The recent announcement that Vietnam’s economy grew by 2.6% during 2021 reflects the challenging times. The Covid pandemic led to strict lockdowns and heavily impacted economic growth. Indeed, the third quarter of 2021 saw Vietnam post negative GDP growth, the first time this has happened since 2000. However, foreign investors are optimistic about 2022, with a particular focus on the technology sector.
Venture capital funding in Vietnam
A recent report by Binh Tran, the co-founder of Ascend Vietnam Ventures, has cast a fascinating light on Vietnam's business start-up market, with growing interest in technology. Over the last five years, venture capital funding has increased from $48 million to a staggering $2.1 billion in 2021. It is no coincidence that Vietnam's digital economy grew by 10% in 2021, with signs that this trend has continued into 2022.
Historically, technology stocks in Vietnam have traded ondiscounted ratings compared to their global counterparts. This is because international tech giants have tapped into huge growth markets and are further down the digital revolutionroad than Vietnamese companies.
Investors excited about the digital revolution
While there is no doubt that broadband penetration rates in Vietnam are comparable with the best in the Asia-Pacific, the digital revolution is only now gaining traction. Recent figures suggest that digitised transactions in Vietnam account for only25% of overall transactions. This compares to 34% in Indonesia and 62% in Thailand. Many businesses have yet to fully grasp the digital revolution, with online business transactions around 10% compared to 49% in Indonesia and 52% in Malaysia.
Aside from the inflow of local and international venture capital funding, the Vietnam government is now much more proactive about digitising businesses. So could this be the perfect storm?
Vietnam courting international investment
Slowly but surely, foreign investment restrictions across Asia-Pacific stock markets are being lifted. Even though foreign investors have to go through an initial signup process to trade on the Vietnam stock market, overall restrictions are less onerous than elsewhere. Consequently, there is a growing belief that greater access for international investors will see Vietnam upgraded to an "emerging market" status in the not-too-distant future.
Many international investors have already experienced the digital revolution in developed countries such as the UK, US and Europe. Therefore, the opportunity to tap into a relatively young but fast-growing Vietnamese digital economy has prompted a significant increase in international interest. As well as enhanced venture capital investment, there’s also been a significant increase in foreign investor trading on the Vietnam stock market.
Local knowledge and a robust trading platform
In what can sometimes appear difficult trading conditions for foreign investors, it is essential to tap into local knowledge. Here at Global Investment Strategy Hong Kong, we are fully aware of the trading environment, the ongoing changes in restrictions, and foreign investment potential. This, together with our global clearing services, safe custody and low latency trading platform, means we can provide in-depth trading services 24-hour a day, five days a week. The Vietnamese digital revolution is still in its relative infancy with many attractive opportunities for international investors.