Korean investors seek assurances

During a recent forum held by South Korean-backed law firm Lee & Ko, minister-counsellor of the Embassy of the Republic of Korea (RoK) in Vietnam Lee Chul noted that various financial and credit organisations within the RoK have optimism on the growth of the local economy and its financial market. “Some of them are now seeking additional opportunities to expand their investments across sectors such as banking and insurance,” he said.

Referring to an investment forum held in Seoul last year, vice chairman of the State Securities Commission Pham Hong Son said he had witnessed a “great deal of interest” from South Korean investors in the Vietnamese stock market, with growth potential and openness attracting attention.

“We want to once again reassure our investors that the Vietnamese government is committed to an open market for all, especially those from the RoK as the nation is one of our most significant strategic partners,” Son stressed, adding that the preliminary legal framework of the local stock market was in fact built upon experiences learnt from the RoK.

According to Son, the local capital market has the ability to offer overseas investors, in terms of the availability of listed companies, state-owned enterprises (SOE) stake sales as well as government and corporate bond issuances.

Vietnam’s stock market, with two main exchanges, is currently home to 1,542 listed companies. By the end of the third quarter, capitalisation and the scale of bond issuances reached approximately US$165 billion and US$47.8 billion, accounting for 76.6 and 22% of GDP, respectively.

“Total market capitalisation was bolstered by 47% in 2017, and it was a rather high growth rate on record. The total capital mobilised through the stock market, meanwhile, merely met some 23% of the social-related investments of the economy,” said Son.

“With the derivatives market opening last August, the local stock market has now turned into a more sophisticated one, establishing itself as a significant channel to draw mid-to long-term funds in for the economy.”

Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, told VIR on the sidelines of the investment forum that while the country has boasted an open economic policy to attract foreign direct investment (FDI), limitations remain in its foreign indirect investment (FII) regime.

“It comes down to the ease of capital inflow and outflow,” he said. “FII will come and go and it will not stay in one market forever or for a long period like FDI. However, should the government and other related authorities continue to uphold a positive attitude for market openness and extend areas of co-operation, many South Korean institutional and private investors will really pay particular interest to the FII market in Vietnam,” said Sun.

“Many of them have bought stocks here. They want to join the mergers and acquisitions (M&A) market so they can buy firms in the country. If the government speeds up SOE equitisation and be more open in trading activities, capital inflow from the RoK will undeniably become more potent than ever before.”

Sun noted that assistance from firms could bolster the value of SOEs, bringing experience and international standards in organisation structures and development. This in turn will smooth future sale processes, in turn reimbursing owners.

“South Korean funders are eyeing securities and real estate, so it is really up to Vietnam to attract secondary or private equity investors into these,” he added.