Domestic stock market turns unattractive to foreign funds ...

Foreign capital inflow into Vietnam through investment funds and big securities firms has dipped remarkably while the existing funds here are approaching maturity, piling more pressure on the country?s poor-performing stock market.

At the Investors Day 2010, Andy Ho, managing director of VinaCapital, said the group intended to set up two new funds of US$200-300 million each, with one for investment in real estate and the other for investment in the stock market.

However, the plan has not fully materialized. VinaCapital has been able to mobilize capital for the property investment fund, and has found it very difficult to do so with the stock investment fund, Ho told the Daily.

It is simply because foreign investors always see whether the macro economy has regained stability and if they could gain profit, while Vietnam is not yet out of the woods. Therefore, investors will choose big markets with smoother capital circulation and more opportunities than Vietnam.

Established in 2007, Saigon Asset Management (SAM) investment fund went through the overheated growth period of Vietnam?s stock market with the VN-Index hitting 1,100 points and also witnessed this index falling below 400 points. The stocks owned by SAM back then has dropped 80-90% in value, so the fund?s performance in Vietnam is not as good as expected, said Nguyen The Lu, general director of SAM.

He said the net asset value of the investment fund had been plunging. In October, SAM will hold a shareholders meeting to decide whether to close the fund or not.

?Many investors have been mulling withdrawing from the local market but the heavy losses have made them hesitant. They expect stock prices would bounce back,? said Lu. ?Therefore, in October, many investors may vote whether or not to close the fund.?

Raising new capital is getting more difficult, said Lu. Investors will take into account the impact of the macroeconomic factors on their investments.

If investment funds generated lower profits than savings interest rates, they would not make investments. As the domestic banking system is being restructured, and concerns about a return of inflation are still there to stay, it is not easy to lure foreign investment capital.

Dinh Quang Hoan, financial consultant director of Ban Viet Securities Company, confirmed this fact, saying that not so many foreign investors want to buy shares for financial investment in Vietnam. They are waiting for economic restructuring.

Hoan noted most investors had bought stocks of local firms active in the same industry as theirs to quickly expand their operations. This is the reason why merger and acquisition (M&A) activity has grown strongly this year.

Hoan said some companies had asked his firm to provide consultancy on investment in major companies in Vietnam. Quite a few M&A deals are worth US$100 million each.

A senior source from a big securities company said he knew many investment funds that had incurred great losses in the stock market, urging them to divest capital. On the other hand, no new investors have entered Vietnam?s stock market.

He said the stock market had remained flat since the start of this year as there was a lack of policy breakthroughs.

The Saigon Times Daily

Source: http://www.saigonmoney.com/2012/09/26/domestic-stock-market-turns-unattractive-to-foreign-funds/

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