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Vietnam’s investment potential is attracting attention, especially in industries such as real estate and technology. In January this year alone, 9,000 new companies were registered.

Despite its authoritarian government, investors in Vietnam have the option of side-stepping the country’s state owned companies to focus on smaller, private businesses that are poised for growth. Low valuations and a rising foreign cash flow mean there is a lot of potential to drive economic progress forwards but many companies still have doubt.

A lot of marketers, retailers and manufacturers are not sure about what to think of ecommerce: is it another buzz word or the future of modern trade in Vietnam? – Kantar World Panel

The current online landscape and its future

Vietnam is home to a handful of ecommerce marketplaces, notably Tiki, Sendo and The Gioi di dong, where site visits are comparable to the likes of Lazada, the biggest e-player that currently claims 30% of Vietnam’s online retail market.

Source: ecommerceIQ Vietnam data

Vietnam has also seen its fair share of newcomers and exits in ecommerce but C2C and B2C models are the most popular in the country. Garena’s Shopee has been steadily gaining traction after almost two years in the country and the Shopee app has been downloaded two million times and processes 10,000 orders per day.

2017 will be a year of intense competition for Vietnam’s ecommerce players especially as traditional retailers pursue an online presence. An example would be Korean cosmetics giant, Lotte.vn, that has an online and offline presence in the country. In January alone, Lotte gained 1.7 million visits on its website. Another threat to online players would be retail chain Aeon Shop that opened its online store AeonEshop.

vietnam, aeonVietnamese consumers shop FMCG 

According to Kantar World Panel research, the internet and online commerce is becoming more accessible to shoppers in Vietnam thanks to mobile phone usage at 80% penetration in the country’s four key urban cities. These are the other findings:

  • 69% of Vietnam’s households have working women who welcome convenience
  • Nearly 6% of urban households have shopped online for (fast moving consumer goods) FMCG at least once in 2016 and when they do, spend 3-4 X more than they would on an average shopping trip to avoid carrying bulky products on their motorbikes
  • The value share of FMCG ecommerce is 0.2% in Vietnam meaning there are plenty of opportunities for consumer good players to serve the demand and rack up sizable market share

 

Help from the government 

The Vietnamese government is set on implementing measures to improve the business and investment landscape to boost economic growth in the country. These include supporting SMEs and in particular, Resolution 35, which aims to create one million private enterprises in 2020 from 515,000 at present, and increasing the private sector share of national GDP from 43% to 49%.

The country was classified a “lower-middle income” country in 2009 – causes of the middle-income trap can include a lack of basic and advanced infrastructure, adequate financing, skilled human capital and innovative enterprise.

“Vietnam’s vision is to reach the upper-middle income category and be well on its way to a high-income economy by 2035” – Daryn Govender, opinion article on Interest.co.nz

 

Roadblocks to Vietnam’s growth

Analysts have said that many companies in Vietnam are looking to increase exports this year, hoping to leverage upcoming free trade agreements going into effect this year.

According to the Ministry of Trade and Industry, Vietnam will have to implement all commitments under the ASEAN Free Trade Agreement with China and other ASEAN member countries, the ASEAN Economic Community (AEC), World Trade Organisation (WTO) to create highly favorable conditions for the country’s economic development.

There are other challenges from overseas and domestic markets that may hinder the growth potential of many Vietnamese enterprises, especially for exports.

Domestic challenges

  • Macroeconomic instability
  • Lack of adequate development infrastructure
  • Growth quality of the Vietnamese economy

Overseas challenges

  • President Donald Trump’s “protectionism” rhetoric could potentially stunt export growth for Vietnam
  • When official, the consequences of Brexit could also impact as Vietnam was emerging as one of the EU’s most active trading partners

The major economies’ shift from trade liberalisation to protectionism could very well change the structure of global commodity supply and demand and directly impact the global trade market. To analysts, this means that Vietnamese companies should focus on building in its domestic market to contribute to economic growth and development.

For those poised to enter Vietnam, does your business differentiate from what’s already available, more FMCG offerings perhaps? Are you able to benefit from government initiatives such as Resolution 35? For investors, are you willing to take a gamble on a still very much developing country such as Vietnam?

With all this in mind, we look forward to witnessing Vietnam’s growth.

In a post Brexit world, emerging markets are suddenly looking very attractive for investors, reports CNBC.

Once shunned by investors for being volatile, emerging markets have gained a certain appeal following Brexit, which sent shockwaves to global markets after the UK decided to leave the European Union.

Some fund managers have low exposure to emerging markets, having pulled out of them as concerns about China’s sharp slowdown weighed on the outlook. Following Brexit, a global flight to quality trade has helped send the S&P 500 to all time highs and long end US treasury yields to record breaking lows.

Analysts are concerned about the limit of gains in US assets.

If the dollar stays steady, market strategists see opportunity in diversifying to emerging markets where growth forecasts remain higher than in developed markets.

According to BlackRock Investment Institute, having a degree of exposure to emerging market is part of having a diversified portfolio. Currencies and trade balance have adjusted following Brexit, and markets in Southeast Asia stand out in an environment of lagging global growth.

The World Bank expects emerging markets and developing economies to grow at a 3.5% rate this year, while advanced economies should see just a 1.7% rate

Exposure in the Southeast Asian market, or other emerging markets brings an element of diversification which can help buffer one’s portfolio against market downturns possible at any period of time. The interest in emerging economies can go onto positively impact all sectors and industries, whether it’s tech, healthcare or finance.

The next investing mega-trend may be adoption of middle-class lifestyles on a global scale with huge implications for global providers of goods and services.

The downturn of the West’s venture capital market is also a post Brexit reaction, as investors in UK startups are wary of the change. The world has shrunk according to President Barack Obama but emerging markets in the Southeast Asian region may be lucky enough to come out of a global slowdown as the unlikely winners.

A version of this appeared in CNBC on July 14. Read the full version here.

Line announces price listing amid a poor IPO market

Source: techinasia.com

LINE, popular Japanese messaging app, is slated to come public in New York under the symbol “LN” on July 14 and in Tokyo the following day. Just over 40 IPOs have been priced in the US this year, down over 50% from last year making 2016 the slowest quarter for IPOs in the last 7 years, with most of the volatility caused by uncertainties regarding the Chinese economy, according to Yahoo Finance.

Line plans to offer 35 million shares at a price range of $26.50 to $31.50 per share. This would value the company at approximately $6.5 billion.

At most, the company could raise $1.3 billion, making it the biggest tech listing of this year so far. Initially, Line was planning to delay its price announcement due to the Brexit craze, but decided to price the company as planned. This could be the biggest tech IPO since 2014.

Line announces price listing amid a poor IPO market

Further worries regarding Brexit followed this month and after a quiet first quarter, the IPO market is going through a phase of normalization. Pricings in the market were held back by a public-private valuation disconnect in the tech sector, and poor trading of 2015 IPOs. The Brexit cloud and its effect on interest rates also contributed to the first quarter slump in the market.

In 2014, Line highlighted its potential valuation at $10 billion, much higher than its current $6.5 billion. The company has seen a deceleration in sales growth, which was up 40% to $1.1 billion in 2015, as it has focused on profitability (operating income swung positive in the 1Q16).

“Instead of trying to expand dramatically, they’ve focused on existing markets and reduced marketing spend, becoming profitable at the expense of growing users,” said Kathy Smith, Manager at Renaissance Capital.

Line currently has around 218 million monthly active users, and is the dominant messaging application in Thailand, Taiwan, Japan and Indonesia. Globally, it faces competition from China’s WeChat, which has 760 million monthly active users, and Facebook’s Whatsapp and messenger, which have a total of 2 billion active monthly users combined.

Line’s performance in July may be indicative of the remainder of 2016 IPOs.

A version of this article was published in Yahoo Finance on July 6. Read the full version here.

Line aims to raise $1.3 billion

The launch of Line’s pop-up store, with its popular bear and rabbit characters in New York City is an effort to give exposure in the West. Source: PR Newswire

Thailand’s  most popular chat app Line is aiming to raise $1.3 billion in a dual Tokyo-New York IPO listing in July, meaning that the company is sticking to its pre Brexit target, the Financial Times reports. It has set a price range between 2,700 and about $26.50-$31.50 per share.

It announced earlier this week that it plans to sell 35 million shares, putting Line on track for the largest IPO in the global technology sector of this year.

The global equity sell-off and price volatility following the UK’s exit from The European Union have cast a dark cloud over Line’s IPO plan, especially at a time when investors were already doubting the company’s growth prospects. Despite investors’ uncertainty, the company is still confident that it should be able to raise $1.3 billion.

This news comes after a two year delay in Line’s initial listings schedule. Fund managers have commented that investor interest in technology startups have lessened and wavered with intensified risk as a consequence of the Brexit vote. Although LINE does not have presence in Europe, this follows the global reaction trend of the fallout.

The risk tolerance of investors has declined in the post-Brexit market volatility. It is also hard to put a premium on Line’s growth potential. – Ikuo Mitsui, Fund Manager at Aizawa Securities

The social messaging app’s  dominance in Japan and Thailand is seemingly not enough to convince global investors of the company’s growth potential. With many competitors in the market, this makes it harder to evaluate potential growth rate. Two-thirds of Line’s 218 million users come from Japan, Taiwan, Thailand and Indonesia, but it is not a major player in Indonesia. Line’s struggle to penetrate the US and European markets has often been brought up by industry analysts and investors.

Line’s effort to establish a name outside Asia and take on rivals, such as Facebook, is reflected in the company’s goal to sell 63% of shares in New York. The company should not be too complacent with its place in Asia, as Facebook is making a push in the region, emphasized by the announcement that it was testing social commerce platforms in Thailand, an area which is also being facilitated through Line.

Excerpts from the Financial Times on June 27. Read the full article here.

brexit impact on thailand not concerned gov, sleeping asian man

The Thai government is positive about Brexit, as officials insist that Britain’s exit from the European Union is unlikely to negatively affect any trade talks Thailand has with the EU. In fact, the Brexit will release a lot of restrictions for its trade policies with Southeast Asian countries. If Britain wanted to initiate a free bilateral trade pact with Thailand, the talks could happen instantly without waiting for a green light from EU commissioners, said Sirinart Chaimun, Director General of the Trade Negotiations Department.

Negotiations for a Thai-EU FTA were formally launched on March 6, 2013. Currently, EU commissioners were reluctant to hold any talks with Thailand until the country’s new constitution is in place. These talks were suspended following Thailand’s 2014 military coup. In June 2015, the EU said it would delay signing an agreement on closer economic and political ties, due to Thailand’s political unrest.

The Brexit will release a lot of restrictions for its trade policies with Southeast Asian countries.

In 2015, Thailand’s exports to the 28 EU countries were just under $22 billion, down 6% from 2014. Shipments to Britain were worth $4 billion. Shipments to the EU contributed to 9% of Thailand’s total export value. The numbers seem to suggest that if anything, Thailand’s own political instability has more of an impact on the country’s international trade, more than Brexit itself.

A version of this appeared in Bangkok Post on June 27. Read the full article here.

 Southeast Asian Stocks Rise As Brexit Concerns Drop

Source: finance.yahoo.com

Stocks across Southeast Asia in four countries rose as possibility of Britain remaining in the European Union increased, reducing market risks.

  • Singapore stocks closed more than 1%, led by oil and gas stocks
  • Philippines closed 0.6% higher with consumer cyclical such as Bloomberry Resorts Corp leading the market
  • Vietnam was up more than 1%, as oil and gas stocks such as Petrovietnam Gas Joint Stock Corp rose
  • Indonesia ended higher, helped by energy shares

Britons will cast their votes on June 23 in a referendum on whether to leave the EU. The probability of Britain remaining in the union rose to 72%, up from 60% in the previous week.

“Perception is that the British public is likely to vote in favour of remaining in the EU. If that is the case, it would remove the overhang of risk in the markets,” said Nirgunan Tiruchelvam, an analyst with Religare Capital Markets in Singapore.

Southeast Asian optimism in the context of Brexit

Initially, panic was spreading across markets in fear of Britain exiting the European Union but now it serves as an important reminder to protect the global market.

Countries such as Philippines has expressed optimism about the new President-elect, Rodrigo Duterte, who is beginning his six-year term on June 30.  Duterte’s economic team will be committed to boosting infrastructure, fixing traffic congestion and improve investment frameworks. Not only will this serve to improve ecommerce infrastructure and transportation roadblocks, it will also improve Philippines’ economic growth as a whole.

A version of this appeared in Jakarta Globe on June 21. Read the full article here.