Fund management firm Mekong Capital has released analysis on theinvestment environment of Vietnam towards 2015 that identifiesopportunities in consumer goods manufacturing, retail and education.
The growing number of middle (231-690 USD) and upper income familieswould result in more consumer spending than GDP growth figures wouldindicate, according to Mekong Capital.
The firm saysthe rapid transformation of Vietnamese families into higher incomeclasses will continue, and the urban upper class will increase from 7percent of the urban population in 2010 to 12 percent by 2015. Themiddle class will go up from the current 52 percent to 69 percent in2015.
As Vietnamese families move up the classstructure, their spending patterns shift dramatically. This will fuelthe growth in demand for consumer durables such as appliances,consumer electronics and home furnishings, which will offer chances forinvestments.
More retail sales will follow growingconsumer demand, while organised retail chains (modern trade) will growfrom 20 percent of the retail market in 2010 to around 31.2 percent by2015.
Retail therefore will provide one of the fastest growing and most inherently scalable investment areas in this country.
Mekong Capital anticipates that the largest retail chains here willgrow from around 125 outlets at present to around 500 outlets by 2015.
On education, it sees that Viet Nam will be at theforefront of the privatisation of education in Asia with total educationspending burgeoning from 7.9 percent of GDP in 2010 to 12 percent in2015, from 7.5 billion to 20.4 billion USD.
Thisgrowth will be driven by increasing market penetration of privatelanguage-training schools (mainly English language for school agechildren), and an increasing number of families that have the means toafford premium-quality private schools.
Meanwhile,the country has relatively liberal regulations on private investment ineducation, as well as foreign ownership of education companies, sothere'll be opportunities to invest in an increasing number of privateeducation service providers.
Consumer loansrepresented only 11.9 percent of 2009's GDP, much lower than 22.1percent in China and 30.9 per cent in Thailand. Banks will increasinglyattempt to increase their net interest margin by shifting their loanportfolio towards higher yielding consumer loans, especially mortgagelending.
Mortgage lending will drive growth in thehousing market, benefiting housing development companies and townshipdevelopment companies.
Consumer finance businesses,such as vehicle finance or mortgage origination, will also flourish inthis environment, and will be attractive acquisition targets for banks.
On electricity, the country has had barelysufficient investment in electricity generation due in part to aregulatory environment which has made it unattractive for privateinvestors. As a result, demand sometimes exceeds supply, especially whenthe hydro-power plants are not operating regularly due to low waterreservoir levels, leading to increasing blackouts.
The development of the power generation capacity will also require aconcurrent expansion and modernization of the distribution system, whichis generally outdated and inefficient.
On theequity market, the report said it was held down by a combination of highinterest rate, foreign investor concerns over the risk of currencydevaluation, relatively low liquidity and negative coverage in theinternational financial media./.
The growing number of middle (231-690 USD) and upper income familieswould result in more consumer spending than GDP growth figures wouldindicate, according to Mekong Capital.
The firm saysthe rapid transformation of Vietnamese families into higher incomeclasses will continue, and the urban upper class will increase from 7percent of the urban population in 2010 to 12 percent by 2015. Themiddle class will go up from the current 52 percent to 69 percent in2015.
As Vietnamese families move up the classstructure, their spending patterns shift dramatically. This will fuelthe growth in demand for consumer durables such as appliances,consumer electronics and home furnishings, which will offer chances forinvestments.
More retail sales will follow growingconsumer demand, while organised retail chains (modern trade) will growfrom 20 percent of the retail market in 2010 to around 31.2 percent by2015.
Retail therefore will provide one of the fastest growing and most inherently scalable investment areas in this country.
Mekong Capital anticipates that the largest retail chains here willgrow from around 125 outlets at present to around 500 outlets by 2015.
On education, it sees that Viet Nam will be at theforefront of the privatisation of education in Asia with total educationspending burgeoning from 7.9 percent of GDP in 2010 to 12 percent in2015, from 7.5 billion to 20.4 billion USD.
Thisgrowth will be driven by increasing market penetration of privatelanguage-training schools (mainly English language for school agechildren), and an increasing number of families that have the means toafford premium-quality private schools.
Meanwhile,the country has relatively liberal regulations on private investment ineducation, as well as foreign ownership of education companies, sothere'll be opportunities to invest in an increasing number of privateeducation service providers.
Consumer loansrepresented only 11.9 percent of 2009's GDP, much lower than 22.1percent in China and 30.9 per cent in Thailand. Banks will increasinglyattempt to increase their net interest margin by shifting their loanportfolio towards higher yielding consumer loans, especially mortgagelending.
Mortgage lending will drive growth in thehousing market, benefiting housing development companies and townshipdevelopment companies.
Consumer finance businesses,such as vehicle finance or mortgage origination, will also flourish inthis environment, and will be attractive acquisition targets for banks.
On electricity, the country has had barelysufficient investment in electricity generation due in part to aregulatory environment which has made it unattractive for privateinvestors. As a result, demand sometimes exceeds supply, especially whenthe hydro-power plants are not operating regularly due to low waterreservoir levels, leading to increasing blackouts.
The development of the power generation capacity will also require aconcurrent expansion and modernization of the distribution system, whichis generally outdated and inefficient.
On theequity market, the report said it was held down by a combination of highinterest rate, foreign investor concerns over the risk of currencydevaluation, relatively low liquidity and negative coverage in theinternational financial media./.
