Temasek’s Vu Nguyen: Vietnam’s equity market at exciting inflection point

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Vietnam’s public equity market represents an exciting emerging trend for investors ahead, Vu Nguyen, a vice president at Temasek, said Wednesday at the Ground Zero 5.0 webinar by RedSeer.

“When I think about Vietnam, what excites me the most is actually the public equity market,” Vu said in a panel discussion after being asked about trends.

Vu noted that currently, Vietnam’s equity market remains classified as “frontier,” rather than an emerging market, but that its metrics were headed toward a change in classification.

“Over the past couple months, we really saw an inflection point in the depth and liquidity of the public market in Vietnam. We used to have a problem with lack of liquidity for stock trading in Vietnam. But over the past couple of months, the daily volume now is averaging about a billion U.S. dollars per day,” Vu said.

“Millions of people have registered a brokerage account to trade stocks in Vietnam. The benefit of that, besides the access to capital, is the new channel for investment. It also opened a new market for IPOs for companies in Vietnam,” Vu said. “All the tech companies or start-up companies are going to think about five or 10 years down the road.”

A classification change from frontier to emerging would unleash a flow of capital into Vietnam’s market, Vu said. A change in the index membership would lead to flows into the market by funds tracking the benchmarks.

MSCI’s criteria for classifying a market as emerging include at least three securities with a free-float market capitalization of US$1.17 billion and an annualized traded value ratio (ATVR) – or the median value of shares traded daily in relation to market capitalization – of 15 percent. In addition, an emerging market must have “significant” openness to foreign ownership and ease of capital flows, and high availability of investment instruments, MSCI has said.

The pandemic sharply accelerated the adoption of digital services in Southeast Asia, with 40 million new users in the region jointing the internet in 2020, compared with 100 million between 2015 and 2019, according to the e-Conomy SEA report for 2020 from Google, Temasek and Bain & Co. The report, published in November 2020, said 70 percent of the region’s population is now online.

Vietnam’s monthly active users for select mobile banking apps grew 73 percent in the January-September period last year, the report said. The country has a population of around 96 million.

Sachin Bhanot, head of investments for Southeast Asia at Prosus Ventures, added that his company has also taken up investments in “democratizing” access to wealth management, which has boosted retail participation in stock markets in Indonesia as well.

He pointed to Prosus Ventures’ participation, announced in May, in a US$65 million funding round in Indonesian digital investment app Bibit. Bhanot was speaking on the same panel.