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M&A activities signal promising fortunes



Although merger and acquisition levels dropped in 2020 across Vietnam, the prospect for such activities remain bright for next year as overseas investors look to local businesses in order to improve market access.

1513 p8 ma activities signal promising fortunes

M&A activities signal promising fortunes. 

Herbert Yum, research manager at London-based market research company Euromonitor International, told VIR that Vietnam is one of the most attractive markets in Asia-Pacific. Based on the group’s merger and acquisition (M&A) Investment Index, high GDP growth and manufacturing output both indicate market growth. Along with production activities in mining, manufacturing, electricity, and water, the combined factors are making Vietnam one of the most robust M&A markets in the world.

The Vietnamese government announcement of removal of the 49 per cent foreign ownership cap on listed companies in 2018 released a strong signal to international financiers. Such a move is opening business opportunities and releasing a strong signal to capital flow in the region, with companies seeking fast-growing economies willing to link up with capitalised western economies, according to Yum.

While macroeconomic factors light up the Vietnamese market, microeconomic factors associated with the relatively young population, expected fast-growing spending power, and rapidly improving social status is expected to support the growth of economies in the longer-term, he added. “Hence, the Vietnamese market is expected to be one of the most attractive markets for foreign investors’ hot money,” Yum said.

According to data from the Vietnamese General Statistics Office, for the full year of 2019 the total value of stake acquisitions by foreign investors hit $15.5 billion, up 56.4 per cent on-year.

In the first nine months of 2020, a total of 5,172 cases were involved in foreign investors’ capital contribution and stake acquisition, valued at $5.7 billion, down 44.9 per cent on-year.

From January to September, between Japan and Vietnam there were 19 transactions publicly announced. The interest from Japanese investors towards Vietnam continues to be strong in the pandemic situation.

Some notable transactions in the first period include Mitsubishi Corporation and Nomura Real Estate jointly acquiring 80 per cent in the second phase of the Grand Park project of Vingroup. Aozora Bank Ltd. also purchased a 15 per cent stake in Vietnam’s Orient Commercial Joint Stock Bank.

World Mode Holdings Co., Ltd, a Tokyo-based total solutions company specialised in fashion and cosmetics, acquired People Link JSC, a leading human resources company. Japan’s listed real estate group Haseko purchased a 36 per cent stake in construction company Ecoba, while Tokyo-based ASKA Pharmaceutical Company received a 24.9 per cent stake in domestic counterpart Ha Tay.

Masataka Sam Yoshida, head of the Cross-border Division and CEO of Vietnam RECOF Corporation, told VIR that Southeast Asia is a promising destination for M&A globally, and among various countries in this region, Vietnam is the most attractive country to enter for foreign investors. It is also considered one of the most successful nations in responding to COVID-19.

While other countries experienced negative growth rate in the first nine months of 2020, Vietnam’s GDP increased 2.12 per cent. The rate is forecast to be still positive at 2.5 per cent for the whole year 2020 and expected to rebound to 6.7 per cent in 2021.

In addition, the EU-Vietnam Free Trade Agreement will also contribute to the future growth of the economy.

“The above factors support the positive outlook of Vietnam’s M&A market in the coming years,” Yoshida said, noting that the slowdown of M&A activities will continue due to entry restrictions over the last six months. The M&A process generally takes from six months to over a year to complete, and recently-announced M&A transactions were initiated before the pandemic situation arose.

“We recognise that many transactions are still on hold due to restrictions. Recently Vietnam has lifted 14-day quarantine for investors entering the country for less than 14 days and we expect Vietnam’s M&A activities will grow robustly in 2021 if the pandemic is controlled this year,” he said.

South Korean investors are also active in Vietnam’s M&A scene. Some remarkable deals in the first nine months of 2020 include SK Investment III, a subsidiary of SK Group, which received more than 12 million shares, equivalent to nearly 25 per cent of Imexpharm Corporation’s stocks. SK Lubricants also acquired a 49 per cent stake in Mekong Petrochemical JSC for ₩50 billion ($42.1 million).

Lotte Chemical, a unit of Lotte Group, has also acquired Vietnamese high-tech material company VinaPolytech. Most recently, GS Caltex spent VND39 billion (nearly $1.7 million) picking up a 16.7 per cent stake in VI Automotive Service, a parent company of VietWash. VIR

Thanh Van



AES, PetroVietnam Gas to sign $1.4 billion LNG deal: Pompeo



HANOI — AES Corp. will sign a deal with PetroVietnam Gas GAS.HM to develop a $1.4 billion liquefied natural gas (LNG) import terminal in Vietnam, U.S. Secretary of State Mike Pompeo said on Wednesday.

“Vietnam has given the green light to AES Corp., a company based in Virginia, to go forward with the project,” Pompeo said at a virtual Indo-Pacific Business Forum.

The deal will open the door for the import of billions of dollars worth of U.S. LNG to Vietnam each year, Pompeo said, describing it as a “real win-win situation”.

The forum, also attended by his Vietnamese counterpart Pham Binh Minh, comes as the United States ramps up its rhetoric against the regional influence of Chinese state firms.

“American companies adhere to the rule of law and transparency and have very high standards of quality for their products,” Pompeo said. “I say that because that’s quite a contrast with the Chinese state-backed companies.”

Vietnam is building numerous LNG-to-power plants, with the first to be operational by 2023, an ambitious move that could see LNG become a major energy source for its fast-growing economy.

Much of that will be imported from the United States, which wants to narrow its trade deficit with Vietnam, which widened to $44.3 billion in the first nine months of this year from $33.96 billion in the same period of 2019.

Also at Wednesday’s forum, Delta Offshore Energy formalised an earlier announced plan for a $3 billion agreement with Bechtel Corp., General Electric nd McDermott for the development of a 3.2-gigawatt LNG power plant in Bac Lieu province, the U.S. Embassy in Hanoi said.


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VN-Index bounces back as trading cools down



VN-Index bounces back as trading cools down

An investor looks at stock prices on a screen at a brokerage in Ho Chi Minh City. Photo by VnExpress/Quynh Tran.

After four consecutive losing sessions, the VN-Index rose 0.7 percent to 925.47 points Friday.

The benchmark index had continued its corrective momentum in the morning and early-afternoon sessions, falling by as much as 10 points before rebounding within the final hour of trading to gain around 14 points as buy orders for blue chips, especially VIC of Vingroup, piled in.

The Ho Chi Minh Stock Exchange (HoSE), on which the VN-Index is based, was predominantly green with 225 stocks gaining and 181 losing. Total trading volume fell nearly 30 percent over the previous session to VND6.56 trillion ($282.15 million), on par with last month’s daily trading average.

According to analysts, after four sessions in which the VN-Index plunged a total of 4.39 percent, investors stopped trying to take profits and are now bottom-fishing, causing the market to rise again.

A restructuring of their portfolios by exchange traded funds like the VN Diamond ETF, the VNMVN30 and the SSIAM VNFIN Lead was also a reason for large movements during the at-the-close trading, which takes place within the final 15 minutes, they added.

The VN30-Index for the stock market’s 30 largest caps rose 0.66 percent, but only 11 stocks gained compared to 15 that lost.

Topping gains was VIC of private conglomerate Vingroup, HoSE’s largest cap, with 5.8 percent, contributing a 5.5-point gain to the VN-Index, according to data from brokerage VNDIRECT.

However, its subsidiaries, VHM of real estate developer Vinhomes and VRE of mall operator Vincom Retail, shed 0.3 percent and 1.2 percent respectively.

Other big gainers this session were spread among different sectors. KDH of real estate developer Khang Dien House rose 4.4 percent, PNJ of jewelry retailer Phu Nhuan Jewelry was up 4 percent, HDB of private HDBank, 2.5 percent, and MWG of electronics retailer Mobile World, 2.3 percent.

The remaining blue chips in the green, which included PLX of petroleum distributor Petrolimex, VPB of private VPBank, and VNM of dairy giant Vinamilk, rose between 0.7 percent and 2 percent each.

In the opposite direction, TCB of private Techcombank led losses with 2.1 percent, followed by POW of electricity firm PetroVietnam Power, down 2 percent, and STB of private Sacombank, down 1.5 percent.

All three of Vietnam’s largest state-owned lenders by assets slumped this session, with VCB of Vietcombank down 0.7 percent, BID of BIDV, 0.4 percent and CTG of VietinBank, 0.3 percent. MBB of mid-sized Military Bank kept its opening price.

An industry group which saw most of its tickers perform negatively was real estate and construction. In addition to VHM, TCH of Hoang Huy Group shed 1.1 percent, ROS of FLC Faros 0.9 percent, while NVL of Novaland kept its opening price.

Meanwhile, the HNX-Index for the Hanoi Stock Exchange, home to mid- and small-caps, was up 0.57 percent, and the UPCoM-Index for the Unlisted Companies Market gained 0.18 percent.

Foreign investors continued to be net sellers this session to the tune of over VND565 billion on all three bourses. The most net sold stocks were again MSN of food conglomerate Masan Group, which remained flat, and VNM of Vinamilk, up 1.1 percent.


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Vietnam forecast to stay in top 10 remittance recipients in 2020



In the East Asian and Pacific region, Vietnam ranked third after China and the Philippines.

Vietnam is forecast to remain the ninth largest remittance recipient globally with an inflow of US$15.6 billion in 2020, slightly declining from US$17 billion received in 2019 and accounting for 5.8% of its GDP, according to the World Bank’s latest data.

This was a fourth consecutive year that Vietnam remains in the top 10 ranking in terms of inbound remittance, with the figure being US$13.8 billion in 2017 and US$15.9 billion in 2018.

 Top Remittance Recipients in 2020. Source: World Bank. 

India claimed the top spot in the top 10 with an estimated of US$76 billion, followed by China with US$60 billion and Mexico with US$41 billion.

In the East Asian and Pacific region, in 2020, Vietnam is set to rank third after China and the Philippines (US$33.3 billion) – the world’s fourth largest recipient.

 Top remittance recipients in the East Asian and Pacific region, 2020.

According to the World Bank, remittance flows to low and middle-income countries (LMICs) are projected to fall by 7%, to US$508 billion in 2020, followed by a further decline of 7.5%, to US$470 billion in 2021.

As the Covid-19 pandemic and economic crisis continues to spread, the amount of money migrant workers send home is projected to decline 14% by 2021 compared to the pre Covid-19 levels in 2019.

The foremost factors driving the decline in remittances include weak economic growth and employment levels in migrant-hosting countries, weak oil prices; and depreciation of the currencies of remittance-source countries against the US dollar.

“The impact of Covid-19 is pervasive when viewed through a migration lens as it affects migrants and their families who rely on remittances,” said Mamta Murthi, Vice President for Human Development and Chair of the Migration Steering Group of the World Bank. “The World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development.”

The declines in 2020 and 2021 will affect all regions, with the steepest drop expected in Europe and Central Asia (by 16% and 8%, respectively), followed by East Asia and the Pacific (11% and 4%), the Middle East and North Africa (8% and 8%), Sub-Saharan Africa (9% and 6%), South Asia (4%and 11%), and Latin America and the Caribbean (0.2% and 8%).

 Projected Growth of Remittances by Region, 2020.

Importance of remittances to amplify in 2020

The importance of remittances as a source of external financing for LMICs is expected to amplify in 2020, even with the expected decline. Remittance flows to LMICs touched a record high of US$548 billion in 2019, larger than foreign direct investment flows (US$534 billion) and overseas development assistance (about US$166 billion). The gap between remittance flows and FDI is expected to widen further as FDI is expected to decline more sharply.

Migrants are suffering greater health risks and unemployment during this crisis,” said Dilip Ratha, lead author of the Brief and head of KNOMAD. “The underlying fundamentals driving remittances are weak and this is not the time to take our eyes off the downside risks to the remittance lifelines.”

This year, for the first time in recent history, the stock of international migrants is likely to decline as new migration has slowed and return migration has increased. Return migration has been reported in all parts of the world following the lifting of national lockdowns which left many migrant workers stranded in host countries. Rising unemployment in the face of tighter visa restrictions on migrants and refugees is likely to result in a further increase in return migration.

“Beyond humanitarian considerations, there is a strong case to support migrants who work with host communities on the frontline in hospitals, labs, farms, and factories,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.

According to the World Bank’s Remittance Prices Worldwide Database, the global average cost of sending US$200 was 6.8% in the third quarter of 2020, largely unchanged since the first quarter of 2019. This is more than double the Sustainable Development Goal target of 3% by 2030. 

Despite being the cheapest, money transfer and mobile operators face increasing hurdles as banks close their accounts to reduce risk of non-compliance with anti-money laundering (AML) and combating terrorism financing (CFT) standards, stated the World Bank.

To keep these channels open, especially for lower-income migrants, AML/CFT rules could be temporarily simplified for small remittances. Further, strengthening mobile money regulations and identity systems will improve transparency of transactions. Facilitating digital remittances would require improving access to bank accounts for mobile remittance service providers as well as senders and recipients of remittances. Hanoitimes

Ngoc Thuy


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