Land of the rising Yen on the hunt for pastures

Dragon Capital said it would cooperate with Japan-based Capital Asset Management to co-manage Vietnam Dragon Fund (VDF) via Dragon Capital Vietnam Fund (DCVF), a new investment trust structure governed by the Law Concerning Investment Trusts and Investment Companies in Japan.

Pham Nguyen Vinh, Dragon Capital’s business development director, said the process of transferring portfolios from VDF to DCVNF would last for two months in several transactions. 

“The transferring will raise the ability to mobilise capital from new Japanese investors, while also benefiting existing shareholders,” Vinh told VIR.

Vinh said in recent years, Japanese investors had looked at investment opportunities abroad and this trend was clearer after its currency strongly appreciated against the US dollar, making domestic investment less attractive. “Therefore, Vietnam will continue to be a focus for attracting foreign investors and a potential market for Japanese investors.”

Around $500 million of portfolio investment capital from Japanese investors has poured into Vietnam during the year to date, according to StoxPlus statistics. 

Vinh, however, declined to comment on what Dragon Capital would do with the money after the deal. He said the transferring would not have negative impacts on Vietnam’s stock markets as it was to be done via put-through transactions.

Vietnam is emerging as one of the best destinations for foreign investors and is generally seen as one of the world’s most promising frontier markets as reform allows underlying demographic, social and cultural forces to come into their own as powerful growth drivers. “Vietnam generally is attractive and it is not time to exit the market,” said Dominic Scriven, Dragon Capital’s CEO.

Earlier this year, Dragon Capital’s Vietnam Enterprise Investments Limited (VEIL) and Vietnam Growth Fund Limited (VGF) were the object of attention from VR Capital, a Moscow-based fund manager which pushed winding up resolutions. Their shareholders, however, voted to continue with the fund.  

VDF is Dragon Capital’s third equity fund. It is a closed-ended, incorporated in Bermuda and listed on the Irish Stock Exchange. Launched in 2005. The fund is the first structured vehicle to give Japanese investors the opportunity to participate in Vietnam’s growth trajectory.

According to State Bank statistics, net flows of foreign portfolio investment into Vietnam reached $1.29 billion in the first quarter  and $510 million in the second quarter of this year, bringing the total first half to around $1.8 billion.