Estimated reading time: 8 minutes
All financiers predict Vietnam economy and businesses booming; the stock market is already flooded with cash. Here is why and how to invest successfully.
As Vietnam re-opens so do the factories who have been relocating to Vietnam during 2 years of closure: access was given strictly to investors and experts in setting–up manufacturing production lines. In 2021, fund managers, financiers and investors based in Vietnam got the stock market insider information as per Bloomberg finance release march 2021 to its subscribers … Since the March reopening of Vietnam the word is out!
Vietnam economy is booming, capital investments are massive and stock markets will benefit
The recent geo strategic and political events in Asia are perfect to bring long term investments flows to Vietnam instead of China. In the 2022 opening-up, if Vietnam continues its policy of facilitating flows of stock & capital markets, services and people know-how, sustainable development can be forecast over the next decade.
For foreigners, the Vietnam stock market can be quite difficult. Private companies in Vietnam, for example, are very new to transparency, compliance and stakeholders best practices. Further, most companies listed are state-owned or with a strong legacy. Enforcement of financial statements declarations and auditing are still in infancy.
Investments in Vietnam economic boom is due to the new corporate strategies ‘China + 1’
Even Chinese companies like Xiaomi invest in Vietnam to circumvent USA embargo or taxes on imports from China, but also to supply Asian/Asean countries from Vietnam at preferential tax rates
- 3-years of strict lockdown in China is more than most manufacturing companies can suffer
- China US trade and technology fight: Apple, LG, Vestas, Xiaomi came in
- Europe and developed countries can not really on only-China supplier
- China + 1 country to source from: Vietnam? Indonesia?
- China Supply chain disruption
- China still closed
- Vietnam is clearly anti-Chinese expansionism in their paracels islands
- Vietnam wants to score higher marks on CSR, inclusion and Green development as they can clearly see China becoming unattractive due to pollution, minority rights and inclusion
Other factors in Asia fueling capital investments to Vietnam stock markets
Vietnam developed its infrastructure with ports and green energy (both solar and wind) as the example of Beijing pollution started to be experienced in Hanoi, Vietnam capital city.
- Hospitality industry had zero income for a long 2 years period 2020-2021 Vietnam lockdown: Mergers and acquisitions are going strong
- Real estate rental costs have been down -30% due to bankruptcies
- Myanmar military coup stopped à 7-year period of continuous investment, now investment money is flowing into Vietnam
- Vietnam Covid19 2020-2021: Top of the World Covid fight for a 100 Mio people
- Vaccination efficiency from laggard to best-in-class in à 3-month catch-up
- Vietnam can accommodate smaller production quantity
- Vietnamese craftsmanship skills are higher than Chinese
- … and of course inflation on salaries are at bay with 1 Mio new young educated workers hitting the job market every year.
The Vietnamese government opportunistic business growth support
Vietnam authorities showed strong management skills, vision and resilience in the 2 years fighting Covid which attracted foreign investments for business growth:
- reporting no deaths in 2020, and still opened to business
- in 2021, despite a defective provision for vaccines stocks, when overwhelmed by the delta and Omicron variant, starting late September, the vaccination campaign was over in November, thus minimizing death ‘for a country of 100 MIo inhabitants and 1300km of border with China’ as per world press.
Why it is not that easy to invest in Vietnam stock markets
Here are a few reminders of why investing in the Vietnam stock markets are still unpredictable as the teenager it is:
- Private enterprises laws started in 2003 and revised in 2008, just 14-years old
- Most companies listed are state-owned or with a strong legacy
- Vietnam is a communist country where politics is not dissociated from the economy
- private companies are very new to transparency, compliance and stakeholders best practices
- Insider information trading is not illegal (stock manipulation is as per recent arrest of FLC CEO)
- Enforcement of financial statements declarations and auditing are still in infancy.
Vietnam stock exchange financial information and transparency is very variable
You can then understand investing in Vietnam stock markets is a specialist sector. Most of the times, professional investors and fund managers will look at 3 parameters:
- Audited accounts and annex investment and business diversification
- Team organization and adaptability to shifting market conditions intrinsic to any young and booming country
- CEO ethics and personal life and connections… this one requires experience
Vietnam Businesses growth have various agendas for their stock market value
Of course, since opened on July 20, 2000, and had its first trading session on July 28, 2000, with 2 listed companies and 6 security company members, today 400 stocks are traded and some companies have CEO and management teams with Ethics | Brain | Energy.
When you are a large state-owned company ‘too big to fail’ like Vietcombank, or a profitable private monopoly like Vinamilk, a newcomer in search of capital for new developments or look for capital to back-up and existing booming growth: your vision of shareholders profits or dividends are dependent on the CEO skills and vision… provided they match your investor agenda beyond the annual report announcements.
But more importantly as a young economy under capitalized -banks loans are mostly backed by land and real estate assets as collateral.
In other words, self financing, SME and private equity is king and for most promising Private Equity (PE) companies not listed on the stock exchange. This is where fund managers get access and make the biggest returns.
You can also read Work Permit, WP exemptions and TRC Temporary Resident cards
Monitor reputations of stock exchange listed companies and CEOs
Note that contrary to the Western countries stockbrokers are salesmen, their advice for stock purchase are attached to their Ethics and experience, which can be very variable from one to the other broker within the same firm.
Do your own research, street smarts, corporate figures and history, employees of the company you plan to purchase, compare stock advice between brokers etc…
Fund managers are expert at that as they have followed successful CEOs and their business relationships and ethics closely.
Investing in Vietnam stocks is clearly reserved to professionals
Opening an investor’s account is easy and fast. Vietnam and local brokers adre more than eager to help inflow of capital and commissions are good for the country.
More than ever the Asian adage is valid ‘it is not WHAT you know, but WHO you know that is important’
Managing the short, medium and long term exposure
More than in any country, investor’s pair trading ‘Risk/Reward’ can be volatile from 5% (bank interest rates) to 30%+ a year aimed by PE fund managers; if you are ready to consider a wide range of investments.
Not all are listed and regulated, just because the stock market is in its infancy. That is where shrewd investors skills pair with notaries and lawyers… knowing that in a 7%/year average growth rate in the past 20-years the above average businesses generate 15% and the smart visionaries deliver above 30% by selling mature business or leveraging capital.
The trends is there regardless of Vietnam stock market volatility
In Vietnam 5-year is a long term view!
There are now index funds by companies like Prudential or investment funds index issued by Dragon Capital or VinaCapital the pioneer resident investors in the Vietnam stock markets.
So what is the ‘Risk/returns’ you can expect over 5-year:
Knowing that the bond markets ‘bank interests on deposit is around 5%’ the economy in general is growing +7% the fund managers targeting the best-in class large companies on the stack exchange are aiming at 15-to-20%/year over à 5-year period including volatility and the premium risk of developing country.
Private Equity is higher but it is not for the faint at heart as professional investors aim higher returns in the range of 30%/year and above.
Why Vietnam investment fund managers are confident: you can benefit their skills
Why should you trust the fund managers? Mekong, Dragon, Vinacapital for the pioneer and most famous?
Most of their founders and team have been established in Vietnam since the start, with their Vietnamese family and home in Vietnam. But more importantly, the founders have invested their own money into the funds, some private equity and sometimes own some personal businesses in Vietnam. They source, cook and eat what they serve to their customers-investors.
Some keys for success is:
- Experience in people and CEOs
- a network of informants
- capital to accompany the star players
- and access to shares or bonds funding
- but also the hindsight of ‘the future of management’ to help apply to those Vietnam investee: HR, management software, Digital Marketing latest technologies
What I call ‘managing a East Asia business with the help of a crystal ball coming from the West’.
Weirdly enough every year the Canada Chamber of Commerce arrange just after Tet lunar new year a seminar gather the finest long-term Experts business residents: lawyers, market research, investment fund managers for a prospective of what a Vietnam, a developing country -deep into the secondary manufacturing sector- can expect as a path to access the status of a developed country.
CONCLUSION The whole world of finance wants you to be successful
Sovereign funds, Private Fund managers, pension funds, index funds, PE listings, Old Public companies behave, joint ventures get internal boost by foreign expertise and market growth experience… They all contribute in pushing your investment up, as last Vinacapital start-ups meeting 30-jun-2022 attracting a delegation of investors from Germany, Austria, and Switzerland led by Dr. Philipp Rösler.
Over the 20-years time has polished the market to make it attractive.
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