Investment funds cutting investments

Thursday, May 22, 2008
Investment funds have become more cautious in making investment deals, though most of them still have good thoughts about the bright prospects of Viet Nam’s economy and stock market.

The strategy of private investment funds or investment companies is to buy stakes of companies to become strategic shareholders with the hope of taking back capital within several years. In general, the investors choose operational companies, which have been showing good business results, to inject money in.

Last year, when Viet Nam was considered the hot spot for investments, a lot of foreign private investment companies eyed the market, looking for companies to inject money in. However, many investment funds did not find their opportunities in Vietnam as they believed that the share prices were too high.

However, nowadays, the overly low share prices also proven to be an unattractive call for the investment flow, though Vietnamese private companies are very thirsty for capital and ready for receiving capital. The fact that Standard & Poor’s lowered Vietnam’s credit rating from stable to negative has dampened many investors’ enthusiasm. Many of them have been trying to sell stocks.

Foreign investment funds in Vietnam like Dragon Capital and VinaCapital have also been cutting investments. Andy Ho, Managing Director of VinaCapital, said that the fund is still seeking new investment opportunities, but it has become more cautious with the deals as the current economic difficulties also mean higher risks for investments.

“We have talked with many companies which want capital. However, we have to think carefully before making investment decisions,” Ho said, adding that previously, the fund invested 10 VND, and now it invests 3 or 4 VND only.

Nguyen Bao Hoang, General Director of IDG venture fund, which has poured money into 33 companies, said that there will be no changes in Vietnam’s economic development in the long term; however, the national economy is facing difficulties for now and the next 12 months.

One of the reasons that makes private investments scarcer at this moment is the uncertainty of the financial market. Analysts said that the low liquidity has been the biggest problem which has made investment funds hesitate to inject money in projects. Therefore, even the companies with low prices cannot attract the investment funds. The companies, which have been operating well do not really have financial difficulties, while the companies which need a lot of capital always bring high risks.

Hoang said that last year, financial investors seemed to ‘go too fast’, while they are now going too slowly as they have become too cautious. Hoang said that now is the most suitable time to buy stakes. (SGTT)