Private-equity firms and sovereign wealth funds flock to Vietnam, following years of economic reform
Global private-equity firms and sovereign wealth funds are pouring record sums of money into Vietnam, fueled by a loosening of ownership restrictions in the communist nation’s largest companies and accelerating economic growth.
At least $3 billion worth of stock sales by Vietnamese companies are taking place or being planned in the coming weeks, including large initial public offerings by private companies. The government is also preparing to sell stakes in dozens of state-owned enterprises to local and foreign investors. Helping to underpin the deal activity is a recent surge in Vietnamese stocks that’s seen the country’s benchmark index become one of the world’s best performers so far in 2018, gaining close to 14%.
One of Vietnam’s largest private sector banks, Techcombank, on Monday priced a $922 million stock sale in the country’s largest-ever initial public offering. The shares were priced at $5.61 apiece, at the top end of their offered price range, reflecting strong investor demand for assets in the Southeast Asian frontier market, bankers on the deal said.
Techcombank’s offering drew investments from private-equity firm Warburg Pincus, which came in as a pre-IPO investor. Singapore sovereign wealth fund GIC Pte. Ltd. and Fidelity Management and Research took up shares in the IPO, the bankers said.
Foreign funds took nearly 75% of the IPO shares, and the company will have a market capitalization of $6.5 billion when it begins trading on the country’s main Ho Chi Minh stock exchange on June 4.
Morgan Stanley , Deutsche Bank AG and Viet Capital Securities are among the banks advising Techcombank on its offering, people familiar with the IPO said.
In what could be an even larger IPO, property developer Vingroup JSC is currently talking to potential cornerstone investors about a listing of its residential property business Vinhomes, people familiar with the situation said. Such an offering could raise more than $2 billion, the people added.
Singapore’s GIC has already agreed to invest $1.3 billion in Vinhomes by purchasing stock in its IPO and a debt-like instrument in the company, Vingroup said in a statement last week. Malaysia’s Employees Provident Fund is also looking to invest, people familiar with that deal said.
Vietnam, a country of 93 million people with a large young and tech-savvy population, presents a rare opportunity for investors. Inefficient state conglomerates traditionally dominated the economy, until the government several years ago began restructuring the firms, saying it would sell or list hundreds of them to raise money for infrastructure spending.
“Recent deal activity represents a major inflection point for international investor interest in capital markets in Vietnam,” said Vijay Vaidyanathan, Morgan Stanley’s head of capital markets for Southeast Asia. “Investors are focusing on the compelling arguments on demographics which are expected to drive strong growth across sectors.”
Government companies up for sale this year include the country’s largest telecommunications operator, MobiFone Corp., two electricity companies and other firms in sectors spanning from health, to transportation to manufacturing. The activity comes on the heels of a $4.8 billion deal in December, when Thailand Beverage PCL agreed to buy more than half of a government stake in beer brewer Saigon Beer Alcohol Beverage Corp., known as Sabeco.
The stake sales have helped boost the country’s stock market: Daily turnover on Vietnam’s largest exchange has soared from about $80 million in early 2017 to as high as $300 million this year. Economic growth is humming, with the economy expanding 6.8% last year, according to official data. It’s a stark turnaround from Vietnam’s previously high levels of inflation, and bad loans that crippled the banking industry before the government began rolling out reforms.
Private-equity funds are now looking to grab a bigger slice of the action as new assets come up for sale and Vietnam’s small public markets get big enough to provide a place where these funds can exit past investments. The combined market value of all stocks listed on the Ho Chi Minh Stock Exchange has increased nearly fourfold in less than five years, to more than $134 billion.
“Vietnam is a much more diverse economy today than it was five years ago.” said Jeffrey Perlman, head of Southeast Asia at Warburg Pincus. Mr. Perlman said Warburg is looking at other potential deals in Vietnam as the market develops and opportunities for exiting investments improve.
The activity marks a sharp pickup from 2017, when private equity and sovereign wealth funds invested just $260 million in a handful of deals—a fraction of the $32.2 billion across Southeast Asia—according to data from Dealogic.
“It’s all about access,” said Kevin Snowball, chief executive of PXP Vietnam Asset Management in the country’s financial hub, Ho Chi Minh City. “There is now proven liquidity in the market.”
Write to Jake Maxwell Watts at jake.watts@wsj.com and P.R. Venkat at venkat.pr@wsj.com