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Foreign portfolio investors turn eyes to Asia, but ignore Vietnam   2009-10-29 - SGTT

Foreign portfolio investors are considering a return to Asia but Vietnam isn’t enjoying much interest.


The 80 percent increase of the VN Index so far this year has made the stock market more attractive in the eyes of foreign investors. However, the recovery of the stock market has not been strong enough to lure foreign investors. Analysts say foreign investors only make up 15 percent of total transactions, while the current market is dominated by domestic investors.


Securities companies say South Korean investors are taking cautious steps to seek investment opportunities, while European and American investors have not made any move except beyond seeking information.


However, foreign investors are only paying attention to big economies like China, India or Indonesia. Meanwhile, Vietnam, though having more advantages than some regional countries, still can’t grab any action.

VinaCapital, one of the managers of the biggest investment funds in Vietnam, tried to convey to investors optimistic messages about Vietnam’s market at the investment conference held in Hanoi on Monday.

VinaCapital’s Chairman Horst Geicke said that the Government did well in the crisis period and that the Government initiated demand stimulus package has helped activate the national economy. He said that high inflation is not the problem of this year and that foreign investors will see the positive changes to the economy in the time to come.


Professor Kenneth Courtis, the founder of Themes Investment Management and former deputy chairman of Goldman Sachs, also said Vietnam is ranked just after China, India, Japan, South Korea and Indonesia in terms of attractiveness.


However, to date, Vietnam is still considered a small market which bears many risks and characteristics of emerging markets. Therefore, Vietnam still has not been appeared in foreign investors’ portfolios


According to Hiroshi Funaki from London-based LCF Edmond de Rothschild securities company, the investment funds in Vietnam, there are some 40 such funds, are still meeting difficulties in raising new funds. Even listed funds, like VinaCapital, though having the net asset value (NAV) increasing, still see the fund certificate traded at 20-30 percent lower than NAV.


As for JSM, a small investment fund in Vietnam, a shareholder in the US has called for an extraordinary meeting to discuss the dismissal of the fund manager.


Analysts believe that the VND/US$ exchange rate and budget deficit are the two factors that make foreign investors reluctant to make investment in Vietnam. The VND is now weak and tends to weaken because of the trade deficit. Meanwhile, the 8 percent GDP budget deficit is considered high


The State Bank of Vietnam has announced it is making every effort to settle the problem. It will borrow one billion dollars from Japan every year for three years.


Vietnamese newspapers have quoted central bank governor Nguyen Van Giau as saying Vietnam may consider borrowing one billion dollars from the World Bank. The loans will be used to improve the payment balance and settle the budget deficit.

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