Consumer goods, health care, energy, construction materials, infrastructure, and technology are among the sectors with enormous potential for investment in Vietnam once the COVID-19 pandemic subsides, an expert has said.
Don Lam, co-founder and CEO of fund management company VinaCapital, recently spoke to a group of Republic of Korean investors through video conferencing about Vietnam’s efforts to manage the outbreak, how the pandemic would affect the economy and investment opportunities now and post-pandemic.
“We have always preferred those sectors that are benefiting from Vietnam’s domestic consumption, which is driven by several factors including urbanisation, young demographics, better jobs and high incomes, and a growing middle class.”
The consumer discretionary sector had traditionally seen the highest growth since people with more money in their wallet spend it on dining out, consumer electronics, jewellery, and others, he said.
“Although there is a short-term hit from the outbreak, we can continue to expect the sector to resume strong growth.”
Health care is another sector benefiting from the growing middle class since the public health care system is expanding yet overburdened.
Private health care is expanding, enabling some people who previously would have gone to Bangkok or Singapore for treatment to get it at home today, according to Lam.
Energy is another promising sector, with demand outstripping supply, requiring the country to import from neighbouring countries.
"LNG and renewables are the future," he said.
Domestic manufacturing, with companies that are involved in infrastructure or catering to the needs or desires of the growing middle class, is also an interesting sector as is technology, according to Lam.
Vietnam has been going through a tech boom in the past few years, with start-ups working in a wide range of areas like fintech, AI, real estate technology, and logistics.
“Tourism will definitely make a comeback in 2021,” he said.
Vietnam could benefit enormously as it is seen as a safe haven amid the outbreak and offers great value for money in addition to its beautiful scenery and rich culture, he said.
Of course the recovery time depends on the global economic condition, transportation options and the medical situation, but now is a good time to invest in the sector, according to Lam.
The stock market is also an option since its valuation has declined by 30-40% during the outbreak, and many stocks are now attractive.
It now trades at a P/E of 10.3, the cheapest since 2012 and the lowest in the region.
But he also shared notes of caution about investing in Vietnam, saying there are some risks just like in any other frontier and emerging market.
"To mitigate the risks and prepare for the best possible outcomes, investors need to take a long-term view, do thorough due diligence, fully understand the market, and have a trusted local partner," he said.
"The days of 'fast money' are over and patience is important when operating in Vietnam," he warned.
"One of the biggest mistakes foreign investors make is that they assume all of Southeast Asia is the same, but Vietnam is not the same as Thailand, Indonesia or Malaysia, and each country has its own development strategies and own way of working," he said.
Successful foreign investors would be those who tailor their products, services and workplaces to Vietnam.
The global economic recovery would take time, but Vietnam was well-positioned to rebound once the COVID-19 outbreak is under control, with revised forecasts still ranking Vietnam among the fastest growing economies in the world, he added.
“The opportunity here is virtually endless.”