Market Fundamentals Strong

General News 26th November, 2009

Vietnam News- Saigon Asset Management (SAM), which operates two Frankfurt-listed funds, the US$50 million Viet Nam Property Holding and US$75 million Viet Nam Equity Holding, signed an agreement on Tuesday with fund management company RNG Invest, in which the HCM City-listed REE Corporation holds a majority stake, to raise funds abroad for investing in the Vietnamese stock market. Viet Nam News spoke to SAM Chairman & CEO Louis Nguyen.

How do you assess the Vietnamese stock market now, especially with the recent falls in both exchanges, and what potential do you see that you decided to set up a new fund?

Long term investors like SAM see the market’s fluctuations as a normal occurrence and are unlikely to shift their views drastically at every turn. Viet Nam’s market fundamentals remain strong for at least the next 5 years. Our decision to jointly launch a new fund with RNG has to do with the opportunity more than necessity. We still have ample cash and the funds we manage are young as well as the top performing funds in Viet Nam according to LCF Rothschild. Joining forces with RNG/REE helps us increase our ability to raise and deploy additional capital into what we believe as unique and proprietary opportunities generated from a base of investors who are industry leaders and domain experts. This is the unique feature of the funds, which, for lack of a better term, we call “smart money funds.” To make it clear, RNG/REE is responsible for the local fund, while SAM is responsible for the foreign fund.

How do you see foreign investors’ attitude to the opportunities and challenges in the market?

International investors fall into two types – financial investors, who simply want to make quick money and tend to be retail or from private banks and may be not long term during the volatility and strategic investors, who have a vested interest in the Viet Nam market and have longer investment plans. Compared to the peak period of 2006, financial investors now appear hesitant to pour more money into emerging markets directly or indirectly as most have not fully recovered from the global crisis and some still view Viet Nam’s valuations as being slightly expensive. Therefore they may wait a little bit longer to take action. Strategic investors, including institutions such as retirement and endowment houses, appear to be always seeking the right opportunities to further expand their businesses or investments in Viet Nam. This group is more difficult to attract but is the preferred choice to work with in our mind since they come and stay because they believe in the long term prospects of this market.

What about the type and scale of the planned fund? Have you set any criteria for participating investors?

The foreign fund SAM plans to launch will be a limited partnership which will likely be domiciled in the US or Luxembourg. The target fund size is approximately US$100 million. The investors we seek will be strategic institutions like those who are industry leaders and domain experts as there will likely be a similar structure to RNG’s local fund. This “smart money” concept creates an environment where the value-creation process is greatly increased not only through the fund manager but the investors as well. I worked at a similar venture capital fund in the US which adopted this concept successfully. This was derived from the Japanese “keiretsu” phenomenon post World War 2.

What are the target sectors for the fund and why? And what are the criteria you will set for the institutions you plan to invest in?

We prefer liquidity and clear exit strategies and are likely to stay broadly within listed securities, private pre-IPO companies, and real-estate projects. The fund will also focus on the core strengths of Viet Nam’s industries including construction and materials, consumer goods, financial services, energy, telecom, food and beverages, media and entertainment.

We like companies with great growth potential, market share, and an experienced management team that believes in strong corporate governance. In real estate, we are attracted to clear land where compensation has been completed; metropolitan/urban and growing areas are preferred and, of course, a decent valuation.

Our core competence would be working with projects that desire foreign branding and know- how as we draw this strength from our pool of domain expert investors in our fund. — VNS