"Thank you for the great service. I also thank Eoin personally for the great presentation at the Chart Seminar in November 2010 in London. My performance has been improving significantly since this time.

"My opinion about the Vietnamese stock market has not changed since the meeting with Eoin. Corruption, bad governance and false capital allocation are the main fundamental problems for Vietnam stock market.

"I am sending you a article by Tom Holland of South China Morning Post. This article outlined the main point of the problems of Vietnam."

Eoin Treacy's view Thank you for this insightful email and the interesting article. Also congratulations on your improved investment record since the November Chart Seminar. Here is a section from Tom Holland's article:

The government is hoping a cheaper dong will make the country's exports more competitive, closing Vietnam's gaping trade deficit. But unfortunately for Hanoi, the trade imbalance is just a symptom of a deeper problem resulting from the government's own economic mismanagement.

For the past few years, the Vietnamese government has pursued a growth-at-all-costs economic strategy. Not only has it successfully encouraged foreign investment, attracting around US$9 billion in direct investment last year, it has also encouraged state-owned companies to borrow from the international markets, while pushing the largely state controlled banking system to lend generously to fund investments by domestic borrowers.

On one level, the policy has worked. Growth last year is estimated at just short of 7 per cent, up from 5.3 per cent in 2009.But that growth is looking increasingly expensive. Bank lending expanded by nearly 28 per cent last year, pushing outstanding domestic credit up to around 140 per cent of gross domestic product. That's higher even than the 130 per cent level that precipitated Thailand's economic crisis in 1997.

Worse, there are fears that much of that lending has vanished into a black hole. Between 30 and 40 per cent of the assets of Vietnam's state banks are believed to consist of loans to the country's state-owned companies, which as a group are notorious for their lousy governance.

Vietnam has been a regional underperformer and laggards usually lag for a reason. The above article does a sound job of pointing out the issues currently affecting the Vietnamese economy. The build up of foreign currency debt as well as the weakness of the domestic currency is a short to medium-term worry, as are high inflation, poor economic and corporate governance and corruption.

However, the weakness of the currency will eventually help improve on the country's competitive edge. How successful Vietnam is in continuing to attract foreign direct investment will probably play a significant role in determining the stock market's trajectory. Dragon Capital's most recent fund report carries some additional information on FDI inflows.

The Vietnam Index remains in an extended base formation and will need to sustain a move above 600 to indicate a return to medium-term demand dominance. An eventual break of the Dollar's uptrend against the Dong would also help to bolster investor sentiment towards the country.