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Experts back Viet Nam as investment location

Update: June, 20/2014 - 08:40
As for the stock market, the VN Index rose to 562 at the end of May, up 11 per cent year-to-date. Last year's figure was 22 per cent. — Photo motthegioi

HCM CITY (VNS) — The Military Bank, listed on the HCM Stock Exchange as MBB, gives priority to investors interested in long-term partnerships, an official of the bank told participants at yesterday's Viet Nam Investment Forum held in HCM City.

Le Hai, the bank's deputy general director, took questions from foreign investors at the event held by Vietnam Investment Review, which included matters about corporate restructuring and business development strategies.

Other companies like Hoang Anh Gia Lai (HAG) and the Financing and Promoting Technology Corp. (FPT) attracted the interest of investors present at the event, an indication of the attractiveness of the country's stock market.

Speaking on Viet Nam's economic outlook, Don Lam, CEO of the asset management and real estate development firm VinaCapital, said that medium- and long-term economic prospects remained positive.

He noted that the banking system was making progress in its restructuring process, with the nine weakest banks having gone through mergers and acquisition or major restructuring.

"The Vietnam Asset Management Company (established in May 2013) continues to purchase and resolve NPLs and with a fairly small capital of US$25 m, it would likely use bonds for most purchases," he said, adding that a mechanism for foreign institutions to buy NPLs should be accelerated.

As for the stock market, the VN Index rose to 562 at the end of May, up 11 per cent year-to-date. Last year's figure was 22 per cent.

Meanwhile, PE (price on earnings) valuation has increased to over 13, up from 12 last December, which is still attractive compared to the average of 18.8 for other emerging markets in the region, including Thailand, the Philippines, Malaysia and Indonesia.

The equitisation of State-owned enterprises is an important aspect of Viet Nam's emerging capital markets, and the Government is entering the important phase of equitisation involving the sale of the largest and most attractive SOEs during 2014 and 2015, he said.

Progress, however, was slow due to the lack of motivation, chronic procedural issues (state audits can take up to 75 days) and a valuation methodology that is not aligned with a market-oriented approach, he said.

Improved efficiency of the equitisation process SOEs represents unique opportunities for private equity investment, he said.

Meanwhile, Thomas Hugger, CEO of Asia Frontier Capital, said he saw opportunities, as the market and the economy are at the bottom and not at the top like in other Asian emerging or developed markets.

He noted the improving business environment with positive aspects, especially the restructuring of the banking sector, which includes the taking over of non-performing loans from commercial banks by the State asset management company and consolidation of banks via mergers and acquisitions, as well as better supervision and severe punishment of banking misconduct.

The Government has been supporting economic recovery through the lowering of lending rates, tax cuts and stimulus packages for various industry sectors as well.

Nguyen Chi Dung, deputy minister of Planning and Investment, stressed that the Vietnamese government had implemented comprehensive economic restructuring based on three pillars: restructuring investment, restructuring SOEs, and restructuring the finance-banking sector.

In terms of restructuring SOEs, he said: "The government has approved a comprehensive equitisation programme that aims to reform 432 SOEs in the 2014-2015 period."

"The programme is a great opportunity for both local and foreign investors who are doing business in Viet Nam by allowing them to buy stakes and become foreign strategic investors of SOEs.

This process is supported by ongoing institutional reforms, and particularly the fact that this year the National Assembly is considering major amendments to the Enterprise Law, Investment Law, Law on Real Estate Trading, Law on Housing and more to improve the local regulatory environment for investment and business.

"Viet Nam has also shown great initiative in deepening international integration through its membership in ASEAN, ASEM, APEC, and the WTO as well as its involvement in Trans-Pacific Partnership negotiations. We plan to sign 16 FTAs with 55 countries and territories by the end of 2015," he said.

"Alongside its advantages, Viet Nam is also confronting a complex challenge in the East Sea after China illegally placed oil rig Haiyang Shiyou-981 in our exclusive economic zone and continental shelf in early May. Our constant policy to safeguard our territorial integrity via peaceful measures led us to demand China observe international laws and the Declaration on the Conduct of Parties in the East Sea (DoC), of which China was a signatory," the deputy minister said.

Vu Bang, the State Securities Commission's chairman, spoke about solutions to attract foreign investment.

"We continue to review and simplify administrative procedures for foreign investor transactions, and to apply a code registration method for foreign investors to conduct online transactions," he said.

Also, they will continue to review and classify companies in order to raise the ownership cap for foreign investors in Vietnamese enterprises, especially in sectors that do not need State control.

Methods to valuate equitised SOEs will be upgraded and their IPOs will be linked with their listings on the stock market, said the chairman.

In addition, market infrastructure will also be improved and market organisation will be restructured into one exchange featuring share, bond and derivative markets, said Bang.

Currently, foreign investors have opened 16,000 securities trading accounts. — VNS

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