Experts talk up VN as investment destination

Friday, Sep 12, 2014 08:27

"Viet Nam is primarily in the hot zone for fast moving consumer goods with strong growth expected to continue".— Photo tinmoi
HCM CITY (Biz Hub) — Viet Nam, with its 90 million population and growing affluence, and more focused efforts to equitise State-owned enterprises and restructure banks, offers great opportunities for portfolio investors despite some hurdles, a seminar that opened in HCM City yesterday heard.

Georges Joseph Ghorra, an executive from the IFC, a World Bank arm, told the two-day Gateway to Vietnam: Rediscovering New Investment Opportunities that his institution "is convinced of the long-term growth prospects in Viet Nam."

He spoke about the country's "golden demographic structure" with an abundant workforce of 76 per cent of its population and a young and growing middle class with increasing disposable incomes.

Macroeconomic stability has been restored with single-digit inflation while the reform process continues, he pointed out.

The Vietnamese market is currently trading at attractive earnings multiples compared to other markets in Southeast Asia, he said, pointing out further that Moody's and S&P have upgraded the country's ratings respectively to B1 and BB-, indicating stable.

The financial market with the recapitalisation and consolidation of banks under way; the infrastructure sector including hydropower/renewable energy, waste treatment, and logistics; manufacturing; agribusiness; and services all offer investment opportunities, he said.

Doan Hansen of global management consultancy McKinsey & Company said with the rapid urbanisation, 10 million people are expected to move to urban areas by 2030, doubling the number of consuming households.

"Viet Nam is primarily in the hot zone for fast moving consumer goods with strong growth expected to continue," she said, asking, "Are you well positioned to meet the rapidly changing needs of Viet Nam's consumers, and how can you proactively support and benefit from the growing infrastructure needs?"

Labour cost is still low but so is productivity, she said.

"The country needs transition to manufacturing and exporting more complex and higher value products."

Ghorra listed Viet Nam's underdeveloped capital markets and cap on foreign ownership in listed companies (30 per cent for banks and 49 per cent for others) as the main challenges facing investors.

The slow pace of bank restructuring and SOE privatisation, underdeveloped infrastructure, and low competitiveness when the country joins free trade agreements are the other challenges, he said.

SOE restructuring

More than 430 SOEs were earmarked for equitisation in 2014-15, but in the first half of this year only 31 made initial public offerings.

According to stock brokerage Saigon Securities Inc – which is organising the seminar attended by around 400 participants — foreign investors' participation in those IPOs was insignificant, with only two of them, Viglacera and Cienco 4, attracting their interest.

Vo Tri Thanh, deputy director of the Central Institute for Economic Management, said it is more important that the assets of equitised companies are used efficiently than the number of equitising SOEs.

Valuation of the SOEs to be equitised is a challenging task, he added.

Alan Phan, managing director of Alan Phan Associates, said the valuations should be decided by the market. He supposed that the IPO of Vietnam Airlines would be made in a foreign stock market with underwriting by an international institution since it would encourage investors both in and outside Viet Nam because of the transparency norms there.

Vu Bang, chairman of the State Securities Commission, said the systems employed by the country's two stock exchanges in HCM City and Ha Noi and securities companies are capable of handling the IPOs of SOEs.

"It is regulated that equitised companies must list within a year after their IPOs, and when a SOE makes its equitisation plans, it must have a listing plan as well."

But he wants the time frame reduced, proposing to the Government that equitised companies should list or trade on UpCom not later than 60 days after their IPO to facilitate liquidity to attract investors. The Government is considering his recommendation.

Non-performing loans

Bad debts or non-performing loans also offer opportunities for foreign investors, experts told the seminar.

Nguyen Khac Hai, deputy CEO of SSI Asset Management Company, said the Vietnam Asset Management Company has bought VND50 trillion (US$2.38 billion) worth of debts from banks since it began operation over a year ago, but has yet to resell any of it.

Obstacles to reselling include a lack of clarity on how to value the debts and how foreign investors can buy them. — vns

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