Vietnam maturing into respected capital player

February 12, 2024 | 23:29
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Dragon Capital is heavily investing in Vietnam and has been ever-present in the country for three decades. In an exclusive interview, chairman Dominic Scriven shared insights with VIR’s Le Luu into the evolving Vietnamese capital market.

What are your reflections on the significance of the Year of the Dragon for your company, especially as you celebrate its 30th anniversary?

Vietnam maturing into respected capital player

The Year of the Dragon is extremely important for us because we are turning 30 years old this year.

We have 200 people in this company. As I meet every new employee to talk to them, I’m now meeting people who were born after we set up the company. I need to think about the future, about words like legacy, succession, responsibility, footprint, and so on. As we enter the new year, it’s time for those reflections.

Broadly speaking, 2023 was a better year for us, but still a difficult year. In our business, it’s all about keeping your investors, persuading them to stay with you, and finding new ones. Last year, while we found some new investors, some left, particularly foreign backers. So it was a challenging year commercially. But in terms of our performance, it was okay.

Everyone’s hoping that this year will be a recovery after last year. They hope that there’s going to be a stronger economy, more international demand, more jobs, more government spending, increased consumer confidence and a recovery in real estate. Most importantly, they hope that companies will make some profits after two years of zero profits. And that’s what we hope for them and for ourselves too.

Over the course of 30 years of operation, what do you think sets Dragon Capital apart from other firms?

The main definition of “being good’ in my business is whether we beat the target. The target is the index, and there are lots of different indices. For example, our clients have demands like “We want you to invest more successfully than the Vietnam index”. There are about five or six different indices for clients that we have, and our job is to outperform them all.

Another thing about our business is that it’s long term. If people want to invest for a week, for a month or two, they probably don’t need us. They can do that themselves. Those who want to invest for their children, their education, their pensions for their parents, their savings - those are the people who we can help. So we have to be responsible.

Being responsible in the long term means not chasing after profit today. It’s nice if you have profit today, but it’s really much more about avoiding disaster tomorrow. We have to have our eyes open today. But more importantly, we need to have our eyes, our ears, our smell, our taste, our touch and our feeling all alive to avoid disaster tomorrow.

What factors do you believe contributed to the surge in retail investors during the last few years, and how does Dragon Capital respond to the challenges arising from this trend?

There are a couple of factors that contribute to this. The explosion in retail investors during the pandemic happened because people were at home with nothing to do. Everyone had a smartphone, and governments everywhere threw money around. With these three factors together, everyone could put money in somewhere.

As they say, what goes up can come down. What’s our response to that? Firstly, technology means that individual investors have much more control over their future. More information gives more choices. That’s a very good thing. As we have to work in that environment, we have to provide additional information. That means we have to offer more. That’s one big trend, and that trend is not changing.

In the same way, all of us can cook food at home, but sometimes we need to go to a restaurant or look on YouTube for a recipe. Sometimes we can go to the pharmacy and buy medicine, but sometimes we need a doctor. There are times when people can benefit from a professional as they have training, time, experience, and responsibility. Investing is the same as anything - not everybody can invest their own money.

We can’t force people to come to us. For about 25 years, we mostly helped foreign funders. Our biggest investors are the governments of other countries in Europe and Asia and big foundations. But a few years ago, we began preparing to be able to help Vietnamese investors. That means thinking about what types of investment, and how we can help people.

One way is through funds. We have four funds for Vietnamese investors, which are the basic four that everybody should know about: equity growth, equity income, fixed income, and income plus.

In addition, we have exchange-traded funds, which are more modern. I don’t think the Vietnamese yet know much about those, but this type is very popular in the United States, Europe, and China.

We also have a very long-term platform, which is pensions, for individuals and also for companies.

Could you tell us about the impact of your first pension launch, which was also the first in Vietnam?

Launching the first pension fund in Vietnam was a mix of good aspects and challenges for us. We had to collaborate with the Ministry of Finance and the Ministry of Labour, Invalids, and Social Affairs to enhance regulations, incentives, and investment opportunities. Pensions are long-term commitments, often spanning 20 years, so our focus is on building sustainable customer service.

We’ve heavily invested in our technology platform to serve Vietnamese individuals, with about 100,000 account holders, of which 50,000 are active. However, this is still a small fraction of Vietnam’s 100 million population. Our aim is to improve access through our apps for individual and company investors, and put money into transparent administration to show investors the status of their investments.

Interestingly, we have about 35 people in our tech department. Technology is vital because we need custom solutions that aren’t available elsewhere. We’ve put around $10 million in tech, expecting this number to grow. Given our 20-year outlook, this investment, though substantial for three years, seems relatively small.

Can you reflect on the evolution of Vietnam’s capital markets over the last 30 years and your outlook for the next 30 years?

The last 30 years have been about establishing and building Vietnam’s markets. We’ve focused on introducing these markets to international investors, who are experienced in understanding equities, bonds, and market regulations. Looking ahead, we anticipate Vietnam maturing into a respected and professional player on the global capital market stage.

Vietnam is working to become a strong and respected player in the world’s financial markets. It’s like the country is growing up, moving from riding a bicycle to driving a car. Vietnam aims to be seen as an equal and professional in these markets, showing confidence and efficiency. Even though it’s still considered an emerging market, Vietnam is clearly making progress and heading towards a more significant role in global finance.

As the economy develops and interest rates decline, people earn less from deposits, prompting them to seek alternative funding in areas like property, bonds, equities, life insurance, and pensions. This trend is expected to grow in Vietnam, as seen in other countries. Although Vietnam boasts seven million securities accounts, with maybe three million active, this is still a small number considering Vietnam’s urban population. We anticipate a significant increase in active investors in the coming years.

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