According to data from the Foreign Investment Agency (Ministry of Planning and Investment), in the first month of 2019, total FDI capital, which was newly registered, increased and contributed to buy shares was $1.9 billion, increased by 51, 9 percent compared to the same period last year. At the same time, estimated FDI projects have disbursed about $1.55 billion, up 9.2 percent over the same period in 2018.
Notably, foreign capital flowed in through capital contribution, buying shares, and merger and acquisition of enterprises. Last year, FDI was in via the capital contribution and share purchase channel amounted to $9.8 billion, up 59.8 percent over the previous year and accounted for over 28 percent of the total registered FDI capital in Vietnam. In January 2019, there were 489 times of capital contribution and share purchase of foreign investors into domestic enterprises with a total value of $761 million, up 114 percent over the same period.
Capital contribution and share purchase have become a favourite form of investment by foreign businesses when penetrating into Vietnam market. It is expected that in 2019, this investment wave will be even stronger with sustainable economic foundations, in addition to the advantages gained through trade agreements, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Particularly for the banking and financial sector, capital flow is expected to have a breakthrough compared to previous years. This expectation is completely grounded when only in the first two months of the year; there are many signals that foreign investors will “land” in the financial and banking sectors of Vietnam.
The first is the case of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank). Earlier this year the bank issued private shares to Singapore’s GIC partner and Mizuho Bankone of Japan’s largest financial institutions, collecting about 6.2 trillion dong (equivalent to about $265 million). In spite of significant value, it only accounts for about 30 percent of the bank’s total share issuance plan, so the rest can be done in the near future.
Next is the sale of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)’s capital to KEB Hana partner of Korea. In 2018, the bank consulted shareholders on offering and increasing its charter capital through private placement of shares to foreign strategic investor, KEB Hana, with 17.65 percent of current charter capital, equivalent to 15 percent of the capital after the release and the deal will be completed this year.
In the case of Vietnam Bank for Agriculture and Rural Development (Agribank), this bank is in the process of equitisation, following the request of deputy prime minister Vuong Dinh Hue, in which, the equitisation must be completed no later than the beginning of 2020. There are currently many partners aiming at AgribankVietnam’s largest network, including NongHuyp Financial Groupthe fourth largest financial institution in Korea, which has “offered” support to this bank in equitisation.
And not only Agribank but also its subsidiary company, ALC I financial company, also received requests from Srisawad Corporation of Thailand to refund 100 percent of ALC I’s charter capital to Agribank (200 billion dong) and pay off the original debt that ALC I borrowed from Agribank (323 billion dong) to fully own this financial company. It is known that the two sides signed a memorandum of understanding and were waiting for approval from Vietnam government.
In addition, “Zero dong” banks are also attracting the attention of foreign investors, in which Ocean Commercial One Member Limited Liability Bank (OceanBank) has been targeted by partners since 2017 but has not completed yet. Other disadvantaged and weak credit institutions are also considered to be attractive destinations for foreign partners in the context of restructuring policies more favourable.
Besides, there are many banks that are still looking for foreign investors, especially those banks that plan to list on the stock market this year will definitely take advantage of calling for foreign capital to increase financial capacity and position, expanding operations. Typically, Nam A Joint Stock Commercial Bank (Nam A Bank) has revealed information that has worked with foreign investors and so far the two sides have agreed on the principles of cooperation. After the 2019 shareholders’ meeting, the bank will issue shares to partners to raise capital and simultaneously list stocks on the Hochiminh Stock Exchange (HOSE).
