Dragon says it is time to stay firm

A positive market swing is just around the corner

Dominic Scriven, Dragon Capital’s chief executive officer (CEO), said Vietnam was seen as one of the world’s more promising frontier markets as social and cultural forces were proving powerful growth drivers.

Scriven said quality macro-economic management was widely seen to be improving in Vietnam, as the government moved to tighten financial regulations, modernise monetary policy and build more stability into growth.

The gross domestic product is expected to expand by 6.5 per cent this year, after 5.3 per cent growth in 2009, among few economies with positive figure amidst the global recession.

“Vietnam generally is attractive,” Scriven told VIR after shareholders of its biggest fund Vietnam Enterprise Investments Limited (VEIL) and another fund Vietnam Growth Fund Limited (VGF) voted to stay for at least next two years in Vietnam.

VEIL and VGF have recently been the object of attention as VR Capital, a Moscow-based fund manager with holdings in the funds, supported resolutions to wind them up. At their annual general meeting last week, with 83.24 per cent of VEIL and 89.22 per cent of VGF shareholders voting against winding up, it is clear that the majority wanted to continue.

“The results reflect a clear sentiment that now is not the time to be exiting Vietnam, given strong market fundamentals combined with low equity valuations,” said Scriven. He added that the country’s stock market had developed rapidly in recent years, now standing at almost $40 billion, from under $1 billion in 2005.

Le Xuan Nghia, the National Financial Supervision Committee’s vice chairman, said that as the European sovereign debt crisis remained unclear, investors would turn their eyes back to Asia.

“Foreign investors are still upbeat on Vietnam thanks to its favourable politic-geographic conditions, particularly the very attractive capital market with increasing numbers of equitised firms and market capitalisation,” Nghia told VnDirect Securities clients recently.

Le Thi Bang Tam, former deputy finance minister and now chairman of HDBank, added that foreign portfolio investors have not left Vietnam. Currently, around $8 billion in foreign portfolio capital was in Vietnam, compared to the peak of $12-13 billion in 2007.

Net flows of foreign portfolio investment into Vietnam reached $1.29 billion in the first quarter and $510 million in the second quarter of this year, bringing the total first half to around $1.8 billion, according to State Bank statistics. Foreign investors also net bought around $382 million worth of Vietnamese equities year to date.

Scriven said that the biggest concern for investors was market liquidity. Therefore, Vietnam will not easily attract more foreign capital if the liquidity issue is not removed. VEIL’s sharp NAV discount trading was attributed to less liquidity, he said.