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Why has Korean chaebol invested over $1.2bn in Masan and its subsidiaries?



Vietnam’s Masan Group Corporation and South Korea’s SK Group have just announced the signing of definitive agreements to acquire secondary shares of The CrownX (TCX) for a total cash consideration of US$345 million, of which $340 million will be from the Korean company.

Following the completion of the transaction, Masan will own 85 percent and SK will hold 4.9 percent in The CrownX, with the Vietnamese firm potentially increasing its stake in TCX further in the near future.

Largest investment in Vietnam from SK

SK Group, one of the largest chaebols in South Korea, has made large investments in Masan.

In 2018, SK spent approximately $470 million buying 110 million Masan treasury shares.

In April 2021, it continued to invest $410 million for a 16.26 percent stake in Masan Group’s VinCommerce (currently renamed WinCommerce).

In total, the Korean investor has poured more than $1.2 billion into Masan and its subsidiaries. This is also SK’s largest investment in the Vietnamese market.

“We stand fully behind Masan Group,” Woncheol Park, representative director of SK Southeast Asia Investment, elaborated on SK’s continued investment in Masan.

“We believe its growth strategy to roll out the ‘mini-mall’ concept and to build a consumer platform will reap a tremendous outcome for everyone involved.”

In May this year, a cohort of investors including Alibaba Group and Baring Private Equity Asia inked a deal to invest a total cash consideration of $400 million for the acquisition of a 5.5 percent stake in The CrownX.

This is Masan’s integrated consumer retail platform, consolidating Masan Consumer Holdings and WinCommerce (WCM), which operates the VinMart/VinMart+ chain.

This deal reinforces its shareholders’ vision of building Vietnam’s first tech-enabled consumer-retail ecosystem, while expanding its reach to serve consumers nationwide.

Mini-mall concept – a winning nationwide model

After successfully turning around WCM and delivering the first profitable quarter in Q3 2021, Masan will shift its priority toward scaling up TCX’s mini-mall, ‘Point of Life’ concept –transformation of WinMart+ (grocery), Phuc Long kiosks (coffee and tea), pharmacies, Techcombank, and Mobicast Joint Stock Company (or ‘Mobicast,’ a new mobile network operating under the ‘Reddi’ brand) transaction points into an integrated loyalty offering.

VinMart+ stores which integrate Phuc Long kiosks have showed improvement in EBITDA margins.

Phuc Long generates VND5 million ($220,000) additional revenue per store a day, improving EBITDA margins by four percent at VinMart+ locations with the kiosks.

Masan will continue to roll out a store-in-store model and target to open about 1,000 more kiosks by the end of 2021.

This model is expected to improve EBITDA margins and bring a revenue of VND1.75 trillion ($77 million) per year.

Masan has made another milestone when expanding into the telecommunications sector by spending VND295.5 billion ($13 million) to acquire 70 percent stakes in Mobicast.

This first step will enable the digitalization of Masan’s platforms and build a unified off-to-online product and service solution for the company’s ‘Point of Life’ consumer ecosystem.

‘Point of Life’ is the only consumer ecosystem that spans grocery, financial and digital life, accounting for approximately 80 percent of the consumer wallet in Vietnam.

This model is similar to Reliance Jio, which has gained tremendous success in India.

Masan’s efforts to transform and meet modern consumer needs is consistent with its vision to provide better products and services for 100 million people in Vietnam so that they can pay less for their daily basic needs.

“We expect WinCommerce to grow into an omnichannel business that covers both online and offline markets, just like Alibaba or Amazon,” said an SK Group official in April 2021, when the conglomerate acquired 16.3 percent of Vietnam’s top retailer.

Piloted mini-mall stores have seen initial success with increased foot traffic and profitability.

Masan is setting a medium-term game plan to re-expand the network nationwide, while maintaining profitability with the following key performance indicators: driving private label portfolios to comprise 20-25 percent of modern retail sales; growing online grocery to make up more than five percent of total revenue or 50,000 orders per day; partnering with 2,000-3,000 of Masan Consumer Holdings’ GT retailers for WCM franchisee model; and developing a loyalty program and payment system via mobile wallets to drive consumer lifetime value and maintain a lean cost of consumer acquisition models.

“SK’s investment is a validation that our ‘mini-mall’ concept, a winning nationwide model, will bring more value to consumers’ daily lives,” said Danny Le, CEO of Masan Group.

“The next quantum leap for us is driving our loyalty platform and digitalizing our offering from products to services to win consumers’ mindshare whether off or online.”

Masan aims to close out its capital raising round of $200-300 million for TCX by the end of this year.



Magnetic strip ATM cards to remain valid next year




A customer uses a chip card for payment at a point-of-sale (POS). VNA/ Photo

HÀ NỘI — The State Bank of Vietnam (SBV) this week issued a dispatch, noting that domestic automated teller machine (ATM) cards with magnetic strips will remain valid for normal use after December 31, 2021.

The dispatch was issued after some banks have recently started sending notices to their customers about stopping supporting cards from ATMs to meet the deadline of the SBV’s Circular 19/2016 on the roadmap to convert from issuing magnetic strip cards to chip cards from next year.

Under the new dispatch, the SBV clarified that Circular 19/2016 makes no mention of a suspension of transactions using magnetic strip cards that remain valid.

December 31 this year is the deadline for changing to chip cards, not the date that magnetic strip cards will become invalid, the SBV noted, adding customers can continue to use magnetic strip ATM cards for transactions at ATMs, point-of-sale (POS) and bank counters, and for internet and mobile banking services after December 31 this year.

Under the new dispatch, the SBV asked card issuers and card payment organisations to ensure card holders’ transactions are carried out smoothly, safely and do not affect the interests of cardholders. They were also asked not to issue policies and regulations that go against the law on bank card operations.

In addition, they were told to launch media campaigns to inform their customers that magnetic stripe cards can still be used after December 31 this year.

However, under the new dispatch, the SBV also asked card issuers to encourage and support their customers to convert magnetic cards to chip cards to enhance security and to warn them of the risks if magnetic cards continue to be used.

There are two common ways to convert magnetic cards to chip cards.

In the first way, customers only need to bring valid citizen ID card or passport to the bank’s transaction point and request to convert from magnetic card to chip card.

In the second way, customers can access digital banking applications and mobile banking to apply for and receive cards at home or at the bank’s transaction points.

Or at some banks, the process is even more convenient. For example, at TPBank, customers can exchange magnetic cards for chip cards at LiveBank 24/7 and receive cards in just a few minutes.

In order to encourage customers to change magnetic strip cards to chip cards, most banks offered this service free of charge and the change is still free at some banks.

For example, at NamABank, the bank will completely convert magnetic strip cards to VIP cards for free from now until December 31, 2021. Similarly, Techcombank is also offering this activity free of charge.

According to experts, the conversion of magnetic strip cards to chip cards is beneficial for users, contributing to improving the security level, transaction speed, safety and ensuring the interests of customers.

Specifically, a magnetic card is a card containing a magnetic strip storing customer’s encrypted information. The data is permanently stored on the magnetic strip and is encrypted only once, so it easily leads to the risk of card information theft and transaction fraud.

Meanwhile, chip cards, which are also known as “smart cards”, have a microchip attached to the surface of the card, and this is the basic difference between chip cards and magnetic strip cards. For chip cards, transaction data includes data stored on the chip and the transaction password that changes with each transaction. Specifically, every time a chip card is used for payment, the chip will generate a unique transaction code and never repeat. In case the customer’s card is stolen from a certain store, the fake card will never work because the stolen transaction code will not be reused, the card will be rejected. —      





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Exporters told to strictly comply with EU regulations to avoid losses



The European Union has a large demand for imported agricultural products and, thanks to the EU-Vietnam Free Trade Agreement (EVFTA), Vietnamese businesses have a unique opportunity to take advantage of this.

 However, local businesses need to strictly comply with European regulations to avoid losses when exporting to the region.

Exporters told to strictly comply with EU regulations to avoid losses
The EU applies strict requirements and regulations on imported food products. — VNA/VNS Photo Vu Sinh 

For food products, the EU has strict requirements and regulations on product quality and the maximum residue level (MRL) of pesticides.

Trade counsellor Tran Ngoc Quan, head of the Vietnam Trade Office in Belgium and EU, said that most regulations across the bloc are similar when it comes to agricultural and food products.

Germany, Austria, the UK, Netherlands and Belgium do have stricter and higher MRL levels than the standard EU regulations, though these vary with different active ingredients, fresh produce and processed products.

Dang Phuc Nguyen, General Secretary of the Vietnam Fruit and Vegetable Association, said that while Vietnamese fruits and vegetables are more competitive than those from countries without a European trade agreement, exporters must focus on improving MRL levels.

Nguyen said: “If enterprises exporting to the EU do not comply with the regulations, they face the risk of increased levels of inspections, supervision and perhaps even being banned from exporting to these markets in the future.

“The EU applies these regulations very strictly. Enterprises that want to export to the EU must obtain certificates and production levels according to GlobalGAP.”

Nguyen added that violators run the risk of incurring heavy losses if they are caught.

According to the new EU regulation No 2021/1900, effective from November 23, the frequency of pesticide testing on Vietnamese herbs and fruits will increase. Of this, 50 per cent of testing will be applied to coriander, basil, mint, parsley, beans corn and pepper and 10 per cent will be applied to dragon fruit.

Nguyen said that as vegetable products in Vietnam often have pesticides, some samples and consignments will be tested for residue. The EU has also increased the frequency of testing, adding that the more enterprises violate the regulations, the more frequent inspections will be. 

He said bans on export to the EU could be applied to violators.

According to a representative of the Vietnam Pepper Association (VPA), the EU’s increase in testing will raise difficulties in exporting to the EU and will invite increased competition from other countries.

“In order to avoid violations, businesses must do better at testing products when exporting, as well as strengthening production links to create a clean and safe raw material area,” said a representative of VPA.

The EU also conducts post-inspections away from ports, so even though goods are being consumed or sold at supermarkets or shops, if they are not of good quality they can still be recalled, said Nguyen.

Using the example of a Vietnamese pepper export enterprise that was refused by Spain when its product was tested at the border gate recently, Nguyen said that if the violation was discovered when the product was already on shelves it would cause larger financial damage to the  Vietnamese exporter. 

Nguyen Minh Lien, General Director of Vinamex Company which purchases Vietnamese goods for export to the EU market, shared that some Vietnamese enterprises do not pay due attention to food safety issues. Lien added that due to the post-inspection of the EU market, some have had to pay fines and incur additional costs due to poor quality products.

In addition, Lien said some basic errors like incorrect packaging leads to products being returned or sold cheaper to other markets.

Lien noted when exporting goods to the EU, Vietnamese businesses must work closely with importers on product quality, packaging and contract inspection to avoid loss and damage.

She said supermarkets in the EU do not directly import goods from Vietnam, so local enterprises should cooperate with importers to arrange products at the warehouse before entering the retail market there.

She also suggested Vietnamese enterprises cooperate to diversify products, ensure sufficient output and take advantage of shared containers when exporting.

Considering EU customers are increasingly interested in buying products from businesses that contribute to community development and the environment, Nguyen said: “Sustainable development should be a long-term direction for export businesses in Vietnam.”

At the same time, even enterprises and manufacturers that follow the GlobalGAP requirements must pay attention to the plant protection ingredients that the EU bans or restricts, as some may be different from the GlobalGAP.

Source: Vietnam News


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Moody’s upgrades VPBank’s rating to Ba3



VPBank is one of the leading banks in Việt Nam. — Photo courtesy of the bank

HÀ NỘI — Global credit rating firm Moody’s Investors Services has upgraded Việt Nam Prosperity Bank (VPBank)’s foreign currency deposits from B1 to Ba3 which is equal to the country’s rating with positive outlook.

Moody’s BCA ratings reflect the independent intrinsic strength of the issuer. This credit rating is assessed based on the macro-environment, financial profile and qualitative assessment factors. In addition to upgrading the BCA rating, Moody’s also upgraded VPBank’s long-term local and foreign currency deposit ratings, rising to Ba3.

VPBank’s credit rating was announced after the bank completed the sale of a 49 per cent stake at its VPBank Finance Company Limited (FE Credit) to SMBC Consumer Finance Co Ltd (SMBCCF), a wholly-owned subsidiary of Japan’s Sumitomo Mitsui Financial Group, Inc (SMBC Group) at the end of October. Moody’s assessed that the capital sale brought about a significant improvement in the bank’s credit profile. Notably, according to Moody’s methodology, the bank’s capital adequacy ratio (CAR) increased from 11.4 per cent at the end of September 2021 to 13.5 per cent at the end of October 2021.

In addition to the improved capital base, the bank’s outstanding business results in recent months, despite the negative impact of COVID-19 on the economy, were also highly appreciated by Moody’s. The business results in the third quarter of the year showed that VPBank’s consolidated before-tax profit reached more than VNĐ11.7 trillion (US$513 million), up 24.9 per cent over the same period last year. The parent bank’s pre-tax profit alone reached VNĐ10.8 trillion, representing 75.2 per cent year-on-year increase. The bank’s total consolidated operating income reached VNĐ33.2 trillion, increasing 17.3 per cent over the corresponding period last year. Its consolidated return on assets (ROA) and return on equity (ROE) indices continued to be among the top of the market, reaching 2.8 per cent and 21.6 per cent respectively.

Moody’s believed that VPBank’s capital capacity will continue to be stable, as the bank has clearly demonstrated its plan to use capital obtained from the FE Credit deal to promote growth and seek new business investment opportunities. In addition, the assets scale will be further expanded thanks to the profit growth from business activities.

“VPBank’s asset quality and profitability will remain stable over the next 12-18 months,” Moody’s said in the announcement, emphasising the belief that VPBank’s asset quality will be well under control as Việt Nam’s economy recovers and vaccination rates increase.

The upgraded ratings from a prestigious international credit rating agency like Moody’s in the context that Việt Nam’s economy has suffered heavy impacts from the outbreak of the COVID-19 pandemic, has demonstrated confidence of international organisations in VPBank’s capital base and development plan this year and in the future. This also contributes to strengthening VPBank’s position, while further enhancing its ability to mobilise capital from reputable financial institutions. —


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