The ongoing FX outlook is relatively benign for investments into Vietnam, according to VinaCapital managing director Andy Ho, who has responded to questions about the dong following the regulatory announcement of a property sale in the country.
The VinaCapital Vietnam Opportunity fund, a London Stock Exchange Main Market traded investment company, previously announced the sale of its stake in the Century 21 project located in Ho Chi Minh City, resulting in net cash proceeds of some $28.7m. This reduced the fund’s exposure to direct property development projects to 8.4% from 12% of the total NAV as it was calculated on 31 March.
“Investing in frontier and emerging markets always entails some level of currency risk. That said, we believe that risk in Vietnam is minimal. The exchange rate is closely managed by the government in order to promote exports and help ensure low levels of inflation. This year, the rate has been stable, although it is possible the currency could be devalued to some degree to further boost exports,” Ho said.
The sale of the property development project does not necessarily suggest that the property sector overall is one that the fund is looking to exit, Ho added.
“We are not shifting out of property but rather to indirect investments in companies with experience in property development. In terms of privately negotiated deals and OTC, we’re focused on sectors that are benefiting from Vietnam’s robust domestic consumption story such as consumer discretionary, education and healthcare.”
In the fund’s regulatory news announcement, Ho was quoted stating that: “Our fully realised private equity investments have delivered an IRR in excess of 20% to date, and we believe these types of investments continue to offer the most attractive returns in the market.”