|Investment funds from Singapore turn to Vietnam as global conditions remain volatile. (Source: VIR)
In the first half of 2019, investment funds from Singapore continued their quest for high-performing firms listed on Vietnam’s main bourses. Most recently, F&N Dairy Investments, the Singaporean subsidiary of tycoon Charoen Sirivadhanabhakdi, registered to buy 1 per cent of dairy firm Vinamilk between July 10 and August 8. At the same time, another big-name in the region – Platinum Victory of Jardine Matheson Group – wanted to purchase the same amount of shares between July 4 and August 2.
The two companies already have significant ownership at Vinamilk – F&N has 17.31 per cent and Platinum Victory 10.62 per cent. The latter might be the newcomer to this race, but they have shown some incredible buying powers: the investor was the sole buyer at Vinamilk’s share auction in 2017, taking up 3.3 per cent of the shares from Vietnam’s State Capital Investment Corporation (SCIC). Not stopping there, the firm continued to buy Vinamilk stock throughout 2018, becoming the firm’s second-largest investor from abroad after F&N.
Earlier in the year, Singapore’s sovereign wealth fund GIC Private Ltd. finally succeeded in buying shares at state-owned Vietcombank. The purchase was previously delayed due to different expectations on pricing. After two years of negotiation, the two sides finally agreed to shake hands, and GIC settled on 2.55 per cent of Vietcombank’s shares, instead of its original aim of 10 per cent.
Following the Vietcombank deal, GIC also injected more capital into conglomerate Masan Group, raising its stake from 8.98 to 10 per cent. The Singaporean wealth fund also boosted its stake to 5 per cent at digital technology firm VNG Corporation. In a recent interview, GIC chief investment officer Jeffrey Jaensubhakij acknowledged that the fund is boosting its presence in Vietnam due to escalating trade tensions around the world.
According to Jaensubhakij, Vietnam is poised to benefit from trade diversions from China, and both Chinese and American manufacturers are expected to shift production to Vietnam. This is why GIC has been active with its investments in the country, especially with high-profile companies. Besides Masan, Vietcombank, and VNG, GIC also has a significant stake in Vingroup’s real estate subsidiary Vinhomes.
At the Invest Asia 2019 conference held by Maybank Kim Eng in Singapore this May, investors also mentioned Vietnam as the top destination for regional capital flows. Strong GDP growth above 6 per cent, a young population with a booming middle class and robust consumption demand are considered the key growth catalysts for Vietnamese companies.
Singaporean investors are also excited to see many firms in Vietnam being put on sale, from state-owned enterprises (SOEs) to leading private companies. Vietnam also recently revised the list of businesses to be equitised or divested. According to this plan, at least 93 SOEs will put their shares on sale until the end of 2020 – including some major names such as Vietnam National Coal and Mineral Industries Group (Vinacomin), Vietnam Northern Food Corporation (VINAFOOD 1), Agribank, Vinacafé, MobiFone, Vietnam Post, and Vietnam National Chemical Group (Vinachem).
On the stock market, new products, such as government bond derivatives and covered warrants, also give Singaporean investors more chances to enter Vietnam. Moreover, from this June onwards, book building was finally made possible for SOEs, and they are now authorised to accept USD-denominated deposits for share auctions.
“Our clients are happy to see regulatory updates in Vietnam’s stock market this year, which shows that the country is making strong efforts to attract foreign investment,” said Jeffrey Goh, regional head of brokerage at Maybank Kim Eng (Singapore).
Despite the general enthusiasm, experts also pointed out that Vietnam’s capital market is in a lull due to there being no sudden spikes in macroeconomic factors. In the short term, global trade tensions might force Singaporean investors to adopt the “wait and see” approach, rather than disbursing the money at the moment.
Regarding state divestments and equitisations, many Singaporean investors feel that there is no standard procedure for these auctions, and practices vary from company to company. According to Vuong Duong, deputy managing director of VinaCapital, sometimes it is very hard for prospective investors to meet the SOEs’ executives or access corporate information in English. Details on the auction and pricing were also vague, which tires investors out.
The reason is that a number of executives at companies undergoing equitisation are not determined to see the auctions through – because these share sales mean that they are losing control at the firm. With this in mind, investors hope that Vietnam will tie the benefits and perks of these executives to the share auction process, as this practice can hopefully motivate them to let go of their control.
Jeffrey Goh from Maybank Kim Engsaid that he looks forward to the launch of intraday trading, as opposed to the current T+3 system in which payment for stocks is only settled three days after the order is made. “This delay caused great inconvenience to investors,” Goh told VIR. Moreover, current confusions regarding the level of foreign ownership at listed firms should also be cleared.
In fact, this is the main reason why Vietnam has yet to be upgraded to the “emerging market” status by Morgan Stanley Capital International. According to MSCI’s latest review published two months ago, the stock market in Vietnam has not given equal access to foreign investors, as company data is not always available in English and many companies still maintain restrictions on foreign ownership.
Other challenges can be technical – for example, similar to investors from other countries, Singaporean funds have yet to make notable investments in Vietnam’s latest financial products, such as covered warrants and derivative products for the VN30 Index. The reason is that international banks have not yet agreed to be custodians for these products.
Dao Phuc Tuong, investment manager at Singapore-based firm APS Asset Management, said that investors who wanted to enter Vietnam due to the trade war might have already done so in the first half of 2019. This means when the hype surrounding trade diversions is over, Vietnam might have to provide another compelling reason to draw in investors.
“In the first six months of 2019, many funds came to Vietnam because they saw this country as a safe haven among emerging or frontier markets. However, if there is no new investment story about Vietnam or the trade war cools down, they might halt their investments here,” said Tuong.