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Good morning Vietnam

• FROM: July 2006 |
• TAGS: london asia capital, vietnamese fund |
• COMMENTS: Add yours

• Good morning Vietnam
• | Printer-friendly version

China is never far from the business and economic headlines but it is not the only fast-growing economy in South East Asia. In fact Vietnam is one of the fastest growing economies in the world.

London Asia Capital, which up until now has focused on China, later this year plans to launch a Vietnamese fund similar to its AIM-quoted Chinese private equity fund. There are already other companies quoted on AIM that provide exposure to Vietnam. Vietnam is poised to join the World Trade Organisation at the end of this year. The signing of a bilateral agreement with the US at the end of May will help move the process along. Government privatisations are providing opportunities for investors although it is difficult for individuals to get involved except through a fund.

While the UK market gets increasingly jittery the Vietnam stock market is on course for a bumper month in July. There are estimates that the new issues planned for July combined with additional cash raised by existing quoted companies could double the value of the main Vietnamese stock market or the Ho Chi Minh City Securities Trading Centre as it is known to around $500m. The Ho Chi Minh City Securities Trading Centre has been trading for six years this July and there were 37 companies quoted at the beginning of July. In June 2005 the government announced plans to privatise 178 state-owned enterprises and this process still has some way to go. Shares in Sacombank are due to commence trading in the middle of July and it could be valued at around $120m.

The Hanoi Securities Trading Centre was set up in 2005 and it operates a system to auction stocks of State-owned enterprises. The longer-term intention is to use this as a market for smaller and medium sized companies which do not meet the requirements of a listing on the Ho Chi Minh City Securities Trading Centre. In effect it is a kind of Over-The-Counter market.

Vietnam has a young population with more than one-half of the people less than 30 years old. The literacy rate is 96% and English is increasing in popularity as a second language.

Although agriculture, fi sheries and the textiles sector are still important in the Vietnamese economy it is becoming increasingly diversifi ed. Medical goods are one of the fastest growing export sectors this year. Labour is cheaper than in China and that is attracting manufacturers. Technologically Vietnam still has someway to go to catch up with other parts of the more developed world but it plans to have its fi rst satellite in orbit in the fi rst half of 2008. The government hopes that exports will reach $50bn by 2010 and, while they will still be dominated by textiles and shoes, electronics could account for $4bn.

Joining the WTO will involve greater scope for exports but it will also lead to reductions in import taxes thereby opening up the Vietnamese economy to more imports. The changes will not all be positive and some businesses won’t prosper.

Vietnam has one of the lowest penetration rates of mobile phones in Asia but this will certainly change over the coming years. AIM-quoted E-pay Asia which provides mobile top-up services in other parts of Asia is looking to enter the Vietnamese market in the near future. Mobile content provider Monstermob has set up a joint venture in Vietnam.

In common with other fast growing economies power shortages are a problem. The hot summer weather has led to power cuts and Vietnam will need to increase generating capacity to keep up with the growth of the economy. It also plans to buy electricity from China for the north of the country.

AIM has dozens of companies that are exposed to growth in China and although there are more limited choices when it comes to Vietnam there are still ways of gaining exposure to its economic growth. Asian education and training group AEC Education has just moved into the Vietnamese market through the purchase of 64.8% of the equity of BrainBox Ltd. This business operates in Ho Chi Min City and provides foreign languages and management studies. This is seen as a stepping stone to building up an increased presence in Vietnam, in what it describes as “the lucrative education market in Vietnam”. On top of this it believes it can recruit students for its operations in Singapore and Malaysia.

Two upcoming AIM floats Alpha Tiger Property Trust Ltd and pensions management software FIS Software are looking to expand their business in Vietnam.

Fishing is an important part of the economy and AIM-quoted Aqua Bounty Tech Inc, which is a biotech company that helps to improve yields for fi sh farmers, has won a tender to supply its SybrShrimp diagnostic kits, used to detect fi ve of the most common shrimp diseases, to Vietnamese government laboratories . These examples only have a peripheral interest in Vietnam at the present time although it could become increasingly important to them. Here are three funds quoted on AIM plus three AIM mining companies who have an interest in discovering the mineral wealth of Vietnam.

Vietnam-related closed end funds

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