Recently, one of the countries I’ve been asked about the most is Vietnam. And I’m not surprised, last year the economy was still able to grow by more than 5%, even despite the global economic slowdown. And looking forward, Vietnam is expected to post higher than 8% growth in 2010 and near 8% growth in 2011. That has a lot of investors wondering about the Market Vectors Vietnam ETF (VNM).

Here are my thoughts: While clearly this is substantial economic growth that may very well lead to a very interesting long-term story, Vietnam presents few opportunities right now. In order for a country to be a good investment, the economic, political, and equity market must all be conducive — and Vietnam fails on several of these fronts. Let’s take a closer look…

One of the biggest problems with investing in Vietnam is that the nation runs a very big trade deficit. In fact, Vietnam recorded a $1.75 billion trade deficit in the first two months of 2010 — nearly 20% of the country’s total export turnover.

This condition puts the country’s currency, the dong, under constant pressure. In fact, the State Bank of Vietnam has actually devalued the dong twice since November of 2009 — shredding the dong’s value by about 8.9% against the dollar.

As a result, Vietnam is plagued by rising inflation. Inflation popped to 8.5% in February from 7.6% in January. And according to my estimates, the county is likely to see an inflation rate of about 10% in 2010. This kind of inflation essentially makes foreign investment capital worth less.

In fact, due to the risk of rapid inflation, Fitch Ratings recently slapped a negative outlook on Vietnam’s credit rating. A negative outlook means there is risk of a future downgrade — which would likely lead to a massive exodus of foreign investment funds.

Finally, Vietnam is a country with a very underdeveloped equity market. This market is thinly traded, and that means a big lack of liquidity. There also aren’t any prominent, pure-play Vietnamese companies listed in U.S. exchanges.  That means that the Market Vectors Vietnam ETF (VNM) has holdings that are mainly the thinly traded Vietnam stocks, giving you a basket of volatilize stocks that can take you for a roller-coaster ride.

There are many opportunities in Asia right now, since this region is the biggest source of global economic growth. However, Vietnam and the VNM ETF are not safe places for investors as of yet.