Foreign Indirect Investment in Vietnam

Among foreign-owned investment funds operating in Vietnam, Prudential is considered the biggest fund with an investment capital of US$500 million. However, 65 per cent of the fund’s capital has been used to invest in Government bonds, and only 35 per cent, or US$175 million, has been used to invest in capital assets and the stock market.

 

Another fund, considered as one of the giant indirect investors in Vietnam, is the Vietnam Enterprise Investment Fund (VEIL) with a total capital of around US$486.9 million, which was calculated by late September 2006.

 

In terms of fund management, Dragon Capital is the company managing most investment funds, with a total investment capital of three funds under the company’s management reaching US$860.4 million. It is followed by Vinacapital with US$491.7 million.

 

Vietnam Opportunities Fund (VOF) is also a big fund, which has mobilised US$171 million, but it still has over US$86 million in cash, so the fund’s market value reached only US$102.4 million.

 

Foreign indirect investment funds are tempted to pour money into equitised enterprises and fledging stock market in Vietnam.

 

Over the past two years, the equitisation of State-owned enterprises has been promoted. More than 1,400 State-owned enterprises were equitised in 2004 and 2005, bringing the total number of equitised enterprises to 2,966 since 1992, when the equitisation process was first initiated.

 

However, these are small and medium-sized enterprises, as State capital in the companies accounted for just 12 per cent of total capital of State-owned enterprises, which need to be restructured. More than 700 State-owned enterprises are to be equitised in the coming years. As they are big enterprises, their equitisation will offer big opportunities and a fertile land for both Vietnamese and foreign investors.

 

By the end of 2006, the Vietnamese stock market has been small. Apart from 458 bonds and two fund certificates, only 193 enterprises were listed on the Ho Chi Minh City Securities Trading Centre (HSTC) and the Hanoi Securities Trading Centre (HASTC).

 

Therefore, total capitalised shares of the market reached around VND 220,000 billion, equal to US$13.8 billion, accounting for around 18 per cent of Vietnam’s GDP in 2006.

 

The listing of stocks of Vinamilk, the Taya Electric Wire and Cable Joint stock Company, the Saigon Commercial Joint stock Bank (Sacombank), the Asia Commercial Joint stock Bank (ACB) and good business results of listed enterprises have made the local stock market heat up.

 

In the year-end session of 2006, VN-Index at HSTC reached over 751 points, up by 146 per cent against that of early 2006 and exceeded the record high figure of 2000 in June 2006. Meanwhile, HASTC-Index at HASTC reached 243 points, up by 170 per cent against early 2006.

 

In the hope that Vietnam will soon equitise big enterprises such as Vinaphone and Mobiphone, or giant banks such as Vietcombank and BIDV, many foreign investors have been ready to pour their money into the Vietnamese market, alongside optimistic forecasts for a high and stable development tempo of the Vietnamese economy.