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Hard times may have laid golden eggs for foreigners
Some market observers fear the current economic climate has created ideal conditions for foreign investors to take control of Vietnamese companies whose earnings have taken a battering.
This year’s economic slowdown hit many domestic enterprises hard but for foreign investors there’s a silver lining – opportunities to make heavy investments in Vietnam, analysts said.
Instead of just trading shares on the stock market, many foreign investors are making a bold foray into the domestic market as strategic partners or bidders for projects that Vietnamese contractors failed to complete in time.
“There are two things that they [foreign investors] are waiting for: the government to take control of inflation; and news of domestic firms’ earnings this year,” said a lawyer, who asked not to be named.
“They will rely on that information to make bids for stakes in Vietnamese companies.”
Investment fund Indochina Capital’s former director Thomas Ngo said this was a golden time for foreigners to enter Vietnam’s market.
Over the past nine months Indochina Capital has invested US$150 million in around 10 Vietnamese private firms.
“There are so many potential companies which lack capital,” Thomas Ngo said.
“They are eager to sell shares or bonds with attractive interest rates up to 25-30 percent [up from 15-20 percent].”
Foreign players have to be a little bit brave, Ngo said.
“I believe many new foreign investors are willing to enter Vietnam’s market.”
Investment consultancy Tiger Invest marketing manager Nguyen Hoang Thang said there were a growing number of private companies willing to sell part or all of their stake after suffering heavy losses from stock and property investments.
The stock market has fallen more than 47 percent this year while the property market has stagnated.
PricewaterhouseCoopers Vietnam Transaction Director Stephen Gaskill said the number of merger and acquisition deals in Vietnam rose rapidly in the first three months of the year, with the value of transactions up to $302.3 million.
Gaskill said the outlook for merger and acquisition activity in Vietnam remained positive despite the value of transactions slipping to $44.1 million in the second quarter.
“The decline came because not many merger and acquisition deals in the second quarter were announced in the media,” he said, adding that many notable transactions will be revealed later this year.
But the eagerness of foreign investors has raised concerns among some Vietnamese business operators.
“Many projects will be bought by foreign players at low prices,” property firm Tuong Phong General Director Lau Nam Tuong warned at a meeting in Ho Chi Minh City.
Pepsico Indochina’s Chairman and General Director Pham Phu Ngoc Trai said a decline in the value of some property projects recently had added to his concern.
Trai suggested domestic companies should cooperate to counter the foreign investor “invasion.”
Trai and Tuong’s warnings are based on hard evidence.
Several months ago the foreign partner took a controlling stake in the food joint venture company.
The foreign firm’s holding went from a less than 20 percent stake to 61 percent, taking advantage of the twin hits on the Vietnamese partner’s operations from spiraling interest rates and a slumping stock market.
The foreign firm changed the joint venture’s product design and replaced contractors within one week of acquiring the controlling stake.
TNK Capital Partners Chairman and General Director Nguyen Quoc Toan, however, said domestic firms shouldn’t worry about foreign investor merger and acquisition deals.
Toan said the growing number of foreign firms entering Vietnam showed the country’s economy had potential.
In a market economy, it was inevitable that weak firms would be taken over by stronger ones, he said.
“Merger and acquisition deals help weak firms avoid bankruptcy,” Toan said.
Thanhnien
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