Consumer fields potential boosts capital flow

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According to statistics released in June by the Ministry of Finance, retail and consumer sectors in Vietnam have grown 9.5 per cent year on year, one of the greatest performances in the Vietnamese market. Reports from Kantar Worldpanel Research in July also showed a recovery in fast-moving consumer goods, with beverages growing 13 per cent compared to 2014.

CEO of Stoxplus Nguyen Quang Thuan noted that foreigners would likely seize this opportunity to invest in Vietnamese consumer sectors, from food and beverages, electronics, and automobiles, to finance, telecommunications, and insurance. Aside from providing direct investment capital, many foreign investors will choose the indirect route via public equity, private placement, or acquisitions.

A string of recent notable deals includes Thailand’s PowerBuy acquiring 49 per cent of the electronics giant Nguyen Kim; Japan’s Daiwa PI Partners partnering up with VinaCapital to buy 70 per cent of International Dairy Products; and Mondelez taking over Kinh Do Confectionery. The Japanese retail heavyweight Aeon also bought parts of Fivimart and Citimart, as well as developing its own Aeon malls in Vietnam.

“Vietnam has many advantages to develop a strong consumer culture thanks to its young population of 90 million, a growing gross domestic product of at least 6 per cent, and a rising middle class. Thus foreign investors prefer Vietnamese firms that benefit from this demographic change, especially those having double-digit growth and at least $50 million of charter capital,” Thuan said.

He added other favourable regulatory factors, including the recent Decree 60 that lifted foreign ownership limit on listed Vietnamese firms. Moreover, more than 400 state-owned enterprises are due for equitisation this year, and the government is scheduled to divest from 1,400 unlisted public firms, especially those in non-core consumer sectors.

Yoko Ogimoto, senior consultant at the Nomura Research Institute in Japan, also told VIR that foreign investors were optimistic about the prospects of Vietnamese public firms in consumer sectors.

“As both a researcher and an independent investor on the Vietnamese stock market, I’ve seen a lot of Japanese corporations and individuals expressing their interest in consumer-related firms. As the Japanese tend to be conservative and prudent in their investment decisions, the majority of them prefer to pour capital into fast-growing consumer fields, ranging from food and beverage to retail to packaged goods to banking,” Ogimoto said.

At the recent Vietnam M&A Forum 2015 in Ho Chi Minh City, various experts noted that foreign investors’ interest would extend to sectors that were indirectly related to consumers. According to managing director of BDA Partners Hong Kong Paul Diglacomo, overseas investors are upbeat that Vietnam’s rising consumption level will fuel both upstream and downstream consumer fields, such as agriculture and real estate.

Chairman of KPMG Vietnam John Ditty also noted that “the buzzword for the years ahead will be consumer and consumer-related. KMPG has noticed a significant increase in M&A deals regarding these sectors. We’ll soon have investors from Japan, Korea, ASEAN, and more coming in via M&A and other indirect routes.”