Foreign investors remain optimistic about the future of Vietnam

Foreign investors remain optimistic to invest in Vietnam

Unlocking Potential to invest in Vietnam: A Magnet for Global Investors

Vietnam's magnetic appeal to foreign investors is rooted in a combination of factors that make it a compelling destination for capital infusion and business expansion. This overview highlights key aspects that contribute to Vietnam's attractiveness on the global investment stage:

Robust Economic Growth: Vietnam has sustained a remarkable economic growth trajectory, outperforming many of its regional peers. This consistent expansion, bolstered by favorable demographics and policy initiatives, underlines the country's potential for investors seeking markets with substantial growth prospects, it's no wonder that many are considering the opportunity to invest in Vietnam.

Strategic Geographical Location: Situated at the crossroads of Southeast Asia, Vietnam's strategic location offers access to a vast market of over 600 million people within a short-flight radius. This makes it an attractive base for businesses aiming to tap into both regional and global markets.

Young and Dynamic Workforce: With a median age of around 30, Vietnam boasts a youthful and energetic labor force. This demographic advantage provides a significant pool of skilled and cost-effective workers, particularly in sectors like manufacturing and technology.

Political Stability and Openness: Vietnam's stable political environment and ongoing efforts to enhance transparency and ease of doing business make it an appealing destination for investors. The government's pro-business policies and commitment to economic reform further solidify its reputation.

Free Trade Agreements (FTAs): Vietnam's participation in various FTAs, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), opens up access to preferential trade terms and new markets, augmenting its investment appeal.These FTAs not only provide investors with reduced trade barriers but also serve as a compelling reason to consider investing in Vietnam.

Growing Middle Class: The burgeoning middle class, fueled by rising income levels and increased urbanization, signifies expanding consumer demand. This creates opportunities for companies in sectors such as retail, consumer goods, and services.

Infrastructure Development: Ongoing investments in infrastructure projects, such as transportation, energy, and telecommunications, enhance connectivity and facilitate business operations, particularly in remote regions.

Thriving Technology Ecosystem: Vietnam's tech ecosystem is thriving, with a burgeoning number of startups and a tech-savvy population. This attracts attention fr om investors interested in emerging technology-driven sectors, including fintech, e-commerce, and software development. For those looking to invest in Vietnam, this vibrant tech landscape offers promising opportunities for growth and innovation in the digital economy.

Natural Resources and Manufacturing Base: Vietnam's rich natural resources and well-established manufacturing sector make it an attractive location for industries like textiles, electronics, and automotive manufacturing.

Foreign Investment Incentives: The government offers various incentives to attract foreign investment, including tax breaks, streamlined administrative procedures, and access to industrial and export processing zones.

Resilience During Global Challenges: Vietnam's ability to weather global challenges, including the recent pandemic, with relatively stable economic performance showcases its adaptability and resilience, bolstering investor confidence.

Vietnam's allure to foreign investors to invest in Vietnam is grounded in its potent blend of economic promise, strategic positioning, a dynamic workforce, and an investment-friendly environment. As the nation continues to evolve and flourish, it presents a compelling proposition for those seeking new avenues of growth and success in an ever-changing global landscape. Specifically, in recent years, many foreign organizations continuously poured investment capital into potential stocks of Vietnam.

Investing in the Vietnam market through Vietnam investment funds

A commonly used approach to access investments in Vietnamese startup enterprises involves venture funds. These funds represent a form of capital commitment extended by investors to newly established businesses, which could be small or medium-sized enterprises (SMEs) or startups. Although these firms have yet to be publicly traded on stock exchanges, there is a prevailing belief in their substantial potential.

Amid the peak of the Covid-19 pandemic, there was a notable surge both in the number of investments and the amount of capital flowing into Vietnamese startups. Particularly in 2020, amidst the emergence of Covid-19, approximately $301 million were injected into businesses, slightly dipping from $330 million in 2019. This robust investment activity during challenging times underscores the resilience and potential of Vietnam's startup ecosystem, making it an attractive destination for those looking to invest in Vietnam's burgeoning startup scene.

By 2021, during the peak of the pandemic's impact, the startup market experienced an accumulated influx of around $1.1 billion. Reports indicated that Vietnamese entrepreneurs secured $92 million in venture capital, with a distinct focus in the first quarter of 2022.

Vietnamese startups have garnered more capital compared to their counterparts in Malaysia ($532 million) and Thailand ($532 million), albeit less than those in Indonesia ($10.8 billion) and Singapore ($8.5 billion) ($444 million).

Continuing the momentum from 2021, several Vietnamese startups managed to secure substantial funding from investment funds during the initial half of 2022, despite the overall global downturn in venture capital investments. Notable examples include Sky Mavis ($150 million), Con Con ($90 million), OnPoint ($50 million), Entobel ($30 million), Finhay ($25 million), Jio Health ($20 million), Timo ($20 million), POC Pharma ($10.3 million), Mio ($8 million), and OpenCommerce Group ($7 million). Also, those companies are potential stocks of Vietnam if the owners can manage to IPO in the future.

Vietnam stands out as a favored destination for 208 active venture capital funds, approximately 40 of which are focused on the water industry, according to Nextrans Investment Fund's analysis of the startup landscape and investment trends in 2021. Prominent and active funds in the field include VSV Capital - Nextrans, Vietnam Silicon Valley, Mekong Capital, 500 Start-up Vietnam, Vietnam Investment Group, IDG Ventures Vietnam, Do Ventures, and Genesia Ventures. Those funds also own many potential stocks of Vietnam.

Invest in Vietnam: FDI Surges to Over 16 billion USD in 7 Months

Based on statistical data available until April 20, 2023, the cumulative sum of fresh registered capital, modified capital, and capital contributions for share acquisition and capital contribution purchases by foreign investors has nearly reached 8.88 billion USD, marking a 17.9% decline compared to the corresponding timeframe. Despite the ongoing decrease in attracted FDI during this period, the rate of decline has shown improvement in contrast to the initial three months of the year (which experienced a 38.8% decrease). Remarkably, even as adjusted investment capital continued its downward trend, there has been a resurgence in new investment capital and capital contributions for share purchases, highlighting the enduring appeal to invest in Vietnam for foreign investors.

As of July 20, data from the Foreign Investment Agency (Ministry of Planning and Investment) reveals that the cumulative foreign direct investment (FDI) - encompassing newly registered, adjusted, and capital contributed for share purchases and capital contributions from foreign investors - has surged to approximately 16.24 billion USD, marking a notable 4.5% increase over the corresponding period. July 2023, in particular, witnessed a substantial inflow of registered foreign investment capital exceeding 2.8 billion USD, signifying an 8.9% upswing compared to June 2023, a remarkable 41.9% jump compared to May 2023, and an impressive 85.7% surge in contrast to the same interval in July 2022.

Regarding the evaluation of foreign investment trends in the preceding seven months, the Foreign Investment Agency highlighted a prominent aspect: realized capital amounting to 11.58 billion USD during this timeframe, experiencing a marginal uptick of 0.8% when juxtaposed with the analogous period in 2022. Remarkably, this interval marks the initial instance within the year wh ere total registered investment capital has achieved an expansion over the equivalent timeframe (a growth of 4.5%), following a succession of months marked by a decline in the initial half of the year.

Potential stocks of Vietnam’s outlook

"Prosperity is expected to return to the stock market, and the Vietnam stock market index is anticipated to continue its recovery in the autumn. Positive sentiment is likely to persist until 2024," expressed the fund from Finland.

In a recent update report, Pyn Elite Fund - an investment fund from Finland - emphasized that the Vietnamese stock market is displaying positive growth despite economic challenges, consumer downturn, and weakened exports.This resilience underscores the attractiveness of the Vietnamese market for investors looking to invest in Vietnam, as it continues to demonstrate its potential even in the face of adversity.

However, according to Pyn Elite Fund, the prospects of the stock market in the coming year will be determined by Government and State Bank policies. The interest rates in Vietnam's market have notably decreased and are expected to continue on a downward trend. Over the past 8 months, the 10-year Government bond yield curve has decreased from 5% to 2.5%, reflecting the substantial reduction in capital interest rates within Vietnam's domestic market.

The interbank overnight interest rate among banks has dropped to 0.17%, indicating robust liquidity within the financial market. Deposits with a 12-month interest rate, initiated by the end of 2022, will mature in the autumn of 2023. This fund will then be directed towards higher interest-rate investment channels, such as stocks.

"We believe that Vietnam's economic development will accelerate due to a series of recent policy implementations. 2024 will be another year of strong growth for Vietnam's domestic market. As a result, prosperity is expected to return to the stock market, and the Vietnam stock market index is anticipated to continue its recovery in the autumn. Positive sentiment is likely to persist until 2024," expressed the fund from Finland.

The decline of Vietnam's economy is closely tied to domestic interest rates and liquidity conditions. The fund believes that as conditions normalize, the stock market could again trade at a P/S (Price/Sales) valuation above 2.0, compared to the latest figure of 1.35. With projected revenue growth for 2024, the P/S ratio could drop below 1.2, making the stock market very attractively valued at the current juncture.For investors seeking potential value opportunities to invest in Vietnam, this suggests that Vietnam's stock market may present an appealing prospect for investment in future.

The investment performance report including many potential stocks of Vietnam from the Finnish-based Pyn Elite Fund in July showed a 5.2% increase in performance over the past month, largely due to several stocks with substantial weightings in the portfolio experiencing gains, including VHM, VRE, ACB, and MBB. Nevertheless, despite this increase, the fund's performance still trails behind the VN-Index. Conversely, the three poorest-performing stocks included STB (decreased by 2.9%), VEA (decreased by 0.3%), and CTG (increased by 1.7%). Furthermore, the fund's current top 10 holdings comprise VHM, STB, VRE, CTG, TPB, ACV, MBB, HDB, VEA, and VNFIN Lead ETF.

The positive outlook of potential stocks of Vietnam is also based on macroeconomic advancements. Vietnam has emerged as an increasingly attractive destination to invest in Vietnam within the global supply chain, driven by a fresh influx of foreign direct investment seeking cost-effective land and labor. Recent efforts in streamlining business establishment, land registration, and loan procedures have positioned the country as an ideal location for establishing new factories.

Amidst a surge in consumer demand and the transition to modern retail channels, Masan Group (HoSE: MSN) stands out as the foremost consumer-focused business group in Vietnam and a promising stock option. Its subsidiary, The CrownX, represents a successful fusion of Masan's F&B arm (Masan Consumer Holdings, or MCH) and its grocery retail platform (WinCommerce).