A capital market with a new “attractive force”

So what exactly makes Vietnam’s capital market so attractive?

The Investment Opportunities in Vietnam and Myanmar Conference recently organised by VPBS and Bloomberg in Singapore attracted more than 150 foreign investors, including several investment funds, banks and financial institutions such as Franklin Templeton, EastSpring Investments, Bank of Tokyo - Mitsubishi UFJ, IFC, UOB Asset Management, Fullerton Fund Management, ING, PIMCO Asia, Temasek Holdings, Duxton Asset Management and Daiwa Asset Management Singapore, and many others.

The common sentiment among seasoned foreign investors is that the Vietnamese capital market has an advantage in terms of offering more investment opportunities compared to its neighbours. These other markets are facing capital withdrawals and divestments due to unstable macroeconomic conditions that are the result of non-economic factors. It is the nature of global capital to regularly flow from region to region, and while divestments occur within some markets, inevitably it will demand alternative investments in other markets.

These movements, coupled with steady growth, sustainable macroeconomic conditions, well-controlled inflation and a stable exchange rate are now creating what I call a new attractive force in the Vietnamese capital market in the eyes of foreign investors.

What are some of their concerns?

In addition to concerns about the effectiveness of the legal framework and instruments to protect minority shareholders, I also hear foreign investors cite their earlier failures in the Vietnamese capital market during 2007-2008. VPBS has learned, however, that the failure in their past investments was due mainly to their entering the market when prices were high, followed thereafter by unfavourable macroeconomic conditions. Then, when the market adjusted, they were faced with disadvantages. The macroeconomics and the capital market, however, are constantly changing and these movements have presented an entirely different landscape compared to the past. Macroeconomics have kept pace with both sustainable growth and a stronger foundation. Also, capital market developments have brought new investment opportunities and we are now seeing prices at attractive levels that are drawing international investors into the market.

There are two other areas that concern investors about Vietnam. The first is the high rate of non-performing loans (NPLs) in the banking system. But the government has taken substantive steps to address this. It has passed Circular 02, which forces banks to classify NPLs more strictly. It also set up the Vietnam Asset Management Company (VAMC) to purchase NPLs from banks and to create liquidity for increased lending. This is working well and the VAMC is now developing plans for disposing of both the NPLs and the collateral backing them.

The second area of concern is the inefficiency of state-owned enterprises (SOEs). The prime minister has taken very definitive actions in this regard. He has forced SOEs to divest from non-core businesses where they have no business expertise and he has significantly increased the pace of privatising SOEs. There is of course still work to be done in both of these areas, but investors can see that the government is serious in addressing these problems and making measurable progress. Consequently, investors are encouraged about the future.

With the assessment that the Vietnamese capital market has many opportunities as well as huge potential, did you note on the sidelines of the conference any specific investment agreements or arrangements that foreign investors intend to execute in Vietnam in the near future?

Besides the main conference, the organisers also set aside ample space for both investment funds and financial institutions from around the world to learn more about investment opportunities in Vietnam. VPBS took a leadership role in providing macro, industry and company-specific information. Foreign investors not only showed great interest in Vietnam’s capital market, but also initiated actions to prepare investment plans. Some of the investment plans have already been agreed upon by the parties. It is likely, therefore, that Vietnam’s capital market will receive more positive signals from foreign investors.

Why did VPBS and Bloomberg specifically hold the conference on investment opportunities in Vietnam and Myanmar?

Foreign investors are interested in getting to know more about investment opportunities in Myanmar because it is carrying out a series of important reforms. So the organisers set out to help investors recognise and compare the various investment opportunities offered by these two high-potential markets. VPBS is in the process of opening a representative office in Myanmar. So one of our objectives at the conference was to send a message to the 150 representatives of the investment funds and financial institutions that VPBS and its partners are well-positioned to bridge the gap and help investors implement their investment plans in Vietnam and Myanmar.

We understand at VPBS that foreign investors need to take timely and decisive action with their investment plans for the Vietnamese market. So we strive to constantly improve the quality of our analyses and diversify our investment products. In fact, we have distinguished ourselves with a long and consistent track record of providing valuable and vital market information on a timely basis to our local and foreign investors. Our efforts have provided a trusted and dependable channel of accurate and current information that enables investors to make sound and rewarding investments in Vietnam.  We are, after all, in a capital market with an undeniable attractive force.