the dong in the past few months and may need to do so again in the near future.

Altogether, the risk-reward ratio of investing in the Vietnamese markets is tipping in an unfavorable direction.

Sound individual investments can still be found in the country though, according to Mark Mobius of Templeton Asset Management, which has sizable investments in the country.

But for now, I would advise exchange-traded fund investors to steer clear of investing in a broader market Vietnam fund such as VNM. If investors have the time and the will they can likely still find value in researching and investing in individual Vietnamese companies but the overall market picture looks unfavorable.

Investors looking to quench their appetite for investment in Southeast Asia should look to iShares MSCI Thailand Investable Market Index ( THD), in which a relatively cheap equity market is still attracting foreign investment despite ongoing political tension. The fund is up by 10.6% year to date, driven by sharp gains in the March.

Two other strong options for the region are MarketVectors Indonesia Index ETF ( IDX), which is up by 13.3% year to date, and iShares MSCI Malaysia Index ( EWM), which has increased 6.9%.

Investors can read my most recent analysis on these three Southeast Asian ETFs by clicking here for Thailand and here for Malaysia and Indonesia.

--Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion had no positions in the securities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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