While adding some sugar to her cup of coffee, an investor from Hong Kong asked the general manager of a real estate company about their project in Thu Thiem Area, District 2, HCMC. The general manager soon introduced her to the company’s potential projects as well as the recovery of the Vietnamese realty market.
This scene took place during the break time at Times Square on Nguyen Hue pedestrian street in HCMC. It was under the auspices of the Vietnam Access Day 2016 held by VCSC. The event has become the annual rendezvous for international investors and local businesses.
The scene was only a sketch of a picture during March 15 and 16 in the aforesaid building. A bigger picture was where speakers presented hot topics of Vietnam’s macro-economy, alongside the very specific opportunities where enterprises introduced their business activities to foreign investors.
Some 330 investors, 40% of which were foreign investors, came to the venue. Most of them were representatives of the organizations that had existing investments in Vietnam. Ngo Hoang Long, senior manager of research and analysis at VCSC, said the number of participant investors rose approximately 40% from last year.
On the sidelines of the event, Vu Quang Thinh, CEO of Vietnam Holding Asset Management Co., an investment fund from Switzerland, said this year welcomed investors from the U.S. and South Africa, who asked him about the economy of Vietnam and its future prospects, and paid much attention to Vietnam’s efforts in the TPP integration process.
A captivating destination
Foreign investors, only after having developed adequate faith in the growth potential of certain stocks, will disburse their cash. Still, this growth will depend on many factors, including macroeconomic situation. Therefore, the information from Aaron Batten, country economist of Asia Development Bank (ADB), drew considerable attention from many foreign investors. Batten highlighted positive changes since 2015 such as steady GDP growth, receding inflation, more flexible management of the exchange rate, and Vietnam’s membership of the TPP (the Trans-Pacific Partnership Agreement). He said Vietnam’s economy in general has moved away from the growth contracting territory and had many opportunities to grow in the future.
Meanwhile, Long said a multitude of foreign investors had asked about areas such as logistics and power generation this year. They believed these are the two sectors demonstrating great growth potential, in addition to consumer goods, real estate and banking which also attracted interest from investors like in previous years.
Therefore, the event featured a roundtable talk about banking, with the main topic of this year being Basel II, the next step in the process of restructuring the banking sector. When achieving the standards of Basel II, banks will achieve healthy financial situation and strengthened capital size. Representatives of the participant banks (which are in the list of 10 banks for pilot implementation of Basel II) said they will raise their capital and review the financial indicators to meet the standards of Basel II.
The 30 companies attending the event have reaped encouraging results. In separate rooms, investors directly met company CEOs, listening to their stories. Vietjet Air, for example, during a presentation, showed a video introducing their achievements and activities during the past year to investors in the Vietnam Access Day.
Thinh noted quite a few new things. The innovation of enterprises in each industry was mentioned there. This was particularly helpful because reading newspapers or getting information from their website were not enough to make an investment decision.
Present at the event, Vu Thi Thuan, chairwoman of the pharmaceutical company Traphaco, said she attended the event every year and tried to bring the best information to foreign investors. She said Traphaco is trying to promote the field of traditional medicine, a strong point of the company, because her company owns the plantations and stringently controls the quality of pharmaceutical ingredients, in the context that there are a variety of traditional medicines with unknown origins in the market.
The remaining issues
Currently, there are still several issues regarding the stock market of Vietnam that still concern foreign investors.
For example, as regards the macro-economy which was said to have achieved many positive changes, Batten believed there are still five risks to the economy in the coming time. Specifically, the chance of getting hit by the unstable global economy exists, given that Vietnam is a commodity exporter. The dependence on trade with China is also a risk, because the economy of the neighboring country is showing signs of decline. Foreign exchange reserves are shrinking after the central bank dealt with the exchange rate issue in 2015. The other two huge problems: bad debt has yet to be fully resolved, and reform of State-owned enterprises remains sluggish.
Investors are quite concerned when foreign ownership in many enterprises is still restricted. A great deal of investors present at the Vietnam Access Day are uneasy with the ownership limit. Investment funds interested in trading in such as the shares of The Gioi Di Dong, FPT, ACB or VNM either must buy at premiums to the market or sometimes unable to find supply in the stock. Also stock liquidity of multiple pharmaceutical firms which are very strong in Vietnam is very low, making investors hesitant.
Meanwhile, Long said many investors are interested in Vietnam’s logistics industry, which are well developed as a large number of foreign enterprises have been investing in them. However, there are not so many companies in the field of logistics on the bourse, thus limiting the choices for investors. The same happens with fast-moving consumer goods (FMCG), which drum up much interest but consumer “pure-plays” are few on the stock exchange.
Connections are the crux of the Vietnam Access Day, which has been a reoccurring aim over the years, Long remarked. Appropriate support from the authorities in changes of policies and mechanisms has helped investors access the market easier. However, due to delay in giving detailed guidance for the changes, it takes a longer time for these reforms to play out in reality.
“The destination of Vietnam will be truly attractive only if the shortcomings are faster remedied. And this is really necessary in the context that foreign investment funds are having an increasingly wide range of choices, especially in the current period of economic integration,” said Thinh.
By Thanh Thuong