Overseas money ready to make splash

Japan’s Capital Partners  was considering doubling its investment in Vietnam to $600 million, said Capital Partners Vietnam’s director Le The Binh. Binh said that figure could rise to $1 billion “if the conditions are adequate”. One of the biggest Japanese institutions investing in Vietnam, Capital Partners has invested $300 million in this market since 2005 via a number of investment funds managed by Vietnam-based fund management company Dragon Capital.

“Vietnam’s high-potential industries like food and beverage, banks, hotels, hospitals and manufacturing may attract our company’s investors. Capital Partners Group is ready to talk with Vietnamese companies who want to raise money from Japan, and prefers the deals whose size are about the tune of VND 2 trillion ($100 million) each or more,” he said.

However, Binh stressed that Capital Partners was still closely watching macroeconomic improvements before executing its plan. “Despite encouraging signs of cooling inflation and the likelihood of stable exchange rates in the first few months of 2012, concerns remain.”

“Inflation in Vietnam remains extraordinarily high and has been a stinging problem for several years. The situation has only improved in recent months. The process must be long-lasting enough to appease investors.

“Meanwhile, the trade deficit problem, which is one of the reasons behind domestic currency devaluations, remains unresolved. The trade deficit has risen for several years but Vietnam has not yet successfully built a globally competitive industry which can help to resolve the problem,” Binh added.

Lotus Investment Management Company (LotusIMC), a small firm raising funds from Japanese and managing Lotus-Mekong River Equity fund of over VND330 billion ($15.9 million) in net asset value (NAV), is also targeting a business expansion.

LotusIMC CEO Nguyen Duc Tai, said he his clients had invested more since early in the year after some redemptions from Vietnam because of the collapse of the local market and Japan’s tsunami last year. Tai said he was hoping for an expansion of the firm’s existing fund and the establishment of a new fund this year.

Being a small, flexible company, LotusIMC is that rare beast - a fund management company that made a profit last year. The company posted after-tax profit of about VND3.5  billion ($168,000), while NAV per share of its fund is 9 per cent higher than VN-Index and 50 per cent higher than HNX-Index in VND terms since the fund launch in late 2009 until now. “2011 was a wonderful year to purchase equity securities at cheap price. The opportunity is still there this year as prices remain attractive,” Tai said.

However, Tai indicated that the return of investors to date remained very modest, with Japanese investors still proving concerned after Vietnam’s market downturn over the last two years.
He added there was an increasing lack of quality enterprises on the Vietnamese stock market, while the room for foreigners in existing good-quality enterprises was drying out. “We need quality enterprises and not a rising trend stock market.”

Meanwhile, sources at major brokerages Saigon Securities Inc. and Thang Long Securities indicated there has been a significant increase in the number of foreign funds opening trading accounts in their firms recently.

The source at Thang Long said some 10 new foreign funds had opened accounts or had made approaches about opening accounts in the firm. Those funds came from Hong Kong, Singapore and notably European nations.

Vietnamese market participants were also excited by the news that large American fund iShares Funds had filed paperwork with the U.S Securities and Exchange Commission for a fund investing in Vietnam known as iShares MSCI Vietnam Investable Market Index Fund.

But the source at Thang Long stressed: “The important thing is those funds’ actual disbursement. They can plan to place huge money amounts in Vietnam but their actual disbursement depends on many factors.”