VC And PE In Vietnam'S Financial Turmoil

Vietnam, Hu Zhiming. Taxis are divided into two categories: slippers and old tricycles. This is the old district where tourists are headed to Hu Zhiming, where the more known name is "Xigong". The other type of driver is dressed in neat cars, mostly Mercedes Benz and Porsche, which are investors. It is only this year that luxury taxi business is getting worse and worse. A large proportion of these investors are VC and PE investors. As one of the world's emerging market countries, Vietnam was once a favorite place for VC and PE. At the time of last year, 9 of 10 people wearing suits in a room were related to VC/PE, according to an investment bank in Hanoi. From the end of 2007, Vietnam's once booming stock market began to slumped. By June, it had fallen from the highest point to more than 1000 points to less than 400 points. This is a major blow to the private equity market. According to the data provided by AVCJ, the fund invested in Vietnam in the first half of 2008 raised a total of $425 million, less than the 1/3 of last year. "At that time, we regret to quit too early, but now we see a lot of psychological balance." The Cube fund, which is responsible for Vietnam's investment in Alexix, has also been regretted that it missed the last 30% increase in the Vietnamese stock index last year. The $1 billion alternative investment fund, which includes private equity funds, real estate and hedge funds, has been one of the most active PE in Vietnam since 2005. Cube currently has two real estate businesses in Vietnam, including Portfolio. Alexix believes that in the medium to long term, they are still optimistic about Vietnam's opportunities. In terms of short-term investments, "the forced sale of capital markets and liquidity reasons" and "substantial increase in interest rates or currency depreciation" are the biggest opportunities. "The financial crisis in Vietnam will not prevent PE and VC from continuing to pay attention to this country," said Vincent Pun, director of AVCJ research department in Hongkong. "In the long run, I am optimistic about the development of the private equity market in this country." Hunters, despite the old Chinese saying, crisis means danger and opportunity coexist. But Chen Shan (a pseudonym) and his fund decided to choose to wait and see. At the end of last year, Chen Shan went to Vietnam to see a food processing enterprise. He is a local fund at home, "currently manages nearly 2 billion yuan renminbi fund", their main investment projects are in the domestic, but also starts to dabble in overseas investment. Chen Shan said that although the company's historical performance is very good, "but we still feel too risky." Although the rapid rise in domestic food prices in Vietnam is a good thing, the price of raw materials in food manufacturing enterprises is also rising. Since March 2008, Vietnam's grain price has started to rise, which has risen from about 0.8 dollars per kilogram to the current 2 or 3 US dollars. Paul Fletcher, a senior partner of British alliance investment, believes that such an enterprise can not invest. "If you invest in an enterprise that may not be able to cross the crisis and the cost is still rising rapidly, then there will be problems." As an investment institution focused on emerging markets, British Union has not yet made direct investment in Vietnam. But Unza, which invested in Vietnam, sold their personal care and household washing products in Vietnam, and its business remained stable. An oil and gas company invested by Apec in Vietnam has also invested in Vietnam. "So we are also exposed to the financial crisis in this country." In Paul Fletcher, there is another type of organization that will be unlucky, those who invest in last year. 4 years ago, when Mekong Capital, a local investment company in Vietnam, bought the Ngo Han Co. share of the magnet manufacturer, its bid was $0.39 per share. But two Vietnamese funds and a private investor bought shares in the company in 2007, and their share price has reached $2.33 per share. That's almost 6 times the Mekong's bid. Now, it is hard for them to find buyers who are willing to take over. Alexix also believes that the biggest impact of this economic crisis is short-term investment capital, such as short-term speculative hot money, OTC capital and completed real estate investment. In the past 2 or 3 years, almost all "visible" assets in Vietnam have appreciated more than 2-3 times. "A large number of foreign capital flows into the country just like water, and most of Vietnam's investment market is very small." According to the data provided by Citibank, the market value of Hu Zhiming's stock market in 2007 was only 22 billion 240 million dollars, while the market value of the Hanoi market was only 83 billion 130 million dollars. The governor of Hu Zhiming, a domestic bank, said, "a large scale fund will go into and out, and there will be a great fluctuation". "Chen fir" waiting for, there is also a fall in asset prices. "In the short term, valuations can be reduced to a relatively reasonable level." Fortunately, the three phase fund raised by Mekong Capital2007 in June changed its investment direction from its original growth period (growth) to buyout. In this economic crisis, the impact was limited. Similarly, similar hunters and overseas institutions have long been involved in Vietnamese markets. Alexix told our reporter that in the medium to long term, it is still very optimistic about Vietnam's investment opportunities. "Vietnam has very similar places with China, such as very similar work norms, and has an attractive geographical advantage (coastline) and population advantage (a large number of young people)." The next round of investment opportunities will not be extended to Vietnam if it is not the first single investment from TPG Texas Pacific Group and Dezhou Pacific Group. Vietnam's domestic GDP in 2007 will be only $70 billion. But Vincent Pun points out that VC and PE are concerned that Vietnam can be traced back to the early 1990s. In 1988, Vietnam, like China in 1978, began to vigorously promote the reform of socialism to market economy, and began attracting large amounts of foreign capital. Vincent said that before 2003, VC and PE entered a new stage of development in Vietnam, and Vietnam became the 150th member of WTO in 2006, which accelerated the inflow of foreign funds. According to AVCJ statistics, the total number of private equity investment funds invested in Vietnam in 2002 totaled 16 million US dollars, and in 2004, the figure was $172 million, an increase of 10 times. In 2006, these private equity funds raised $661 million, which rose to $1 billion 386 million every other year. The source of the charm of Vietnam is also quite similar to that of China. Since 2005, Vietnam's GDP growth has remained above 8%, and has remained at 7.5% growth rate for the past 15 years, ranking only second after China's ranking. "The cost of manufacturing industry can be comparable to that of China's coastal areas", said Paul Fletcher, a senior partner of British Union Investment. Wang Shen explained that when the first single flower fell to Vietnam, it also said, "this country has only 84 million people, the average age is only 24 years old, and 96% of them are literate." The Vietnamese born after the war are very willing to spend, "earn a few hundred dollars a month, but are willing to spend thousands of dollars to travel overseas." Seeing this trend, Chris Freund returned to Vietnam in 2003 to form Mekong Capital. "If you invest in a good company, the fund will get 50% to 100% annual investment return." According to its estimate, by 2007, the net value of the fund company has doubled about 4 years ago. Almost all industries have unlimited prospects. Mekong Capital has invested in garment manufacturers, mobile phone manufacturers and men's hair care products in the past few years. TPG, a company invested by Vietnam in FPD, is the largest IT enterprise in Vietnam, covering the entire IT industry from hardware sales, system integration, software, telecommunications services, even Internet games, Internet newspapers, etc., with sales of over $700 million in 2006. "At present, there are about 20 investment institutions registered in Vietnam to help foreign investors invest in Vietnam." Vincent Pun of AVCJ says this data excludes strategic investments made by regional funds in Vietnam. IDG is the first foreign VC company to enter Vietnam, and Vietnam's chief executive, Nguyen Bao Hoang, said that it has invested more than 30 projects. Alexix told reporters that in the long run, the CUBE foundation is concerned about Special Situations and investment opportunities in real estate. When the fund was raised, there were hedge funds that had been investing exclusively in special situations. "Of course, if PE and VC funds have long-term investment plans, such as 5 or 7 years, they may still make money in Vietnam." Paul Fletcher, senior partner of British Union Investment Co. Compared with the conclusion that Fletcher has many premises, Vincent Pun, director of AVCJ research, is simply more: for an emerging economy like Vietnam, the cycle of economic development is normal. This is the risk that all investors who enter this market should realize earlier, "just like what China has experienced in the past 20 years". The analysis of investment risk in Vietnam by many agencies seems to be the same as the criticism in the Chinese market: private equity investment is still a new industry here. The relevant legal and regulatory framework is still in the process of evolution, and the maturity of the management team of enterprises is not enough. Their role in positioning VC and PE is still biased.