BizLIVE - Louis Nguyen, chairman and chief executive officer of Saigon Asset Management, talked to BizLIVE about the impact of the Vietnamese central bank’s new forex rate regime on foreign investors.
I Prefer Market-based USD/VND Rate: SAM CEO
Louis Nguyen, chairman and chief executive officer of Saigon Asset Management (SAM). (Photo: BizLIVE)
The USD/VND rate will fluctuate frequently in 2016. Will this hinder Saigon Asset Management (SAM) from investing in Vietnam?
I have no concrete assessment yet. Returns on investment and the fluctuation of the USD/VND rate depend on macroeconomic changes, the volatility of the Chinese yuan and movements of the Fed’s interest rates.
The USD/VND rate is now a sensitive issue as Vietnam’s forex reserves are now just 10 weeks of import cover, compared to 16-17 weeks previously, suggesting that the pressure on the USD/VND rate is considerable. Foreign investors will need to ponder their decisions when returns in Vietnam decline.
Between fixing the forex rate fluctuation at 3% a year and floating the rate, which mechanism do you prefer?
I prefer the market-based forex rate regime. All investors like the market-based mechanism and don’t want interventions. The state intervention is just needed when money market moves off the safe level.
Comparing the U.S. market with a stable dollar with the Vietnamese one with a volatile dong, which one do you see more investment opportunities?
Each investor has his own risk appetite. Returns in the U.S. are lower than those in emerging markets, but the risk in the former is lower.
Meanwhile, Thai players are fond of investing in Vietnam and an investment fund run by Morgan Stanley has invested some million USD in the VN30 Index.
Annual returns of between 20%-30% can attract foreign investors to Vietnam as they require higher yields to offset risks.
In which markets is SAM looking for funding?
Fund resources for SAM are dwindling. SAM and Vietnam Fund Management are seeking for capital in Asia, the Middle East, North America and Europe. The start of the year is a good timing for fund raising.
Despite fluctuations in Vietnam, we expect to raise funds successfully.
Thank you very much!
SAM on January 5 signed a deal to acquire a 15% state in My Chau Investment Corp, a medicine distributor based in Ho Chi Minh City.
The firm plans to set up a private equity fund, which is set to come into operation next month and focuses on the food and technology sectors, said Mr. Luis Nguyen.
In November 2015, SAM struck an accord to wholly acquire shares of Heritage Beverage Corporation, the exclusive U.S. and Canada distributor of Saigon beers, products of Saigon Beer Corporation (Sabeco), the largest brewer in Vietnam.
The State Bank of Vietnam, the country's central bank, on January 4 started to announce the interbank rate for USD/VND transactions on a daily basis. It is a managed float regime, ending four years of applying a daily fixing with a trading band.