Foreign capital inflows pour back into Vietnam

The event will provide opportunities to find potential partners

Investors ahoy!

Bridge Capital and other five institutions have just spent a combined almost $23.7 million acquiring 25.5 million shares of the bourse-listed housing developer Nam Long Group (NLG) through an additional offering.

This is to some extent a happy end to a story that started in October 2012, when they met each other at an international investment conference co-organised by Viet Capital Bank and Viet Capital Securities Co. (VCSC).

Until that day, Nam Long did not list yet. Deputy director Nguyen Vinh Tran joined Vietnam Access Day 2012 with a presentation on opportunities to invest in his firm in the hope of finding suitable investors for a placement. Fortunately, his dream has now become a reality.

Speaking at a ceremony held two weeks ago to mark the admission of the new shareholders, Nam Long chairman Nguyen Xuan Quang said: “It’s great that we’ve found partners who understand and want to work in concert, especially in a situation where the real estate market is still in a tough time.”

Bridge Capital is happy too. The fund entered Vietnam in 2008 but it has been able to make three investment deals only to date, with Nam Long being the latest.

The organisers might be totally unaware of such outcome, but that was what they hoped to see after the Vietnam Access Day 2012 event.

Encouraged by sharpening enthusiasm among foreign investors for getting into Vietnam, Viet Capital founders want to make Vietnam Access Day a periodic two-year event. 

Vietnam Access Day 2014 will provide investors with a complete panorama of the local economy as well as detailed information about specific sectors of interest. Business leaders and think-tanks will converge to give presentations and host panel-led debates.

They will discuss a host of issues, including economic outlook, changes in consumer trends, risks to the banking system, and derivatives and new products for the stock market.

The organisers hope to see 200 global investors at the event, where some 38 leading Vietnamese firms will be able to promote investment opportunities.

Vietnam Access Day 2012 gathered 210 local and global investors, 60 representatives from leading Vietnamese businesses and 34 guest speakers, making it the largest event of its kind about Vietnam.

Come on in!

Upon the financial crash and subsequent recession in the West, confidence evaporated and capital fled for adventures in emerging markets. But since developed economies showed signs of turnround with the US Federal Reserve tapering its QE program, funds have been retreating to the rich world.

The capital outflows from emerging markets would end shortly. History data tracked by a securities firm have shown that it takes 40-50 weeks for such a flight to cease. If history repeats itself, this means funds will stop fleeing emerging markets from April or May, and even reverse their trend towards Asia.

Vietnam has emerged as a more attractive market as regional peers such as Thailand is facing political instability, Indonesia will host a presidential election and possible subsequent changes, while the Philippines is characterised by relatively expensive stocks. Even China’s official non-manufacturing PMI is worsening.

The local bourse generated a return of roughly 22 per cent last year and a 16.23 per cent plus in the first two months of this year, an adequate reward for the risks foreign investors are taking. Moreover, Vietnam’s political and economic stability alongside stronger efforts to reform the banking system, state-owned enterprises and the economy as a whole are beckoning investors.

Many offshore institutional investors have expressed an interest in Vinamilk, REE, DHG Pharma, FPT and Binh Minh Plastics, but few opportunities exist for further investment. So, the long-awaited decision to lift foreign ownership cap to 60 per cent from the present 49 per cent should attract certain foreign capital inflows once approved, although stock prices have already taken the information into account.

So far this year, net buys by foreign investors reached $133 million, equivalent to as much as 40 per cent of last whole year. While exchange-traded funds (ETFs) still make up a significant portion of foreign capital inflows, many other funds are much more active now. One foreign fund jumped in right after the country’s traditional Tet holidays and two others are mulling an entry. Meanwhile, some existing leading funds have successfully raised new capital, thus indicating that a significant amount of money is pouring in.

“Foreign investors show more and more interest in Vietnam’s market,” research head with a securities firm said. “Specifically our institutional research team has received many offshore institutional investor visits to Vietnam in the year to date. This year, foreign investors tend to diversify their assets to more stable and potential markets and we think Vietnam is one of the markets they are keen on. When they visited Vietnam, they showed more interest in such sectors as consumer, oil and gas and affordable residential real estate which are closely tied to Vietnam’s growth.”

A picture is worth a thousand words, goes a popular saying. Vietnam Access Day 2014 will provide investors site visits to Dat Xanh Group’s housing projects, Vinamilk’s factory and Ho Chi Minh City Infrastructure Investment Co.’s Thu Duc water plant. The overall picture should be rosy enough and foreign investors might view Vietnam a destination, rather than just a stopover.