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M&A in technology booms during pandemic

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The Mergers and Acquisitions (M&A) market in Viet Nam has been going through a downturn due to the pandemic, but the technology sector is bucking the trend.

The seminar on “Digital transformation and M&A trends in the technology sector in 2022” was jointly held by Nha dau tu Magazine and Nova Group on January 11. — Photo itcnews.vietnamnet.vn

Nguyen Cong Ai, deputy director of KPMG Viet Nam, noted that technology sector was becoming more appealing to foreign investors. In 2021, technology M&A doubled in transaction volume and tripled in value, reaching about US$963 million by October.

Sub-sectors that have been attracting strong investment inflows include e-commerce, fintech, ed-tech, logistics and digital transformation.

Tiki has sucessfully raised $258 million in a funding round led by AIA Insurance; Sky Mavis $152 million by Andreessen Horowit; and Momo $100 million by Warburg Pincus.

“Foreign investors are showing great interest in Viet Nam’s technology sector. Recently, we have been receiving an increasing number of requests from Korean and Japanese investors who are interested in Viet Nam’s internet economy, fintech, edtech and media,” Ai added.

The deputy director believes foreign interest in technology can be mainly attributed to favourable policies of Vietnamese Government on tech startups. Another contributing factor is the quality of human resources, which has been improving substantially in recent years.

Nguyen Viet Khoi, director of Institute of Skills Education and Creative Intelligence, said Viet Nam’s digital economy had been forging ahead over the past few years. Rapid growth could be observed in information technology (IT), telecoms, e-commerce and startup ecosystems.

Remarkably, 5,600 new digital firms, with nearly one million personnel, were established last year, raising the total number of digital firms to over 64,000 and marking a 9 per cent growth in the sector.

Such a steady expansion has allowed the technology market to draw in massive foreign investment and multiply M&A transactions.

However, digital firms in Viet Nam are still at an early stage. A majority of them are startups with original ideas but have trouble with management and strategic planning.

Meanwhile, investors with deep pockets prefer putting money in firms that can draw up a detailed plan to realise their ideas.

This mismatch between investors and investees is causing a setback for M&A growth.

To deal with the setback, Khoi said the grow-at-all-cost model was indispensable. Additionally, trading floors for startups, which are similar to ChiNext (China), KONEX (Korea) or NASDAQ (US), could be developed to facilitate startup funding.

The director also recommended the Government launch a regulatory sandbox to provide digital firms with testing grounds for their technology innovations.

Regarding M&A in IT, Nguyen Thanh Tuyen, deputy director of the Ministry of Information and Communications’ Department of Information Technology, revealed there was no significant M&A in digital technology in Viet Nam prior to 2015.

It was between 2015 and 2018 that first major transactions in the sector began to emerge, notably VNG seizing a 38 per cent stake in Tiki and the buyout of Mundo Reader by Vingroup.

From 2019 to 2021, Viet Nam saw a sharp upturn in M&A with many noteworthy deals including Vision Fund and GIC Fund pouring $300 million to VNPay, Temasek’s investment of $100 million to Scommerce, and the buyout of Base platform by FPT.

As the COVID-19 pandemic has been paving the way for the widespread application of digital technoloy, M&A in this sector will continue to boom in the next several years. Sub-sectors that are likely to become investment magnets include e-commerce and fintech.

Despite the positive outlook for M&A, Tuyen said that most products and services of Viet Nam’s tech firms only targeted the domestic market. Few seek customers abroad.

Such a narrow market reach is a setback for the rapid growth of M&A.

Ho Phi An, chief executive officer of EI Industrial, believes the rapid growth of M&A in technology is good news for the sector. Through M&A, digital firms will be able to tap into abundant sources of foreign funds.

The downside is that firms are more vulnerable to hostile takeovers as soon as they are open to M&A. However, growth always comes at a cost, so the risk of a takeover should not be a matter of concern.

“We should not be concerned with hostile takeovers when we participate in international markets. It’s quite normal for a firm to be taken over if it is not good enough,” An added.

Bui Thu Thuy, deputy director of Enterprise Development Agency under the Ministry of Planning and Investment, acknowledged that the legislative process in Viet Nam was quite lengthy. It takes 5-7 years to develop a fully-fledged legal framework, so Government policies normally cannot keep up with the pace of change.

Additionally, the practice in some countries that financially supports 100 per cent of startups’ initial costs or accept a failure risk of 20 per cent is unsuitable for Viet Nam currently.

“Our current financial situation does not allow such a practice and we cannot accept such a high risk either,” Thuy said.

The deputy director said the authority would come up with favourable policies for digital firms and startups, but financial support would require cooperation between agencies and assocciations across the board. —

Source: VNS

Source: https://vietnamnet.vn/en/business/m-a-in-technology-booms-during-pandemic-808577.html

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Upgrading the market for the sake of all participants

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An employee passes electronic boards showing share prices inside Hồ Chí Minh Stock Exchange in HCM City. — VNA/ Photo Hữu Khoa

HÀ NỘI — An upgrade to emerging status will not only help the stock market develop quickly, transparently and sustainably, but also attract huge foreign capital inflows, said experts. 

Recently, the Government has directed to purge the market and improve the trading system’s capacity, showing its determination to enhance the quality of the stock market.

The refinement is to protect investors and open a door for the Vietnamese stock market to be upgraded from a frontier to an emerging market.

Prime Minister Phạm Minh Chính has taken an interest in the development of the capital market and the stock market, including the matter of upgrading the market. 

During a trip to attend the ASEAN-US Special Summit, on May 16, the PM visited the New York Stock Exchange (NYSE) – the largest stock exchange in the world – hoping it supports and shares experience to develop an effective and sustainable stock market in Việt Nam, and successfully build a regional financial centre. 

PM Chính also expected the NYSE and its Vietnamese partners to foster a sustainable, mutually beneficial partnership, contributing to making the Việt Nam-US comprehensive partnership more substantive and effective.

On the occasion, PM Chính witnessed the awarding ceremony of two cooperation documents in the fields of finance, banking and investment funds between Vietnamese and US partners, including a cooperation document between the Vietnamese State Securities Commission (SSC) and the NYSE regarding support to upgrade the country’s stock market and build a mechanism for investors to participate in both stock markets.

Previously, the PM chaired a conference on developing a safe, transparent, efficient and sustainable capital market to stabilise the macro-economy and ensure major balances of the economy.

At the conference, PM Chính also asked the Ministry of Finance to immediately solve the order congestion situation and invest in technological innovation and digital technology application, while urgently implementing measures to upgrade the market from frontier to emerging status to attract investment capital, especially foreign investment.

Dominic Scriven, head of the Việt Nam Business Forum’s (VBF) Capital Markets Working Group, said that the move to purify the market is a great effort and determination from the Government.

As the goal is to build and develop a safe, transparent and sustainable securities market, cleansing the market will ensure the interests of businesses and genuine investors, increase the stock market’s appeal, and attract more investment capital flows both at home and abroad.

Meanwhile, Phạm Lưu Hưng, chief economist of SSI Securities Company (SSI), said that the move to purge the market in recent years raised expectations that the upgrade process will be easier. Hưng hoped that in the next assessment, the Market Rating Organization (MSCI) will note some positive comments about what Việt Nam has done.

According to Minister of Finance Hồ Đức Phớc, the ministry is currently working with international organisations to deploy solutions to upgrade the stock market by 2025 as per the set roadmap.

Huge foreign capital inflows

Analysts believe that the upgrade from frontier to emerging status will be an important driving force for the market.

Zafer Mustafaoglu, World Bank (WB) Practice Manager for Finance, Competitiveness and Innovation (FCI) for East Asia and Pacific, said that the capital market development is a long-term effort, and there is still much work to be done in Việt Nam.

Upgrading to emerging market status is not only an improvement in position, but also signals strong enhancement in quality with a solid market foundation.

Upgrading to an emerging market also attracts the attention of high-ranking international investors to Việt Nam. In the stock market, upgrading to an emerging market could result in an additional US$10 billion in new investment for the country. The first year alone can receive an additional $2-5 billion.

According to Nguyễn Minh Tuần, General Director of AFA Capital Investment JSC, the criteria for upgrading from frontier to emerging status focus on two main factors – size and liquidity of the market (quantitative) and market access (qualitative).

In terms of size and liquidity, there are four criteria which are the number of companies included in the Standard Index, total market capitalisation, floating capitalisation and market liquidity. Việt Nam has almost met three standards, he said. 

The main issue is qualitative standards. In the latest ranking in June 2021, there are nine criteria that the country has not yet met, including the ownership rate, ownership restrictions and equal rights of foreign investors.

Source: https://vietnamnews.vn/economy/1194077/upgrading-the-market-for-the-sake-of-all-participants.html

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EVN accelerating projects to gear up for hot season

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EVN workers checks electricity equipment. — VNA/  Photo

HÀ NỘI — Vietnam Electricity (EVN) said it is accelerating power generation and grid projects, especially urgent infrastructure, to ensure supplies in the hot season.

The State-owned group said in the first four months of 2022, the firm and its subsidiaries had started work on 30 projects and put into use 31 grid facilities between 110kV – 500kV.

It cited meteorological forecasting centres as saying that heatwaves this year are likely to appear in the northern and central regions later than usual, but won’t be too severe.

Power demand in the north is unlikely to rise sharply in May, and daily consumption will be around 805 million kWh.

EVN noted that this month, it is working to guarantee supply for production and business activities as well as daily life, especially the 31st Southeast Asian Games (SEA Games 31) and the 15th National Assembly’s third session.

It is maintaining high water levels at multi-purpose hydropower plants in the north, operating thermal power plants in the region, and importing about 540MW of electricity in May.

Its subsidiaries were also requested to ensure power supply in the dry season, ready manpower and equipment for any possible incidents due to natural disasters, and recommend people, agencies and factories use electricity in a safe and economical manner.

In April, the entire EVN system produced 22.62 billion kWh of electricity, up 1.9 per cent year-on-year. That added up to a four-month figure of 85.65 billion kWh, increasing 6.2 per cent. —

Source: https://vietnamnews.vn/economy/1194045/evn-accelerating-projects-to-gear-up-for-hot-season.html

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Deputy Finance Minister Nguyễn Đức Chi takes charge of the State Securities Commission

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Deputy Finance Minister Nguyễn Đức Chi. — Photo vtv.vn

HÀ NỘI — Minister of Finance Hồ Đức Phớc had assigned Deputy Finance Minister Nguyễn Đức Chi to take charge of the State Securities Commission (SSC) from May 19.

In a dispatch to the SSC, Minister Phớc stated that Deputy Minister Chi will manage the commission during the consideration and completion of personnel for the commission.

Earlier on May 18, the Party Central Committee’s Inspection Commission announced the inspection conclusions and Party disciplinary measures on the SSC Party Committee in the 2015-20 tenure and relevant individuals. Right after that, the Ministry of Finance directed the SSC, stock exchanges, the Việt Nam Securities Depository and relevant agencies to review and implement measures to remedy the violations and shortcomings.

Specifically, the ministry dismissed Trần Văn Dũng from the position of the Chairman of the SSC, while giving a warning to Vũ Bằng, former secretary of the SSC Party Committee in the 2015-20 tenure and former SSC Chairman.

Warnings were given to Nguyễn Thành Long, secretary of the Hà Nội Stock Exchange Party Committee; and Nguyễn Sơn, chairman of the management board of the Việt Nam Securities Depository for their wrongdoings during their tenures. —

Source: https://vietnamnews.vn/economy/1194041/deputy-finance-minister-nguyen-duc-chi-takes-charge-of-the-state-securities-commission.html

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