Last night I had dinner with an American guy who works at an investment firm here in Saigon. He's been in Vietnam for 5 years and it was interesting to get his perspective on prospects for Vietnam's rapid growth. His general message was "Things are getting better, but don't expect Vietnam to take off overnight." It seems like there are private equity groups who have launched funds and are hyping the market like crazy. The hype may be outstripping the reality, but then again it may catch up. Stay tuned.
Here's a Wall Street Journal article that appeared on May 24.
Vietnam Growth Lures Investors,
But Supply of Shares Is Limited
May 24, 2006; Page C12
Increasing numbers of foreign stock investors are struggling to gain exposure to Vietnam's fast-growing economy -- and that is spurring ideas on how to get it.
Demand for Vietnamese shares exceeds the limited supply. So investment companies and analysts are creating funds and suggesting that foreigners invest in companies that do significant business in Vietnam but list their shares elsewhere.
After several years of slow progress, Vietnam has been generating some buzz. Last month Vietnam's top leaders excused themselves from the ruling Communist Party's congress to shake hands and be photographed with a pillar of the capitalist world, Bill Gates. The Microsoft Corp. chairman was in the country to put in a good word for Vietnam's high-technology aspirations. It was a potent piece of public relations, following closely on the heels of Intel Corp.'s decision earlier in the year to build a $300 million semiconductor plant there. Indeed, Mr. Gates was given a rock star's reception in Hanoi.
Since then, the U.S. has agreed on a trade deal that opens the way for Hanoi to enter the World Trade Organization, marking a move that will further open the Vietnamese economy, which expanded 8.4% last year and is expected to grow more than 8% this year.
The problem for investors hoping to piggyback on Vietnam's expansion is that the country's capital market is tiny and too prone to speculative flurries to provide attractive, reliable returns. The Vietnam Stock Exchange index, for instance, comprises just 36 stocks with a combined market capitalization of about $1.8 billion. The index has almost doubled since February -- showing a symptom, analysts say, of a lot of money chasing too few assets.
"There's no doubt that Vietnam is a compelling story. But the question is how to get some exposure without being sucked into a bubble," says a U.K.-based fund manager.
Foreign money tends to be invested in funds managed by local specialists such as Dragon Capital, VinaCapital Investment Management, PXP Capital and Mekong Capital. In the short term, that trend looks set to continue. VinaCapital, for one, is opening a new technology-oriented fund to enable foreign investors to get some exposure to that potentially lucrative slice of the economy.
Louis Nguyen, managing director of VinaCapital's technology practice in Ho Chi Minh City, says the goal is to invest in Internet and technology companies that, under Vietnamese law, multinational players such as eBay Inc. or Yahoo Inc. will need to form a partnership with to set up in the country. He hopes to raise $20 million to $50 million for the fund but may increase the figure if there is demand.
"Two thirds of the fund is subscribed already, so we are pretty pleased with that," Mr. Nguyen says.
While VinaCapital's approach owes a partial debt to speculation on Vietnam's growth, Merrill Lynch & Co. believes it has come up with an alternative: investing in a basket of stocks with strong exposure to Vietnam's boom but traded on overseas markets -- including companies as diverse as Malaysian budget airline AirAsia, Singapore-listed consumer-goods-and-property company Fraser & Neave Ltd. and South Korea's SK Telecom Co., which owns 27.5% of Vietnamese mobile-phone network S-Fone.
"These probably represent a much less volatile, and more diversified, way to build exposure while we await the process of more profound capital market development," Merrill Lynch strategist Spencer White wrote in a research report this month.
Write to James Hookway at firstname.lastname@example.org