Pham Ngoc Bich, Deputy General Director of the Saigon Securities Incorporated SSI, said he has received the executives from 10 foreign investment fund management companies, which are managing the capital worth 500 billion dollars. The businessmen came to learn more about listed companies before deciding where to invest in.
Bich said that the presence of the investors shows that no need to worry about the lack of the capital flow to the stock market. However, he also said it is necessary to take necessary measures to attract the capital, instead of sitting and waiting.
The exchange rate risk
The story that Dragon Capital, which managed the investment funds with the capital of one billion dollars, lost 100 million dollars on February 11, 2011, when the State Bank unexpectedly adjusted the dong/dollar exchange rate, has caused a big worry to many foreign investors.
The weakness of the domestic commercial banks, which seems to have no close relation with the exchange rate, turns out to be also a concern for foreign investors.
Once the banking system cannot perform well, this would lead to the increase of the bad debts. In some cases, the bad debts even eat into the banks’ stockholder equity. In order to settle the bad debts, it would be necessary to pump money into the banks, which would then affect the dong/dollar exchange rate.
According to Louis Nguyen, General Director of the Saigon Asset Management SAM, foreign investors are always interested in the information about the inflation, monetary policy, interest rate, the stability of the banking system as well.
Therefore, he does not think the situation would get improved by the end of the year, since there have been no bright signs of the national economy. Meanwhile, foreign investors have many other choices, including Myanmar and Indonesia which have offered better opportunities. This would certainly affect the Vietnam’s capability of attracting foreign investors.
Foreign investors will only make investments when they can clearly see the profitability opportunities. If they predict that the inflation rate is 10 percent, the local currency depreciates by 10 percent; they would expect the profit of 30 percent. Meanwhile, this is really a difficult task.
Multi-field groups would not be chosen
In general, foreign investors do not cast their eyes to the companies which make investment in many business fields, simply because they believe multi-field groups would be less competitive than the companies specializing in one business field.
South Korean Samsung Group always obtains high revenues from its investments in many business fields, including banking, insurance, TV and phone manufacturing. However, the rate of return on a stock of Samsung is lower than that of the companies which specialize in making phones only.
Dr Alan Phan, President of Viasa investment fund agrees, saying that the movement by Vietnamese conglomerates investing in different business fields has cause many big consequences.
The lack of transparency in information exposure
Louis Nguyen listed a lot of differences in the corporate governance skills applied in the US and in Vietnam. The board of directors in the US would be ready to share with investors the information relating to the administration, the share ownership of the members of the board of directors, and the profile of CEOs.
Vietnamese managers tend to focus on the works which can bring benefits to individuals, while they are not open to share information about relating issues. Meanwhile, it’s difficult to find reliable figures about the market, because the reports from different institutions provide quite different figures.
Sources: Doanh Nhan/VietNamNet Bridge