April 3, 2010
Bloomberg
There is still money to be made in one of Asia's fastest growing economies, write Yoolim Lee and Beth Thomas.
Nguyen Thanh Trung brings Vietnam's only privately owned plane level at 24,000 feet over the Central Highlands towns of Pleiku and Dalat before swinging right and bringing the eight-seat Beechcraft King Air 350 in for a smooth landing at Ho Chi Minh City airport.
Trung is familiar with the landscape: 35 years ago he was a Vietcong agent and fighter pilot who recalls dropping two bombs on the headquarters of the American-aligned southern regime in the city then known as Saigon, one of the last skirmishes before the end of his country's civil war.
Today Trung, 62, is on a mission that symbolises his country's transformation: he is the personal pilot for Doan Nguyen Duc, an entrepreneur who is one of Vietnam's richest men.
Duc, 46, estimates his empire, which includes the country's biggest listed property company, gave him a personal wealth of 28.4 trillion dong ($1.63 billion) at the end of last year. Trung says: ''Duc owning a private jet is very good for Vietnam's economy; it shows that Vietnamese people can also be successful like businessmen in other countries. This is a time for dynamic entrepreneurs.''
But foreign investors in Vietnam are experiencing a bumpier ride than Duc and his pilot are. Indochina Capital Advisors last year decided to liquidate a London-listed Vietnam equity fund that had lost 50 per cent of its value. In November the San Francisco-based hedge fund company Passport Capital demanded the return of uninvested cash from a fund that had bought Vietnamese and Cambodian property.
The Ho Chi Minh City Stock Exchange's benchmark VN Index, Asia's best performer in 2006, plunged 66 per cent in 2008 as inflation followed by global recession destroyed confidence in Vietnamese investments. The index rose 57 per cent last year. It was up 2.1 per cent this year eight days ago.
Investors who have the stomach to stay in Vietnam are quietly bullish. It is possible to make money in this land of 86 million people provided you are willing to ignore the market froth, says Mark Mobius, the chairman of Templeton Asset Management, which had $24 million invested in Vietnam in February.
''Investors should see the real value of specific investments without being driven by pure sentiment,'' he says. ''The private sector continues to grow and has become more important to the development of the economy.''
That new realism follows a decade of unbridled enthusiasm for Vietnam. After the shift to a more market-oriented economy in 1986, foreign direct investment commitments in Vietnam went from zero to$60.3 billion by 2008, almost three times Vietnam's foreign exchange reserves at the end of that year.
Gross domestic product grew 7.2 per cent a year on average from 2000 to 2009, making Vietnam the fastest growing economy in Asia after China and Cambodia, according to the International Monetary Fund. The government forecasts GDP growth of 6.5 per cent this year.
''Vietnam was viewed as the final frontier of Asia,'' says Son Nam Nguyen, the managing partner of Vietnam Capital Partners. He advised global investors on more than $30 billion in financing as the former head of Citigroup Inc's investment bank in Vietnam. ''No one wanted to miss out on the next China.''
However, some investors grew tired of the roller coaster. Shareholders of the Indochina Capital Vietnam equity fund voted to shut it down in September after its net asset value had plunged to $243 million by June 30, from $500 million in March 2007.
Passport Capital, which held a 13 per cent stake in the property fund JSM Indochina Capital, won the backing of shareholders to replace three of the directors of the London-listed fund and begin the return of uninvested cash.
From its inception in June 2007 JSM Indochina, listed on London's Alternative Investment Market, had fallen 70 per cent by November 18 2008.
''Historically, because of bad experiences with inflation and currency depreciation, people are very quick to lose confidence,'' says Manu Bhaskaran, a Singapore-based partner and the head of economic research at Centennial Group Holdings, which provides advice on emerging markets.
Duc, the tycoon with the private plane, has become a symbol of Vietnam's emerging class of Western-style entrepreneurs.
When he bought the Beechcraft there was no luxury-goods tax on such purchases. He has since ordered an $18 million Embraer Legacy 500 jet from Empresa Brasileira de Aeronautica that will be delivered in 2012.
This time Duc will have to pay a $5.4 million new levy on the deal.
''They had to set the tax level for private jets after I bought the jet,'' he says with a smile.
With that, Duc departs for the war-era Rex Hotel in central Ho Chi Minh City, where Vietnam's most prominent capitalist keeps a suite in the building that was used as a US military media centre during the US fight against communism.
Nguyen Thanh Trung brings Vietnam's only privately owned plane level at 24,000 feet over the Central Highlands towns of Pleiku and Dalat before swinging right and bringing the eight-seat Beechcraft King Air 350 in for a smooth landing at Ho Chi Minh City airport.
Trung is familiar with the landscape: 35 years ago he was a Vietcong agent and fighter pilot who recalls dropping two bombs on the headquarters of the American-aligned southern regime in the city then known as Saigon, one of the last skirmishes before the end of his country's civil war.
Today Trung, 62, is on a mission that symbolises his country's transformation: he is the personal pilot for Doan Nguyen Duc, an entrepreneur who is one of Vietnam's richest men.
Duc, 46, estimates his empire, which includes the country's biggest listed property company, gave him a personal wealth of 28.4 trillion dong ($1.63 billion) at the end of last year. Trung says: ''Duc owning a private jet is very good for Vietnam's economy; it shows that Vietnamese people can also be successful like businessmen in other countries. This is a time for dynamic entrepreneurs.''
But foreign investors in Vietnam are experiencing a bumpier ride than Duc and his pilot are. Indochina Capital Advisors last year decided to liquidate a London-listed Vietnam equity fund that had lost 50 per cent of its value. In November the San Francisco-based hedge fund company Passport Capital demanded the return of uninvested cash from a fund that had bought Vietnamese and Cambodian property.
The Ho Chi Minh City Stock Exchange's benchmark VN Index, Asia's best performer in 2006, plunged 66 per cent in 2008 as inflation followed by global recession destroyed confidence in Vietnamese investments. The index rose 57 per cent last year. It was up 2.1 per cent this year eight days ago.
Investors who have the stomach to stay in Vietnam are quietly bullish. It is possible to make money in this land of 86 million people provided you are willing to ignore the market froth, says Mark Mobius, the chairman of Templeton Asset Management, which had $24 million invested in Vietnam in February.
''Investors should see the real value of specific investments without being driven by pure sentiment,'' he says. ''The private sector continues to grow and has become more important to the development of the economy.''
That new realism follows a decade of unbridled enthusiasm for Vietnam. After the shift to a more market-oriented economy in 1986, foreign direct investment commitments in Vietnam went from zero to$60.3 billion by 2008, almost three times Vietnam's foreign exchange reserves at the end of that year.
Gross domestic product grew 7.2 per cent a year on average from 2000 to 2009, making Vietnam the fastest growing economy in Asia after China and Cambodia, according to the International Monetary Fund. The government forecasts GDP growth of 6.5 per cent this year.
''Vietnam was viewed as the final frontier of Asia,'' says Son Nam Nguyen, the managing partner of Vietnam Capital Partners. He advised global investors on more than $30 billion in financing as the former head of Citigroup Inc's investment bank in Vietnam. ''No one wanted to miss out on the next China.''
However, some investors grew tired of the roller coaster. Shareholders of the Indochina Capital Vietnam equity fund voted to shut it down in September after its net asset value had plunged to $243 million by June 30, from $500 million in March 2007.
Passport Capital, which held a 13 per cent stake in the property fund JSM Indochina Capital, won the backing of shareholders to replace three of the directors of the London-listed fund and begin the return of uninvested cash.
From its inception in June 2007 JSM Indochina, listed on London's Alternative Investment Market, had fallen 70 per cent by November 18 2008.
''Historically, because of bad experiences with inflation and currency depreciation, people are very quick to lose confidence,'' says Manu Bhaskaran, a Singapore-based partner and the head of economic research at Centennial Group Holdings, which provides advice on emerging markets.
Duc, the tycoon with the private plane, has become a symbol of Vietnam's emerging class of Western-style entrepreneurs.
When he bought the Beechcraft there was no luxury-goods tax on such purchases. He has since ordered an $18 million Embraer Legacy 500 jet from Empresa Brasileira de Aeronautica that will be delivered in 2012.
This time Duc will have to pay a $5.4 million new levy on the deal.
''They had to set the tax level for private jets after I bought the jet,'' he says with a smile.
With that, Duc departs for the war-era Rex Hotel in central Ho Chi Minh City, where Vietnam's most prominent capitalist keeps a suite in the building that was used as a US military media centre during the US fight against communism.
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