Vietnam, from Napalm to Nappa

I recall my first night in Vietnam, sipping a large whisky on the terrace of a hotel which had seen better times. A relic of French colonial rule, it was now the only hotel in Saigon with a barman. It was September 1974. The few journalists that remained in the city and a handful of off-duty US Officers stood around in animated huddles at the old cocktail bar. A Napalm Surprise, the barman’s special, was advertised discreetly on the bar with a guarantee “to explode on the outside and burn on the inside”. A flustered voice from a local radio station broadcast what we all knew but didn’t want to speak about. The Vietcong were edging ever closer to the outlying districts of the capital. It took a further seven months for Saigon to fall.

Immediately in front of the hotel, shanty huts with corrugated iron roofs lined the roadside. A cacophony of noise came from thousands of snarling bike exhausts. The smell of burnt oil, rotting fish, and fear hung in the air. Elegant women and half-naked children dodged unconcerned between the rows of bikes ploughing through gigantic puddles throwing up a wake of mud and dirt.

The people of Vietnam are no strangers to foreign occupation, and with it political repression and economic exploitation. First by the Chinese in 111 BC, and subsequently governing itself only to be colonised by the French for seven decades following the Treaty of Hue in 1874. After the defeat of the French at the epic battle of Dien Bien Phu in May 1954, the country only knew death and devastation until the US left ignominiously after failing to defeat the North Vietnamese Regular Army.

Unification of the country by the North in 1975 saw an industrial north devastated and an agricultural south reduced to subsidence farming by a hostile US foreign policy. The economy faced near collapse through an adopted Chinese communist model. After decades of misery, a democratically-elected government established a free market economy. The last 25 years have seen Vietnam grow from one of the poorest countries in Asia, to one of the most prosperous.

Saigon is now Ho Chi Minh City. The dilapidated hotel has long disappeared and with it the Napalm Surprise. The dirt road strewn with puddles has been replaced by a modern two-lane highway. The shanty huts have given way to shopping malls, where an emerging middle class sports luxurious nappa leather attire.

Vietnam’s equity market peaked at a high in 2006 and is at a 10-year high today, outperforming all other Asian markets. Its economy grew at 6.7% in 2016 in contrast to Europe’s mere 1.5%.

However, not all countries in Asia have enjoyed the same economic success as Vietnam. While sensible investors need to think globally, they place the odds of investment success over time firmly in their favour by keeping costs to the minimum, employing an investment strategy of indexing. The market can stay irrational longer than the investor can stay solvent. Risk cannot be avoided; it must be managed. Watch the signal, not the noise.

Jeremy Blatch TEP
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This article was also published in both the online and print editions of the Sur in English