Smart money ready for future profits

VinaCapital Group’s chairman Horst F. Geicke shared about the opportunities foreign investors should be looking for in 2010 and beyond.

Foreign direct investment registration and foreign portfolio inflows have dropped considerably in 2009. Can Vietnam regain the investment momentum lost after 2008?

Vietnam’s economic performance in second and third quarters of 2009 has been remarkable, including the recovery of the capital markets. But it’s true that foreign investors have been largely absent from the market, buying only about USD36 million in shares. This is not the case for countries like Indonesia and Thailand, so we could say that Vietnam has temporarily lost its shimmer in the eyes of foreign investors. However, I believe this downturn will not last.

After the domestic crisis in early 2008 sunk the VNIndex to under 400 points, the market briefly recovered to 600 points in mid-2008 before the global crisis took hold and the index fell to a low of 235 in February 2009. With the country’s recent economic rebound, the market is once again at 600 points.

This type of turbulence always challenges foreign investors and has people rethinking their strategies. For VinaCapital, our view on the market here has not changed even during the recent turbulent times.

How should Vietnam approach foreign investors now? Is enough being done to attract investors that seem to have begun looking elsewhere?

One very positive sign is that during this volatile period, Vietnam’s government has managed economic policy with a notable degree of flexibility and competence. It is not often that a country can emerge from two full-blown economic crises in the space of 12 months to record 5 per cent gross domestic product growth and world-beating stock market gains. Vietnam’s economic resilience in 2009 has been nothing short of remarkable.

This will boost the confidence of foreign investors. That Vietnam experienced great volatility during the 2008 financial crisis was essentially unavoidable. How the government managed to stabilise the economy is what will garner attention, and this is something that should be explained and promoted to foreign investors as much as possible.

Among the positive press so far: HSBC in September predicted gross domestic product (GDP) growth in 2010 would be 6.8 per cent, and UK Trade & Investment for the second year running has Vietnam at the top of its non-BRIC ‘priority markets’ for global investors over the next five years. So people are taking notice.

VinaCapital will continue to work hard at promoting Vietnam. We have played an active role for six years in communicating the ‘Vietnam story’ to investors around the world. At venues like the World Economic Forum, Vietnam’s presence has been strengthened in part by VinaCapital’s efforts as a ‘commercial ambassador,’ bringing foreign investors and the country’s top corporate leaders together.

What are some of the main messages VinaCapital is delivering at its investor conference? What can you share about Vietnam’s current investment environment?

Above all, we believe that Vietnam is one of the top emerging markets in the world today. However, even as the dark clouds clear from the economy, events of the past two years have taught us all valuable lessons in preparing for the next rainy day.

Vietnam has great prospects, but at the corporate level there will be winners and losers. Proper asset allocation and risk management will be crucial to avoid unnecessary losses if the market experiences another unexpected downturn. We should manage our expectations and not encourage a return to the over-exuberance of 2006-07.

Identifying the winning sectors is not so difficult. But finding the winning companies and opportunities within these sectors is more challenging. The driving force in the domestic economy is urbanisation and the growing middle-class consumer base with its increasing demand for improved services and more modern living and shopping spaces.

Residential housing and retail facilities, urban infrastructure, consumer goods, healthcare and financial services are all areas that will develop rapidly. These sectors are relatively easy to identify, as they are common to many emerging markets.