Vietnam, With 49 Stocks, Attracts Investors to `Emerging China'
By Darren Boey
Sept. 22 (Bloomberg) -- Vietnamese stocks are Asia's best performers this year and the International Monetary Fund's chief economist is touting the country as an ``emerging China.''
International investors, who have had too few stocks to select from, may soon gain choices in Vietnam. Companies are listing as the communist nation expands its two-decade-long move to a capitalist system. Entry into the World Trade Organization this year may encourage companies to follow the lead of Intel Corp. and Ford Motor Co. and invest in Vietnam.
The stock exchange, the six-year-old Ho Chi Minh City Securities Trading Center, lists 49 stocks with a market value of $3.1 billion, according to Vietcombank Securities Co. Neighboring Thailand has 485 listings with a value of $132.3 billion.
``As more companies list on the stock market, I'd expect interest in Vietnam, underpinned by strong growth and foreign direct investment flows, to steadily increase,'' said Brad Aham, who manages the $1.7 billion SSgA Emerging Markets Fund at State Street Global Advisors in Boston.
An average of just $6.6 million worth of Vietnamese shares traded daily in the past three months, compared with $314 million in Thailand and $3.2 billion in Hong Kong, Bloomberg data show.
The Vietnam Stock Index has surged 66 percent this year in dollar terms, the most of 413 Asian indexes tracked by Bloomberg. Chinese indexes are the next-best performers.
Saigon Thuong Tin Commercial Joint-Stock Bank, known as Sacombank, in July became the first lender to trade on the stock exchange, raising the market's value by 50 percent. Bank for Foreign Trade of Vietnam will sell shares next year, followed by Mekong Delta Housing Bank, according to Tran Dac Sinh, director of the Trading Center.
The Next China?
The stock market started in July 2000 with just two listed companies and a total value of 270 billion dong ($16.8 million).
The International Monetary Fund's Chief Economist Raghuram Rajan said at a Sept. 14 news conference in Singapore that Vietnam ``was considered by many to be the `emerging China,''' owing to its ``relatively strong rates of growth.''
The IMF forecasts 7.8 percent growth this year, the fastest of any developing Southeast Asian economy, according to the organization's Web site, while predicting China will grow 10 percent this year. Standard & Poor's this month raised Vietnam's credit rating to two levels below investment grade, citing the nation's economic growth potential and commitment to market- oriented policies.
`Critical Mass'
Christopher Wood, a strategist at CLSA Ltd., recommends investors buy into Vietnam.
``It's a very exciting story,'' Wood, voted the second-best Asian strategist in an Institutional Investor survey this year, said in an interview at a CLSA investor conference in Hong Kong last week. It featured a seminar on investing in Vietnam.
``In the next couple of years, we might see the Vietnamese stock market reach critical mass as more companies are listed,'' Wood said. ``The stock market program is finally coming to fruition.'' He recommends investors put 3 percent of an Asia- excluding-Japan portfolio in Vietnam.
At the moment, though, investing in the nation's stock market remains difficult for international investors, who typically seek companies with enough shares trading so that they can buy and sell without moving the stock price dramatically. By contrast with Vietnam, China has 1,381 listed companies in two markets, with a value of $650 billion.
``Vietnam is not on our radar screen at the moment because there isn't enough liquidity for us,'' said London-based Nick Timberlake, who manages the $221 million HSBC Global Emerging Markets Equity fund.
New Listings
Overseas investors are restricted to a 49 percent stake in companies listed on the Ho Chi Minh City bourse and a 30 percent holding in Sacombank. What's more, investors seeking Vietnamese stocks must do so through a securities company registered domestically and must have local currency bank accounts.
One avenue for foreign investors is through Vietnam funds incorporated outside the country, such as the $193 million Vietnam Growth Fund, which is based in the Cayman Islands, and the $96 million Vietnam Dragon Fund, based in Bermuda. Both are managed by Ho Chi Minh City-based Dragon Capital Management Ltd.
The number of targets on Vietnam's exchange is picking up as the government sells shares in state-controlled companies. Vietnam in the next four years plans to increase the value of its stock market to between 20 percent and 30 percent of gross domestic product from 6 percent, Tran from the Ho Chi Minh City Securities Trading Center said in August.
Foreign Investment
That would lift the stock market's value to as much as $24 billion, based on Sinh's estimate of GDP reaching $80 billion by 2010. Besides Bank for Foreign Trade and Mekong Delta Housing Bank, companies including Electricity of Vietnam and Vietnam Post & Telecommunications Corp. will sell shares by 2010, Sinh said. All the companies are government-owned.
The government, which has cut poverty in half since 1993, is aiming to move the country out of the ranks of the world's lower- income nations by 2010.
Intel, the world's biggest chipmaker, said this year it would invest as much as $605 million in a semiconductor test and assembly plant in the Ho Chi Minh City area, the biggest investment in Vietnam by a U.S. company. Ford, the second-biggest U.S. carmaker by sales, has invested $100 million in an assembly plant in the Hanoi area in the past decade.
Mark Mobius, who oversees about $30 billion in emerging market equities at Templeton Asset Management, said his funds are ready to pour money into Vietnam. Templeton owns an apartment complex in Hanoi.
``If we were to get more involved in Vietnam we would want a purer exposure'' through equities, Mobius said. ``Vietnam is still rather small and illiquid at this stage. However, as the market grows we will be interested in investing there.''
To contact the reporter on this story: Darren Boey in Hong Kong at dboey@bloomberg.net . |
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