(FORTUNE Magazine) - Three decades after the end of the Vietnam war, corks are popping in Ho Chi Minh City. The reason might make the man for whom this town was named spin in his grave: Vietnam's stock market is the second-best-performing exchange in the world this year (behind only Zimbabwe's).

Since Dec. 30 the Vietnam Stock Index is up 60%. And from a market capitalization of $144 million for 22 listed companies two years ago, it has increased more than tenfold, to $1.5 billion for 35 companies today.

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That's not bad for an exchange that only started trading in July 2000.

Expectations are for the total market cap to double again by the end of this year.

"It's starting from a very low base, so you have nowhere to go but up for the next three to five years," says Don Lam, who runs VinaCapital in Ho Chi Minh City and operates the largest fund through which foreigners can invest in Vietnamese stocks, the $300 million Vietnam Opportunity Fund, traded on the London Stock Exchange.

Vietnamese companies are undervalued by global standards, says Tran Dac Sinh, CEO of the Vietnam Stock Exchange, who cites an average price-to-earnings ratio of 11.9 for Vietnamese companies, compared with 18 for Chinese.

Other factors fueling Vietnam's stock boom include a fast-growing economy (8.4% last year); reforms allowing foreigners to hold 49% of public companies; and a push to encourage state-owned companies to go public. "Things have changed a lot in Vietnam," says Lam. "Americans are the only ones still thinking about the war. The Vietnamese have moved on."

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