11:09 | 24/07/2015 Investment
Vietnam is fully capable of utilising foreign portfolio investment (FPI), an important form of overseas investment in an economy, helping stimulate the financial market towards efficiency, transparency and expanded size, as well as helping improve corporate management quality and fostering economic relations.
Foreign investors at the investment promotion conference themed 'My Vietnam - Your Investment Destination' in New York on July 1
Large room for foreign portfolio investment
At the investment promotion conference themed 'My Vietnam - Your Investment Destination' held in New York on July 1, Vietnamese Minister of Finance Dinh Tien Dung talked about investment opportunities for foreign investors, saying that Vietnam is now emerging as a country with great potential for foreign investment as it boasts a favourable geographical location, political stability, and stable economic growth among others.
He noted that Vietnam posted an average economic growth rate of 6.4% in the past ten years and was listed in the group of three countries with highest economic growth rate in Asia. The minister added that there was large room for FPI activities as Vietnam's market capitalisation was US$46 billion, equivalent to 25% of GDP.
In addition, the recently expanded ownership limits and voting rights for foreign investors in listed enterprises on Vietnam's securities market are expected to open up new opportunities for foreign investors, he stated.
Chairman of the State Securities Commission Vu Bang said that the scale of Vietnam's stock market will rise sharply in the 2015-2020 period following the government's effort in boosting the equitisation of State-owned enterprises aligned with getting companies listed on the stock exchanges.
Along with the government's decision on raising foreign ownership limits for publicly-traded companies, the stock market will continue to be restructured by shortening the time to settle securities transactions, reducing registration procedures for foreign investors, and implementing a derivatives market among others, which will contribute to simulating Vietnam's stock market and capital market, Bang said.
Bang noted that these moves demonstrate the government's determination to upgrade Vietnam's stock market status to emerging market in order to attract international investors.
Founder and Chairman of WL Ross & Co. LLC Wilbur Louis Ross affirmed that Vietnam was an attractive destination for foreign investment, particularly investment in the stock market and equitised State-owned enterprises. He pointed out two factors for foreign investors to consider: the Vietnamese government's efforts to restructure the economy, particularly the restructuring of tax policy, and the increase of foreign ownership limits.
He noted that the real estate sector and sectors with advantages for export would develop strongly in the future and would be worth investing in. Wilbur L.Ross added that it was obvious that Vietnam had taken impressive economic growth steps and in his opinion, Vietnam was the safest country for investment in the world.
The view was shared by Philip Falcone from Harbinger Group, saying that he believed in the development of the economy with over 90 million people - the majority young people. After eight years, the multi-billion dollar project Ho Tram invested in by Harbinger Group in Vung Tau has proven its efficiency and would bring about benefits for parties involved, he said.
Senior Vice-President of Government Relations at Manulife Financial Corporation, Peter Levitt Wilkinson said Manulife first became present in Vietnam 16 years ago when it recognised Vietnam’s business environment with many advantages and the government's positive support for enterprises. He affirmed that Manulife would increase its investment in Vietnam in the coming time.
It can be seen that US FPI in Vietnam is currently too modest compared to the potential of US investors and compared to the capital absorption capacity of Vietnam market.
Creating extra motivation for FPI
The Vietnamese government has attempted to equitise State-owned enterprises and list them on the stock market and promoting the development of the private economic sector in a bid to attract FPI from the US and other countries.
Finance Minister Dinh Tien Dung affirmed that the Vietnamese government hoped that foreign investors, including US investors, would eye investment opportunities in Vietnam, particularly opportunities raised from the equitisation process and from the stock market.
He noted that the participation of foreign investors would create strong impacts on the Vietnam's stock market, making it more transparent, effective, and professional. Furthermore, foreign indirect investment would help domestic enterprises to grow and enhance their competitiveness.
To absorb foreign portfolio inflows, domestic firms should make every effort to strengthen corporate governance and risk management as well as enhance transparency and the publicity of information. At the same time, management agencies must improve their management and supervision over the market to ensure market stability and attract more FPI while limiting disadvantages arising.
Deputy General Director of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) Pham Quang Tung said BIDV was always ready to welcome investment from US financial institutions.
BIDV has built a plan to sell its shares to foreign investors with 10% of its chartered capital to be sold to a financial investor and 15%-20% of its chartered capital to be sold to a strategic investor, Tung stated. Through the sale of its shares to foreign investors, BIDV hoped to gradually reduce the proportion of ownership of State shareholders at BIDV to 65%.
Tung added that BIDV looked forward to a foreign strategic investor to assist the bank in implementing a model of optimal governance, risk management, product and service development and human resource development among others.
Similar to BIDV, a series of large State-owned enterprises attending the conference - Vietnam National Textile and Garment Group (Vinatex) and Vietnam National Coal and Mineral Industries Group (Vinacomin) and others - all wanted to seek foreign strategic investors and foreign indirect investment./.