Jun 24, 2018 / 08:10

New capital inflows are targeting Vietnam

New foreign investments into Vietnam through the initial public offerings (IPOs) of both state-owned and private enterprises have helped Vietnam continuously have a net foreign inflow to date this year despite adverse impacts from the global market.

Despite an interest rate hike of the US Federal Reserve (Fed) and a correction in Vietnam’s stock market recently, Chairman of State Securities Commission (SSC) Tran Van Dung said that the foreign inflows in Vietnam to date this year have shown positive movements in general.
Dung Quat Oil Refinery earned $243.9 million from IPO early this year
Dung Quat Oil Refinery earned $243.9 million from IPO early this year

Dung cited SSC’s estimates as saying that except for February 2018 when foreign investors net withdrew about US$32 million, January and March 2018 both recorded net buying of foreign investors with respectively US$670 million and US$270 million. The net buying value has increased recently to US$617 million in April 2018 and over US$700 million in May 2018.
Success of IPOs
According to SSC, besides the investment in Vietnam’s bond market with value estimated at VND1.3 trillion (US$57 million) by the end of May, foreign investors has been also poured a significant amount into corporate bonds of Vietnamese enterprises before their listing.
The IPOs of some large-sized enterprises such as Binh Son Refining and Petrochemical Co Ltd (BSR) - the operator of the sole oil refinery in the country, Vinhomes and Techcombank have attracted the enthusiastic participation of foreign investors.     
An initial equity offering of Vinhomes JSC, the residential property development subsidiary of Vingroup JSC, last month raised about US$1.35 billion in Vietnam’s biggest ever issue after being priced at the top of an indicative range.
State-owned Binh Son Refining and Petrochemical Co Ltd (BSR) also successfully divested roughly 8% of its State capital after 62 organizations and 561 individuals scrambled to snap up over 241.5 million BSR shares, at an average price of VND23,043 each. These shares represented 7.79% of the refinery operator’s chartered capital, with proceeds totaling VND5.56 trillion (US$243.9 million).
Comparative advantages 
According to Dung, foreign investors are seeing the diverse and open investment opportunities and potentials in Vietnam, in comparison with neighboring markets. For example, if pouring capital in Singapore, investors can hardly find a good opportunity to make profit as everything has grown to saturation level. Capital flows from Thailand and Malaysia are also pouring into Vietnam.
Vietnam has many comparative advantages which make it attractive to foreign investors, Dung said, explaining that the economy has maintained GDP growth of 6.5% and above. In many forecasts of international organizations, even the most cautious forecasts did not mention that GDP growth of Vietnam in the next five years would be less than 6.5%.
Besides, in the past, when mentioning about GDP growth, many people thought that Vietnam’s economy largely depended in petroleum exports, but the situation is now different as new growth factors have appeared. For example, there are many new large foreign direct investment (FDI) projects which bring high efficiency, such as the case of Samsung.
According to Dung, Samsung’s exports last year were estimated at US$55-56 billion. The company plans to open a new plant in Vietnam. This is one of the reasons why foreign funds made large withdrawals in many neighboring markets but modest ones in Vietnam, and the net inflowing trend is in general fairy clear.
In addition, he said, the golden population structure, competitive salary level paid to laborers and high potential real estate market are the factors that bring comparative advantages to Vietnam in attracting foreign capital.