Vietnam private equity outlook bounces back
Investors viewing Vietnam’s investment environment favourably have increased over the last six months, according to a bi-annual survey on the nation’s private equity outlook done by Grant Thornton Vietnam.
About 41% of the respondents said they feel Vietnam is a more attractive place to invest compared with other destinations, an increase of 14% over the previous survey six months ago.
The financial distress in Europe and weakening of the US dollar are the main factors for private equity activities continuing to rise in Asia, especially Southeast Asia.
Hence the number of respondents who decided to increase their portfolio in Vietnam has improved significantly from 29% in quarter 4, 2011 to 45% in quarter 2, 2013, although the country is still suffering from the economic downturn.
Healthcare and pharmaceutical industries have been the most favoured investment areas in the last three surveys.
High growth rates, demand for expertise as well as favourable demographics have created a significant opportunity for investors to invest in Vietnam’s health care sector, the survey found.
Education remains the second most attractive sector for survey participants with the same proportion as last year survey (39%). It has been in the top rung for more than three years in succession.
Vietnam is ranked fourth in terms of the most attractive market in the world for the retail sector, which has grown robustly in recent years.
The Government’s approval for foreign investors to establish 100% foreign-invested companies has made this sector highly attractive to investors.
The fourth most attractive sector, according to the survey, is real estate, which got 37% of the respondents’ votes.
Merger and Acquisition (M&A) deals in the real estate sector were forecast to increase in 2013. Many real estate developers facing financial difficulties were forced to transfer their projects, creating investment opportunities for buyers with long-term strategies.
The largest investment in the sector last year was by Japan’s Tokyu Group with total capital of US$1.2 billion.
On investment obstacles, 82% of the respondents considered corruption and government red tape as problems when investing in Vietnam, with the latter component showing an increase of 10% since the previous survey.
Current economic difficulties and challenges mean PE investors are becoming more prudent in their investment strategy and focusing on long term growth opportunities, the survey found.
Transparency in business activities emerged as the second most important factor in making investment decisions. This factor has always been in the list of the top three most important factors to consider when investing in Vietnam, the survey report said.
The third most important factor was cash flow, the life blood of every business.
Other factors included corporate governance and the skill as well as experience of existing management.