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Investors Gaze Into The Crystal Ball

Investors Gaze Into The Crystal Ball

Want to know what foreign investors think of Vietnam's investment climate? More than 100 local and foreign bankers, investment fund managers and businesses who attended the Alternative Investments IQ Vietnam 2007 conference in Ho Chi Minh City last week helped provide some answers. Xuan Hoa reports.

Vietnam’s market return potentials is standing head and shoulders above the rest of the Asian pack.
Kuwait Asia Holdings Private Equity Division senior manager Waleed Alowaiyesh was one of many of the conference attendees to offer a robust vision of Vietnam’s advantages over its investment rivals.
“We are looking for opportunities to become a minor stake holder in local firms that are operating in the three hot sectors of manufacturing, IT and real estate,” Alowaiyesh said.
The conference was the first to have been held in the country that looked to identify sweet spots in the domestic market for fund managers such as Alowaiyesh to exploit.
Rounding off a hectic first day, Alowaiyesh held a fistful of business cards and proclaimed: “We will find the answer to our question on where opportunities are located amongst these cards.”
Gazing into the looking glass, BIDV-Vietnam Partners Investment Management (BVIM) general director Bradley Lalonde said his firm saw the biggest opportunities to make substantial returns laying in the bevy of state-owned enterprises that were to embark down the equitisation road.
However, Lalonde signaled his concern over the repeated delays of eagerly anticipated initial public offerings (IPOs) such as the Vietcombank issuance. Fund managers in Vietnam fear that further hold outs may decelerate investment flows into the market, a real worry for firms such as BVIM that has $90 million in funds from domestic investors and a further $300 million from offshore players waiting for the green light to jump into the fray.
In response to investors’ concerns, State Capital Investment Corporation deputy general director Le Song Lai revealed that a plan to equitise and list 71 large state-owned enterprises (SOEs) by 2010 had been adopted by the prime minister.
According to the Ministry of Finance’s assessment, only 44.4 per cent of SOEs are classified as Group A (i.e. profitable) businesses, 39.5 per cent as Group B, and 16.1 per cent as Group C and most of them are small-sized ones.
VinaCapital, which recently announced it had established an infrastructure development fund pushed the infrastructure agenda with middling success. VinaCapital Group co-founder and managing partner Don Lam said Vietnam needed approximately $140 billion between now and 2020 for public works and strategic opportunities lay in the government’s lack of access to significant funding.
“With finance-banking and construction-real estate, these are the three most exciting areas for us, for the next three months at least,” said Andy Ho, VinaCapital Group’s managing director.
However, a large number of Vietnamese business representatives at the forum’s debate opined that red hot industries such as IT products and services, retail, bio-tech and pharmaceuticals are where the high-end profits were hiding.

Are the fruits still sweet?
A buzz surrounded this year’s conference on the stock market’s prolonged “correction” and the market forecast downgrade by Merrill Lynch.
VinaCapital’s Don Lam said that the buzz was much ado about nothing.
“These past few months have been a challenging time for the stock markets. The VN Index peaked at 1,133 points in mid-March and dropped till now, however, the underlying fundamentals still strong,” he said.
PXP Vietnam Asset Management director Kevin Snowball said the continued focus on China and South East Asia would push the alternative investments in Vietnam considering the country as a hedge against a “China only” strategy.
In his message to PXP’s investors, Snowball said: “At 900 points by August this year, PXP estimates the VN Index to be on 22 times weighted average 2008 earnings. 1,200 points is achievable by year-end, particularly if the exchange reacts quickly to resolve the issues of trading technology and the delay of large SOE equitisation.”

Stumbling blocks to investment
However, Ernst & Young Vietnam partner Allanda McConnell rang alarm bells. “Vietnam can be both an enormous opportunity and a potential threat to any foreign investor,” she said.
Another problem that looms large on the horizon for first time investors in Vietnam is corruption. Vietnam ranked 111th out of 163 countries in 2006 based on the Corruption Perception Index and its rank of 160th out of 174 countries for ease of doing business is woefully short of where the country needs to be.
Templeton Asset Management Limited executive director Richard Piliero sits on the other side of the fence and is adamant that the financial market is on its way to substantial growth.
At the moment, corporate disclosure is still weak even during IPO stages and worse for OTC companies. Piliero said the over-the-counter market was still largely un-regulated and comprised the bulk of “listed” securities with no requirement for a display of full financials.
These are the operational challenges that are faced by stakeholders before and during the investment process in Vietnam.

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