Strategic investors manage to stay ahead of the curve

January 08, 2013 | 16:10

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Strategic foreign investors played a leading role in Vietnam’s business arena last year as they hunted valued partnerships that leverage their business expertise.

According to statistics compiled by VIR, in 2012’s first 10 months, the total net foreign indirect investment (FII) inflows to Vietnam hit $1.3 billion. The figure was derived from indirect investment in the stock market or outside, including mergers and acquisitions (M&A) deals and foreign bonds.

From November 1 to December 15, 2012 net FII flows into the market increased by $200 million, excluding many M&A deals of unlisted companies such as Thailand-based Siam Cement Group spending 7.2 billion baht ($235 million) to buy a 85 per cent stake in Prime Group, a cement corporation from Indonesia purchasing Thang Long Cement and the Refrigeration Electrical Engineering Corporation (REE) issued $25 million in convertible bonds to foreign investors. If these deals are included, net FII inflows to Vietnam in 2012 could reach $1.9 to $2 billion.

Statistics of such deals showed an increase in the participation of strategic investors, rather than financial investors.

State Securities Commission (SSC) chairman Vu Bang said that this was a positive trend for the stock market and enterprises. “While financial investors sell their financial assets at low prices, strategic investors, operating in the same sector and value chain, have seen the long-term value of Vietnamese enterprises,” Bang said. “The participation of such strategic investors will help businesses achieve more stable operation and take advantage of more support from strategic partners. Domestic investors should evaluate companies in the long term.”

Aside from the Siam Cement Group deal, Japan’s Sumitomo Life Insurance Company purchased 18 per cent of Bao Viet Holdings from HSBC at $340 million and Japan’s Bank of Tokyo-Mitsubishi UFJ bought a 20 per cent stake in Vietinbank, worth $743 million. Whether or not these two large acquisitions had increased investment inflows to Vietnam, the buyers are companies operating in the same field, which promises more support from new strategic investors for BaoViet and Vietinbank.

The purchase price is higher than the market price for Bao Viet’s shares, reflecting that Sumitomo Life highly valued Bao Viet. In the case of Prime Group, though highly rated by two foreign financial investment funds, its share price only increased after the deal with Siam Cement was secured.