Thai players solidify position as top investor

Thai financial powerhouse SCBX last week announced its acquisition of Home Credit Vietnam Finance, in a deal valued at approximately $865 million. The move aligns with the overarching strategy of SCBX in seeking robust growth opportunities in neighbouring countries.

Home Credit Vietnam Finance logo

Specifically, SCBX subsidiary Siam Commercial Bank will acquire all shares of Home Credit Vietnam from the Netherlands-based Home Credit. The transaction is scheduled for completion by mid-2025.

Home Credit Vietnam, established in 2008, stands as Vietnam’s second-largest consumer finance company, boasting a significant footprint. With a vast network of 14,000 point-of-sale locations, the company has served 15 million customers.

“Amid an anticipated population decline in Thailand, the financial sector faces heightened competition, prompting key players to diversify their portfolios and expand beyond national borders. Vietnam, with its burgeoning economy and youthful population, presents an attractive landscape for growth,” the company said.

SCBX CEO Arthid Nanthawithaya said, “This strategic acquisition strengthens our presence in the high-growth ASEAN market. It is the beginning of our expansion into Vietnam and brings a 15-million customer base, 14,000 point-of-sale locations, and an experienced management team comprising both European and Vietnamese members.”

According to Nikkei Asia, SCBX had faced competition from rival Kasikornbank (Kbank), which had also expressed interest in buying Home Credit Vietnam.

“SCBX’s successful bid underscores its commitment to expanding its footprint and leveraging growth opportunities in the dynamic Southeast Asian market,” the news outlet said.

Meanwhile, Kbank has set its sights on acquiring more than 8.4 million Vietnamese customers and injecting over $1 billion into Vietnam by 2027. Chairman Pipit Aneaknithi made the announcement late last year, outlining that the majority of the investment, a substantial $735 million, was earmarked for banking operations.

“The remaining funds will be allocated to KBank’s two subsidiaries in Vietnam – the investment fund KVision ($336 million) and the technology company KBTG ($7 million). Vietnam is strategically positioned as a crucial point for our development in the Southeast Asian region,” he added.

With its advantage of a young population and a considerable number of engineering graduates, Vietnam holds the potential to deeply integrate into the global supply chain, Aneaknithi explained. Coupled with government policies steering the economy in the right direction, it makes Vietnam a crucial part of Kbank’s regional expansion.

Establishing supremacy

Central Group, another Thai giant, is strategically targeting Vietnam due to cultural similarities, consumer behaviour alignment, and an established retail infrastructure through its subsidiary Central Retail, as outlined in the company’s February announcement regarding establishment of a legal entity in Vietnam through real estate arm Central Pattana.

The newly established entity, named CPN Global, will primarily operate in the retail real estate sector.

Central Retail is poised to expand its presence significantly in Vietnam with a substantial investment of over $3 billion, affirming its ambitious foray into the country’s flourishing retail real estate market. Yet, with Southeast Asia’s retail real estate sector attracting major players like Lotte, AEON, Vincom Retail, and THACO, the Thai giant anticipates formidable challenges ahead.

Meanwhile, the investment of ThaiBev in Saigon Beer-Alcohol-Beverage Corporation (SABECO) is driven by a long-term vision, aiming to establish supremacy in the Vietnamese beer market as a strategic foothold for broader expansion into the Southeast Asian region despite market volatility.

SSI Research exercises caution when contemplating SABECO’s trajectory for 2024, acknowledging potential influences from both stricter regulations on drink-driving and a potential reduction in consumer incomes.

Drawing insights from China’s experience, where stringent driving laws effective since 2011 significantly slowed beer consumption, it posits that similar strict regulations implemented in Vietnam since 2020 will play a pivotal role in decelerating beer consumption growth.

However, SABECO reported a substantial market share gain in the first nine months of 2023, capitalising on its competitive edge in the mainstream segment as consumers tightened their spending, shifting from premium to mainstream products.

“We expect this trend to persist into 2024. The more favourable malt price (down by 17 per cent) in 2024 presents a significant opportunity, as SABECO is poised to lock in material prices over the next nine months, from August to September 2024,” SSI said.

Similarly, WHA Group, a Thai developer specialising in industrial estates, logistics facilities, industrial utilities, and power, is actively extending its footprint in Vietnam.

In addition to progressing with WHA Industrial Zone 1 Nghe An, the company plans to expand its footprint with three new industrial projects across an extensive land plot.

Stock selling pressure

“Thailand has solidified its position as Vietnam’s top ASEAN trading partner, boasting nearly $20 billion in total trade volume. The surge in Thai investments reflects a tripling of projects to 735, valued at over $14 billion, marking Thailand as the ninth-largest foreign investor in Vietnam,” said Thai Ambassador to Vietnam Nikorndej Balankura. “We anticipate a promising 2024 that envisions an elevated comprehensive strategic partnership, fostering strengthened bilateral ties and contributing to subregional and regional stability and prosperity.”

Beyond direct funding and acquisitions, a surge in Thai indirect investment is anticipated in Vietnam.

“Certain foreign-invested enterprises are exploring stock exchange listings in Vietnam, prompting the need to swiftly facilitate the listing of eligible businesses,” said Deputy Minister of Planning and Investment Nguyen Thi Bich Ngoc at an event in Hanoi last week.

Vietnam, considered a frontier market, has not garnered much attention from significant investment funds, an industry insider told VIR. “The domestic market itself, characterised by modest capitalisation, makes foreign companies less attractive. Consequently, the potential for listing on the Vietnamese stock market is not highly regarded,” he said.

Furthermore, in the final weeks of December, foreign investors resumed significant selling pressure in the Vietnam’s stock market, a trend attributed by some experts to the active participation of Thai investors.

Some Thai funds, including K Vietnam Equity Fund, Bualuang Vietnam Equity Fund, and United Vietnam Opportunity Fund, have actively participated in Vietnam’s equity market. However, noteworthy returns have not yet materialised.

According to SHS Securities, the selling pressure may stem from Thai investors, reacting to the upcoming changes in personal income tax regulations for foreign investments set to take effect in early 2024.

Specifically, the Thai Revenue Department issued rules last September as a guideline to assist tax officers in determining the personal income tax implications for foreign-sourced income brought into Thailand by Thai tax residents.

Previously, Thai residents only paid tax on foreign-source income if the income was brought to Thailand in the same calendar year. The move effectively eliminates the loophole, requiring any income earned overseas from employment, business, or property to be declared and taxed in the year the income is earned, regardless of when it enters Thailand, according to consultancy firm Dezan Shira & Associates.

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