Dominic Scriven, General Director of Dragon Capital, an investment fund management company, warned at the workshop on the stock market late last week that Vietnam may witness the capital withdrawal of foreign investment funds in the time to come. The information has caused big worries to investors.
A series of funds fall due
In 2010, the Vietnam Enterprise Investments Limited (VEIL) managed by Dragon Capital faced the pressure from some shareholders, who asked for capital withdrawal. Whether to continue investing in Vietnam would be, once again, the question to be posed at the investors’ meeting to be held in 2012 – the meeting which is organized every two years.
A series of investment funds will become matured by 2012 or 2013. These include the Vietnam Opportunity Fund (VOF) managed by VinaCapital, which will become matured in the third quarter of 2013, or a Prudential’s fund in mid 2013.
According to Dominic Scriven, if there is no new cash flow, the maturity of the funds will put a hard pressure on the market. Meanwhile, it is very difficult to raise funds in the current circumstances. The macroeconomic uncertainties, including the high inflation, high interest rates, plus the fluctuations on the gold and foreign currency markets and the weak liquidity all have badly affected the capital use efficiency and the capital mobilization.
According to SGI Capital, a fund management company, the wave of foreign investment funds getting dissolved after falling due would begin in 2012, while the highest peak of the wave would come in 2013. It is expected that 3400 billion dong would be withdrawn in 2012, while the capital withdrawal would continue until 2015. SGI Capital thinks that about 63 trillion dong would be withdrawn from the market in the next four years.
Louis Nguyen, General Director of the Saigon Asset Management (SAM), has also said that it is very likely that foreign investment funds would withdraw capital when the funds get expired and the stock market remains lackluster. The continued falls of the stock prices, which has led to the sharp falls of the net asset value (NAV) of the funds will also prompt investors to take back capital.
Opportunities in risks?
Some other experts said that they are not sure if foreign funds would withdraw capital when the funds fall due by 2012 and 2013. The investors of some investment funds, which fell due some months ago, still decided to extend their operation in Vietnam. Therefore, it is now still too early to say about what will happen in the next two years.
The experts believe that investors will decide on whether to continue investing in Vietnam after considering the macroeconomic performance and the stock market. Especially, even if they decide to withdraw capital, but the securities items have low liquidity, they would have to extend the duration.
Louis Nguyen said that the government of Vietnam needs to be determined to curb inflation and ease the bank loan interest rates, because these would be the most important factors for businesses to operate well and make profits.
He said that if the inflation rate climbs to nearly 20 percent per annum, and the interest rates keep staying firmly high, it would be impossible to persuade investors to leave capital in Vietnam.
However, according to Le Dat Chi from the HCM City Economics University, foreign investment funds themselves need to admit their problems. The funds should have anticipated the risks when calling for investment in a newly emerging market like Vietnam.
He said that if the management companies had had better vision and forecast capability, they would made wise moves at different moments of the stock market. The bad performance of the funds can easily explain why investors do not want to stay in Vietnam.
However, he said, it may happen that in the time to come, investors would withdraw capital from the old funds and put money into new funds managed by other management boards.
Tien Phong
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