24 October 2016
Vietnam is being seen by private-equity funds as a big new investment opportunity. Photo: Xinhua
Vietnam is being seen by private-equity funds as a big new investment opportunity. Photo: Xinhua

PE funds turn their focus to Vietnam

As it’s getting harder to secure professional talent to manage China-focused dollar denominated private-equity (PE) funds, many are shifting their sights to other countries in the region.

Amid these efforts, one country is especially coming into focus — Vietnam.

As the South East Asian nation’s inflation and exchange rate issues have stabilized, many PE firms are actively seeking opportunities there.

The Vietnam government has launched a series of incentive polices since last year to attract foreign investment. One of the policies is the remove of the previous 49 percent cap on foreign investors’ holdings in companies.

Although foreign investors are still not allowed to hold over 30 percent stakes in some sensitive industries like banks, many foreign merger and acquisition funds are excited. The consensus among PE fund managers is that it is no longer hard to make deals in Vietnam.

According to Dealogic, over the past two decades, the average annual PE investment in Vietnam has been less than US$200 million.

But recently, as inflation stabilized and the real estate market bottomed out, PE investment in Vietnam has begun to rise. In 2013, there were US$400 million worth of deals. Many big PE funds entered the scene last year, so the figure for 2015 should be much larger.

M&A funds have been making plans for years. KKR, for instance, invested US$159 million and US$200 million in 2011 and 2013, respectively, in Masan Consumer, Vietnam’s biggest fish sauce producer.

Since then, many PE firms have started investing in Vietnam’s consumer industries to seize opportunities from the nation’s fast-growing youth and middle-class consumption market.

In addition, some funds also sought to ride the rapid growth of Vietnam’s real estate market, especially high-end properties, in recent years.

PE funds like EXS Capital and GAW Capital Partners dipped their toes into the Vietnam market in 2013 and 2015.

With increasing inflow of capital into the real estate market, Vietnam’s government has been considering tightening the mortgage policy and curb soaring home prices.

This article appeared in the Hong Kong Economic Journal on Feb. 19.

Translation by Myssie You

[Chinese version 中文版]

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Director at Spring Capital

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