Inflows from foreign funds push domestic investments in Vietnam

In first eight months of 2017, Vietnam received US$13.5 billion from 1,624 newly licensed projects along with US$6.4 billion in terms of increased capital and US$3.5 billion in terms of stakeholders’ purchase, totaling US$23.4 billion, an increase of 45.1 per cent compared to the same period of last year. 

Foreign Direct Investment (FDI) into real estate accounted for five per cent of total FDI, ranking fourth after manufacturing, electricity, AC production and distribution and mining and quarrying.

Also, 85,357 new businesses were established in Vietnam, 3.7 per cent of which were in the real estate market. Regarding retail and services, turnover in first eight months of 2017 reached VND2,580.2 trillion (roughly US$113.7 billion), up 8.9 per cent y-o-y, excluding inflation. 

With the record high level of new supply in 2015 and 2016, the entry of international retailers, and the quick expansion of convenience stores and other modern retail formats/venues, modern retail in Vietnam has been growing rapidly. While it will take some time for Vietnam to catch up with the level of retail in regional countries, the local market is showing very good progress.

According to Deal Street Asia, in 2016 and 2017, private equity investment in real estate companies in Vietnam was US$613.5 million, the highest amongst other sectors including retail/consumer, education, finance, technology, infrastructure, and entertainment. 

Thanks to active capital inflows from foreign funds, local developers are now expanding rapidly. In Q3 2017 Vincom Retail, backed by Warburg Pincus, is implementing procedures to transform its Vincom Retail unit to a public company on the Ho Chi Minh City Stock Exchange to raise US$600 million. 

Meanwhile, Shinhan teamed up with Vincapital to invest US$100 million in Novaland. Samsung Securities will co-operate with Caldera Pacific, a private equity fund from Hong Kong to buy a 40 per cent stake in Dragon Capital to become the second-largest shareholder. Also, Keppel Land bought 20 per cent of Quoc Loc Phat, the developer of Song Viet Complex in Thu Thiem, District 2, Ho Chi Minh City.

Apart from the above private equity investment deals, the market reported 27 successful deals of tangible assets and development sites worth nearly US$900 million across Vietnam. 

Looking forwards, more and more investors are not only eyeing but acting to enter the market and catching up with the game. Q3 2017 was an endless summer to existing developers.