“Vietnam has its own attraction to international investors”

“Regarding investment capital flows into Vietnam, I think China is just one of many influencing factors, and Vietnam still has a unique, strong attraction to international investors,” Mr. Andy Ho,  Managing Director and Head of VinaCapital Investment, told VnEconomy.

“News that GDP will reach 7%”

Through economic indicators in the first 2 months of 2016, how does VinaCapital view Vietnam's economic picture in 2016?

In the first two months of the year, Vietnam's economy maintained its basic growth momentum, with strong consumption and moderate inflation throughout the recent Lunar New Year.

FDI investment grew well, the domestic currency was stable and the trade balance was in surplus. Vietnam's purchasing managers' index (PMI) surveyed and announced by Nikkei decreased slightly but was still above the average of 50 points, showing an improvement compared to the previous month.

Current policy foundations continue to be implemented and favorable macroeconomic conditions with strong progress in production, export and consumption will create a solid foundation for the economy to develop further.

In general, VinaCapital is optimistic about the quite promising economic picture in 2016. Sharing this assessment, the Prime Minister recently raised Vietnam's economic growth expectation this year from 6.7% to 7% and we think this goal is feasible.

Many experts and investors are concerned about the possibility of a "hard landing" of the Chinese economy. How do you view this possibility, and if that happens, how will it affect investment capital flows into markets like Vietnam?

Like many other investors, we are concerned about this possibility. The decline of China's economy will have an indirect impact on Vietnam through Vietnamese goods will have to compete more with cheap Chinese goods and the dong will also be under pressure to depreciate according to the Yuan.

However, regarding investment capital flows into Vietnam, I think that China is just one of many influencing factors and Vietnam still has a unique and strong attraction to international investors.

“Vietnamese stocks still have good prospects”

Recently, many foreign stock investment funds specializing in early markets have had a positive view of the Vietnamese stock market and announced plans to buy stocks in the Vietnamese market. As the leading large investment fund in Vietnam, how do you and VinaCapital personally view investment opportunities in the Vietnamese stock market in 2016? Which industries are most attractive to VinaCapital?

VinaCapital believes that the Vietnamese stock market still has good prospects thanks to the potential for corporate profit growth along with policy adjustments that help promote the reduction of State ownership and loosen room for foreign investors.

First, profits of listed companies continue to maintain an increase of about 8-10% in 2016 with good revenue growth in domestic consumption industries, credit growth is quite good, although it may be lower than the previous year, thanks to continued loosening of monetary policy, while profit margins still remain high due to input raw material prices remaining low and corporate income tax reduced in 2016.

The industries that we expect to achieve high profits in 2016 include essential consumption (food, beverages, Internet services), non-essential consumption (retail, phones, jewelry, garments), banking/insurance and export support industries (seaports, airports, industrial parks).

However, in terms of cash flow, the market will encounter some difficulties due to selling pressure from foreign investors when the US Federal Reserve (FED) continues to raise interest rates and the domestic currency continues to depreciate in 2016.

The profits of some businesses may be affected somewhat when having to compete with cheap Chinese goods in Vietnam's domestic market and export markets as well as the possibility that interest rates will increase in 2016.

However, the policy of loosening room for foreign investors and the continued divestment of State Capital Investment Corporation (SCIC) will be a big driving force to attract capital back to the market.

Currently, the State still holds a large number of shares in enterprises at the time of IPO, but this is only the first step of the equitization process. Recently, SCIC's promotion of divestment in post-equitized enterprises and listed enterprises, ceding control of the company to private sectors, has created great motivation for investors to continue to respond to this program.

Along with that, the room for foreign investors continues to be expanded, helping to attract a large amount of international investment capital to neutralize the general trend of withdrawing capital from emerging markets.

For VinaCapital, we are closely following the equitization program of state-owned enterprises and will participate in more appropriate opportunities in the near future, and also have high expectations for good quality listed and private companies operating in the fields of food - beverages, healthcare, education, production and consumption...

Don't worry too much

Currently, there are only 3 listed businesses that have increased room for foreign investors to 100%. The shareholders' meeting season is about to take place simultaneously. What do you expect that many businesses will ask for shareholders' opinions to expand room, and how will this impact the Vietnamese stock market?

The recent room opening partly comes from the State's motivation to reduce the ownership ratio in some unimportant industries and the State does not need to hold a high or dominant share ratio.

This also helps the State obtain revenue to help balance the Government's spending balance and create conditions for the Government to expand public investment. Relaxing room creates opportunities for international investors to increase their participation in good businesses, especially businesses that have run out of room. With new funds starting to enter the market, this is a good time to disburse funds.

Of course, VinaCapital hopes that more listed companies will propose to open room right at the upcoming shareholders' meeting, but depending on the strategy and process of each business, this can last a whole year.

In general, loosening room, especially for blue-chips like VNM, helps create conditions for new foreign indirect investment capital to flow into Vietnam, helps maintain growth for the VN-Index and increases market liquidity, helps neutralize the general flow of capital withdrawn from emerging and frontier markets like Vietnam, as well as helps balance the overall balance of payments to make the dong more stable.

Through contacts with foreign investors, how does VinaCapital perceive the opportunity to mobilize foreign capital into the Vietnamese market, and which stocks in Vietnam are foreign investors interested in?

There have been many concerns about investment capital flows into Vietnam due to changes in the world. But, as mentioned, we think overall it's not that worrying.

Vietnam is still attracting the attention of many investors with many strong economic, social, capital market development policies and especially the successful signing of important free trade agreements such as the Trans-Pacific Partnership Agreement (TPP) and the Vietnam - EU Free Trade Agreement (EVFTA).

When ratified and put into practice, these agreements will open the door to help not only exports but also other sectors of Vietnam access markets and capital flows on a global scale.

The interests of foreign investors are extremely diverse, but in general, what they need is a healthy, fully developed capital market to help domestic and foreign investors operate smoothly. The scale must be expanded and more and more good companies in diverse industries are listed for investors to easily choose.

Source: http://vneconomy.vn/