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Indochina Capital dissolution shows low confidence on Vietnam’s market
The collapse of Indochina Capital Vietnam (ICV) shows that the investors’ confidence has been serious eroded.
The decision on Indochina Capital Vietnam’s liquidation, which was released on September 4, was not a big surprise at all. The death of the fund has been anticipated, since the price of the fund certificate has been trading at 50 percent below the net asset value (NAV).
The collapse of ICV shows that the prestige of investment funds in Vietnam has been severely injured. More seriously, it threatens to make Vietnam’s stock market less attractive in the eyes of foreign investors.
Foreign investment funds in Vietnam, how are they?
In fact, Indochina Capital Vietnam (ICV) is not the only foreign investment fund which makes loss in Vietnam and has the business result lower than the growth rate of Vietnam’s stock market. Most of the operational funds in Vietnam are facing the same problem.
The reason that makes ICV collapse, while other funds still exist, observers say, is the problems in management and disagreement of the fund’s leadership.
In July 2009, ICV leadership presented to its shareholders a solution it believed to improve the situation after the fund certificate was traded at far less than the NAV. ICV planned to liquidate a half of the portfolio, while the second half would be still put under management when ICV cooperates with Dragon Capital, the fund management company with better achievements. However, the plan did not get receive the support from shareholders.
Analysts say there are some 100 investment funds in Vietnam, but only 20 of them are operational. There is only a few big prestigious funds which are listing on foreign stock exchanges, including VinaCapital, Dragon Capital, Indochina Capital, PXP and Saigon Assets.
2006-2007 was the ‘golden age’ of investment funds. It was so easy to raise funds for investments in Vietnam, when the market was booming. What the investors of VinaCapital saw was that no market could bring such a high profit of 65 percent in 2006 and 38 percent in 2007 like Vietnam.
However, as the VN Index kept decreasing in 2008, funds met a lot of difficulties. The situation has not been much improved, even though when the VN Index has increased again.
The index has risen by 70 percent so far this year. Meanwhile, the report on newly emerging markets by LCF Rothschild showed that the investment funds in Vietnam have seen the growth rate of 25 percent only.
How to restore investors’ confidence?
It is now really very difficult to raise funds for investments in Vietnam, which is considered an ‘impossible mission’ for many investment funds. Though some investment management companies still announce plan to raise new funds, their move is believed to aim to polish their images rather than the serious business plan.
“Fund management companies once could easily raise funds in the past, because they did not make trouble at that time and because the market was on the rise. However, the situation has become quite different now. It is now not easy to persuade investors with just words,” said director of an investment bank.
It is clear that the dissolution of Indochina Capital will have bad impacts on the prestige of other investment funds in Vietnam, though experts believe that it is not a threat to the market. At this moment, most of listed investment funds all see their certificates trading at below NAV.
Vietnam Opportunity Fund, for example, has the NAV at $2.18 per share, while the fund certificate is now trading at $1.46 only. Vietnam Equity Holding has the NAV at Euro2.3 and trading price at Euro1.16.
VietNamNet, SGTT
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