Investors doubt Vietnamese economy: survey

The last quarter of the year has seen a significant fall in private equity investors’ confidence in the Vietnamese economy, a recent report by audit advisory Grant Thornton Vietnam said.

According to the Investment Sentiment and Outlook Quarter 4 report released early this week, negative sentiments about Vietnam’s economy more than doubled to 51 percent compared to last year’s report.

The percentage of investors showing positive outlook also plummeted from 53 percent to 17 percent in the second quarter.

Over all, there was a decrease in confidence in Vietnam and private equity investors were much more cautious than 6 months ago which the report says reflect current challenges in Vietnam’s economy and the fall in GDP and consumer spending growth.

Almost 85 percent of respondents said the current macro-economic situation was the biggest obstacle to investment into Vietnam.

The attractiveness of Vietnam’s economy also reached the lowest point among the last 6 surveys. Particularly, only 38 percent of investors considered Vietnam as more attractive than other investment destinations, a decline of 16 percent compared to the previous survey.

The survey also shows that 41 percent of respondents said that Vietnam was less attractive or unattractive.

In line with the plunge in Vietnam’s attractiveness among private equity firms, the percentage of respondents who planned to increase their allocation to Vietnam decreased considerably to 29 percent in this survey compared to 53 percent in the previous one.

Meanwhile, 43 percent of participants said they were adopting a “wait and see” attitude and there was no change in their allocation of investment funds to Vietnam.

The previous figure was 28 percent.

35 percent of participants thought the most significant source of deals was private or family businesses, followed by secondary buyout deals, and only 10 percent of respondents said it was the public market.

Bill Hutchison, Grant Thornton Vietnam’s Advisory Services Partner, said this result was “unsurprising as the private sector contributed nearly half of GDP in Vietnam last year and has continually increased its contribution.”

However, he said the somber business outlook as confidence waned was making investors bide their time at the moment.

While the extremely high interest rates in Vietnam in the second and third quarter of the year had led to an increase in the number of distressed assets, especially in the real estate sector, the report shows a surprising finding that real estate had taken the position of the most attractive sector for investment.

It had overtaken education, which was ranked as the most attractive industry for private equity investment in a survey conducted in Q2.

But almost the same number of respondents rated the real estate sector as the least attractive sector.

Following real estate in this list were education, oil, gas and natural resources, and manufacturing sectors.

Weak macroeconomics was the most important obstacle to investment, followed by corruption and red tape.

Infrastructure and the inadequate legal system also affected investments.